Changing ones mindset to save more?

[AmbitiousSaver]

How do you guys build up a savings fund for emergencies and NOT touch it?

I already have 10% of my pay going into our savings account, but I never am able to just "leave it". I've used my savings to pay down the CC even more... but I reallly need to start building an EF. We still haven't used the CC in over a year but if I don't start building a savings fund, if something major comes up - I might have to.

Are there any tips you do to not touch your EF? Do you put it in a separate bank? Put it in a CD or something? What helps you keep that mindset that your EF is there for emergencies and not for something like paying down your CC? I'm really thinking that in order to build an EF I need to make it so I can't see it or something.

[noppenbd]

I keep mine in an online high-yield savings account which is linked to my checking account. Transferring money out takes 3-4 days, which is enough of a buffer to make it hard to impulse spend it. CDs are an even better option but you need to make sure you can get the money if you truly need it, so you probably should ladder the CDs so you are not giving up all the interest if you have to withdraw from one of the CDs early.

[Caoineag]

For me, it was simply ignoring it and knowing what it was for. For my friend, she knows she isn't supposed to touch hers except for when she isn't employed.

What is your ef for? If you can identify that, you may find that knowing its only for that will help you. After all, you taught yourself to stop using credit cards, its just a very similar concept.

[Reldon]

I have mine in an high-yield online savings account as well. What I do is setup an automatic weekly transfer from my checking account to my online savings account and do not access the online savings account except for 2 times a month. I consider it as the account I can't touch so I never touch it.

[LuxLiving]

Well, for me it was a process. Once I identified what I needed to budget for, then it began to fall into place. I was once like you find yourself, and couldn't keep myself out of the cookie jar.

What helps me is thinking of my budget as ANTICIPATORY. We know we'll have car repairs, right? So instead of just slapping them on a CC when it comes up and worrying later how to pay for it, we anticipate that we'll have car repairs and save up for them in a Car Repair Fund a/k/a escrow account. And, we anticipate that we're going to have vet bills since we have pets and we save for them in a Vet Fund. AND, we have an Emergency Fund. It's for unemployment or a major catastrophe or unexpected unanticipated major stuff, such as a family funeral out of state or some such. And we have lots of other little 'funds' for various needs.

After some time you'll get to a tipping point. You've anticipated new tires, you've saved separately for them, you can then go buy them and start the process all over. If you have a car, you'll always need to be saving for new tires, right? You'll always have repairs, yes? You'll always need a new hot water heater sometime? You'll always need to have a house-repair fund? Unless you're a nudist you'll always need to have a clothing budget? Right? Right.

These aren't emergencies. They are just rare occurances in most cases, but they or things like them are what might be derailing you now.

No, we won't have the gazillions of dollars we used to think we had to 'spend willy-azz-nilly'. BUT, all the bases are covered. There aren't as many bumps in the road any more and things smooth out.

We have our escrow accounts set up in online banks as well. As noppenbd stated above, the time-frame to get it back can help slow you down.

Keep thinking. You're on the right track!

[Broken Arrow]

Originally Posted by AmbitiousSaver

How do you guys build up a savings fund for emergencies and NOT touch it?

Well, let's see. How did my mindset change?

Hmm, it may have something to do with my ex and I's net worth bottoming out at around 330k in debt... and then fighting over money... and the subsequent divorce because we never could quite reconcile.

Yeah....

[gamecock43]

For me its being VERY HONEST with myself about how much money it really costs me to live. For some reason when I budget my allowance to spend for the month, I am feeling strong, dedicated, and arrogant. I refuse to admit that I will have at least 3 undeniable cravings for thai food, and that if I go out with my girlfriends I will spend at least $50 that night.

Instead- arrogant, money-saving dedicationist me thinks to myself "oh no, thai food is such a waste of money. I will only get my delicious fattening treat ONCE this month. Thai food-you get $15 for ONE meal. "
I also say to myself "hmmmm...I should give myself an extra $100 in case I go out with the girls this month once or twice- but what if I dont go out with them? Thats $100 that will get wasted on stupid stuff like thai food cuz it's sitting in my wallet. And I have a cc bill right here that needs to be paid now. I'll just put the whole $100 on the credit card."

I convince myself to live on a very low monthly allowance, and of course I then cant make it through the month and go to my emergency fund, or the cc and get in a tad deeper and become even more unrealistic with my budget the next month.
So I know my problem...I am working hard to correct the problem.

[lehresman]

I have my emergency fund designated for specific purposes. I use the envelope method of budgeting for my checking account, and I use that principle with my emergency fund as well. Basically, I have $X designated for car savings, $Y designated for medical emergencies, and $Z for a future vacation. Those are my future savings categories, and by labeling it for a specific purpose, I'm more likely to not touch it.

Should a real emergency arise, I can take from those savings envelopes pretty easily without much regret (although I'd be pretty sad to not get my future vacation, but still.. it's better than going in debt again).

[M-squared]

We set up a money market acct through my retirement savings company. It's a PITA to get to, so we don't bother it unless there is going to be a MAJOR purchase. Also, you can only make a withdrawal of $500+, so it truly is ONLY for big bills.

