Not that long ago, my bank account hit zero — or damn near close to it — almost every other week. While this might sound alarming, it never bothered me. In fact, I was pretty much always planning on it to happen. I knew that I was going to be paid a certain amount of money twice a month, and as long as it got me to my next paycheck, then I was all good.
Fortunately, I’ve learned that living paycheck-to-paycheck is not a recipe for long-term success and financial security.
I wasn’t the only one approaching life this way. According to a 2017 study, 78 percent of US workers live paycheck-to-paycheck. Most Americans can’t cover an unexpected $1,000 expense.
Today, my finances are much more stable. My wife and I have set aside a portion of the money we’ve made over the past few years so we can handle a large unexpected expense or pay our bills if one of us is unable to work for an extended period of time.
But in order to accomplish this, I’ve had to adjust my mindset a lot when it comes to personal finance — I had to learn how to look five, 10, and even 40 years down the road, instead of just two weeks.
Here are three things I needed to learn in order to save for a rainy day and work toward financial stability.
Just because you can afford it, doesn’t mean you should buy it
This lesson is was one of the most important — and one of the hardest — insights for me to learn. At times, I would hit the end of the bi-monthly pay period with a few hundred dollars to spare.
Unfortunately, my reaction to this little bit of surplus was to conclude that I could afford to have a big weekend out with my friends or buy concert tickets. But if you have unused money, that’s the perfect time to set money aside and get ahead. You never know when you’re going to need it in the future.
That’s why it’s better to plan to save money for things you really want, like concert tickets or a nice dinner, and not just buy them on a whim.
You should have a plan for every dollar you make, even if that plan is to put it in savings.
Find a number to set aside every paycheck and stick to it
The best way to save money for the future and get ahead is to pick a number to save every paycheck and stick to it. If, after taxes are taken out, you make $1,000 every two weeks and you decide to set save $100 every paycheck for a rainy day, then make sure you don’t ever skip this step, if possible. Once you start breaking your financial rules, it can be hard to stop.
Mobile apps can offer a huge assist as you try to stick to your savings goals. For instance, as a freelancer, I have to save money on my own to pay quarterly taxes. In order to make sure I am setting aside enough money, I have Qapital on my phone, which automatically sets aside 30 percent of every payment above $100 that is deposited into my account. (You may also set it up so that a certain dollar amount is set aside per paycheck deposited.)
The money goes into a Qapital account, which can easily be linked to your bank account so money can be sent back and forth quickly and easily. This way, you know money is being set aside before you get a chance to spend it.
Plan for semi-frequent bills
When calculating bills, it’s easy to forget about those bills that don’t recur every month, such as oil changes, doctor visits, home and auto insurance — not to mention seasonal expenses like buying Christmas presents and wedding gifts.
While $50 or so for an oil change isn’t necessarily a large or unexpected expense, it is something you can plan and set money aside for. You don’t want half of the money you worked hard to save the previous week to immediately be put towards an oil change that you know you need every three months or so.
Another semi-frequent expense might include having to buy presents for a relative or friend’s birthday or paying to play in a recreational sports league. That’s why it’s important to have a “special occasions budget” or a “rec sports budget” so you’re always prepared and budgeting appropriately. A monthly budgeting spreadsheet can be immensely helpful when it comes to planning for these infrequent expenses.
Keeping your bank account above $0 can be challenging, but can be very beneficial to your future and your overall stress level. These common-sense tips will have you well on your way to spending money only when you can afford to — because you didn’t spend it simply when you could.