A savings account is not something to hang on the wall and stare at, like a Rembrandt. You are not hoarding. You are preparing to use your money in a different way.
Refer, please, to your Spending Plan. It says that your current goal is to pay down debt. Or 3 month’s living expenses in the bank. Or $2,000 more in a college account this year. Or $5,000 for long-term investments. Or $1,000 to play the slots in Vegas, where you will really make some money. Tithing, or semi tithing, is how you are going to raise your stake.
Here is how to accomplish it:
First, write down how much you are going to save (5 or 10 percent of each paycheck).
Second, write down how long it will take to reach your goal. At $250 a month, you will have your college account in 8 months. (Tip: It is easier to save $59 a week than $250 a month. The smaller sum sounds more doable, even though it comes to the same in the end.)
Third, note each future $250 (or $59) payment on your calendar and check off every one you make. That may sound hokey, but it is a strong motivational tool. Every time you turn to a new week or new week or new month, there is a written reminder to keep up your resolve. Saving money is easier if you see it climb toward a specific end. It is like polishing the car. You feel that you have accomplished something.
Fourth, when you have reached your goal give yourself a little present. Then start the process all over again.
Should you build up a bank account instead of paying off debt?
No, no and again, no. Repeat after me: paying off debt is a form of saving. In fact, debt repayment is one of the most lucrative ways to save. It is nuts to keep money in the bank at 4 percent interest while carrying credit card debt at 18 percent. You are losing 14 percent a year on that deal (the 18 percent cost of the debt minus the 4 percent earned on the bank account). Take most of your money out of the bank and reduce the debt. If you need quick cash, you can borrow against your card again, and in the meantime, you are saving yourself a mountain of interest.