We started it when we were saving for a house, (spent a lot of it on the down payment) then starting saving again for fertility treatments. Luckily we didn't need to spend it on that, but we kept adding to it and it became the EF.

[aida2003]

It's very easy. We just do NOT touch and that's it. But we never had CC debt either.

[jIM_Ohio]

I think paying down the cc is a better decision than leaving money in savings.

If one thing (cc) is costing you 10 or 20% and another thing (savings) earns you only 2%, then it makes sense to pay off the debt costing you more money.

I keep my savings safe by putting it in CDs which are less than 100% liquid, but still in cash. CDs do not show up on my bank statements, but they are at the same bank my atm card used to access my monies.

The easiest way to change is to look at your SPENDING habits and not analyze the savings habits so much. Get the saving to be automatic- send $500/month to a CD for example, or send $100/month to a mutual fund or other investment. Create savings from a HABIT and at same time stop the spending habits. I don't carry my atm card with me and that slows my spending down considerably.

[Caoineag]

Originally Posted by jIM_Ohio

I think paying down the cc is a better decision than leaving money in savings.

If one thing (cc) is costing you 10 or 20% and another thing (savings) earns you only 2%, then it makes sense to pay off the debt costing you more money.

....

From a mathematical viewpoint, this is very true. From a standpoint of learning good habits, this is so very wrong for a spender. I had to learn how to save before I really learned how to control my spending. Its a habit like any other and if you don't develop it, you won't have it.

I agree that you shouldn't try to save up a fortune while paying off the credit cards but you do need some savings to avoid continuing to rack up the cards. Otherwise, you make nice large payments on the credit cards while you make nice large purchases on them as well and you never make any progress.

[PrincessPerky]

In general for me, out of ight is out of mind.... at first I had our EF in a separate account. which I hardly looked at.

I also decided just how much HAD to stay there... while we were in CC debt I picked 1K. Now that we are out of debt I hope to keep it at one months salary. When we are totally debt free I will up it again.

Of course for the real bare neccessities (food and shelter) I would touch it..but not for any luxuries (like internet...or my super long hot shower)

[AmbitiousSaver]

I think the only reason I really question about the CC is... we currently have it at 3.65%... and even after the offer is done in October... right now the NORMAL apr is 7%.

But I guess what strikes me to want to have some sort of cushion is... I enjoy not using the CC and because I keep depleting my savings to pay down the credit card, lets say we get into a car accident and I have to pay our deductible all of a sudden. I don't want to have to put that on a credit card cause the credit card will charge the 7% rate and then whenever I pay that down, it'll keep the 7% balance on there and pay more on the 3.65% balance. So I know I have to save up some money aside to cover things that may come up so I can keep from using the credit card even if something unexpected occurs.

BTW, thanks for all the ideas. They definitely help

[skydivingchic]

For years, I was doing the exact thing that you are - running up several thousand worth of CC debt, and then raiding my EF to pay them off. What helped me is having the money for my EF visually seperated from the rest of my money in Mvelopes. My EF is its own envelope, so everytime I look at my envelopes I see Emergency Fund right there in big letters. You could do something similar by opening an online savings account that is ONLY for your EF. Set up a direct deposit or automatic transfer from your checking account and then "forget" about the money. My paycheck is split into several accounts by direct deposit, so every payday my EF gets a bit bigger.

I also have escrow accounts (envelopes) as a previous poster mentioned for car repair, vet bills, gift giving, and medical bills. That means my EF is only for unemployment or very big car repair, vet, or medical bills that can't be covered by my regular escrow envelopes.

[Ima saver]

I also have escrow accounts for things like insurance, taxes, christmas, medical, etc.
Starting the $20 challenge has really helped me to save. It has shown me how just putting away a few dollars a day can really add up.
I also keep the majority of my savings in C.D's so I will lose the interest if I cash in early. I just don't touch the money at all.

[Daylily]

From a mindset perspective: Both my DH and I have weathered periods of unemployment and come out fine thanks to a thrifty lifestyle and a nicely funded EF. What keeps me saving more and more in the EF is the knowledge that I can lose my job at any time and that no matter how talented or credentialed I am, it might take a while to find another job.

I actually have no fear that I'm going to lose my job now, but you never know. Further, some kind of medical mishap could occur.

[maat55]

I put mine in an online account and it takes two or three days to get. I have no desire to touch mine, I'm a save freak.

[tripods68]

We utilized automatic transfer from checking account to MMA beginning of each month. Its also important to have a budget and stick to it. For instance, if you over budget on food items, don't just spend that money apply it towards EF. Conversely, if you pay off your credit card this month. Saved that money the following month as extra savings. Also, if you sold something on craigslist it goes to EF. The point is, you want to think ways to save everyday instead of spending. The earlier you can adapt to this habit, the easier it gets in the long run. Good luck

[skydivingchic]

One other idea. Sit down and determine what is the absolute minimum amount you feel comfortable having in an EF until your CC is paid off. Is that Ramsey's recommended $1000? 2 months of expenses? 1 month of expenses? Decide for yourself, then take anything above that amount and put it on the CC. Vow not to touch the rest. Then once your CC is paid off, take the payment you were making to it and use it to build your EF up to be fully funded (i.e. generally recommended at 3-6 months of expenses depending upon your situation).