I have often been told how difficult it is to save money, whether you live in Topeka Kansas or New York City.

Here are a few steps that if taken will absolutely put you on the path to excess cash and personal savings.

It takes a little work and faith, but it always works! Instead of being managed by your bills and living check to check you will become a money manager and have savings of your own!

  • This is the yuckiest part: I need you to do a budget, a real budget. Consider the usual: Housing, Electricity, garbage, water, landline phone, cable, internet, cellular phone, child care or support, food (grocery, eating at work, ordering in), transportation (car payments, gas, tolls, parking or bus, subway, transit, cab), insurance outside of deductions from paycheck (renters, home, umbrella, car, health, dental/vision, life, disability, Medicare, long term care etc…) debt (car, student loans, credit cards, personal) drug store, prescriptions, pet supplies, home or car maintenance, clothing, dry cleaning, laundry, and lastly charity, entertainment (movies, eating out, plays, books, classes gifts etc…). Please account for 5 or 10% if possible to go towards savings. We will get to this in a later step. Whew! There may be more but you get the idea! Note: Do not spend more than 20% of what you make on debt. If you only focus on paying off debt, you get what you focus on!
  • Open a bank account where you have your checking account where you can easily transfer funds monthly without monthly charges. This new account will be for deposits only. Every time you get money, either by paycheck, rebates, tax returns gifts or cash, deposit all of that in this account. Let us call it the Deposit Account!
  • In your present checking account, use for writing bills and only writing bills. In step one you discovered your monthly expenses. Let us say it is $4000 a month. Only transfer from your deposit account $4000 dollars. Not a penny more. This is now your Monthly Account!
  • Remove from your wallet all the following: all credit cards but one for emergency (defined as life threatening need such as need to get towed because of car accident), all cash except for $40 that you only use when you cannot use a debit card. For all spending use a debit card linked to your Monthly Account. Thus you can only spend the $4000 that month and every month.
  • Open an account with a high yield savings bank like Emigrant, ING or This is where the 5 or 10% gets deducted from your monthly account for savings. This is done automatically like a payment so you do not have to think about it. Treat it like another bill, but you are paying yourself! This is your 6 month account, or your Freedom account. Think of how free you will feel if you have 6 months cash saved in case you lose your job, want to travel or want to move somewhere new… Once you have 6 times what you spend in this account, you can allocate your 5 or 10% to other uses like investing, buying real estate, starting a business or perhaps collectibles. Who knows, but you will become an investor, not a consumer only!
  • If you have one time annual expenses that are fixed and budgetable here is a great idea! Use ING or to budget that annual expense by setting up a separate savings account. For example, let us say you want to take a vacation for $1500in 8 months. Smartypig will calculate based upon present interest rates how much to deduct monthly from your savings account you need to save in order to reach your goal. It will automatically deduct ~$180 a month for 8 months so that Voila! With 8 easy deductions, plus interest, you have your vacation money when you need it! This can be done for anything, taxes, Christmas, a car… you get the idea! It is not a bad thing to have many accounts. In fact it shows that you know how to manage your money, not be managed by your bills! Isn’t that what we all want?
  • This is the Wow factor… If you follow the above steps, you will notice that your Deposit Account will have excess money in it over time. This can be added periodically to savings, or as you progress, put towards your new investments! You are building wealth!

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