Pay yourself first

Rosie_D

Hi there

We are just starting out with our savings & I have just read The Automatic Millionaire by David Bach, where he says to set everything up automatically & it just takes care of itself without you having to think about it all the time.

I'm really taken by this method & I've just set up a standing order for £700 per month to go into our offset mortgage savings account. Does anyone do automatic savings? I've never thought of this before, it seems too easy not to have to think about it!

Thanks

Rosie D

chris_m

Rosie_D wrote: »

Does anyone do automatic savings? I've never thought of this before, it seems too easy not to have to think about it!

I used to do that - had a standing order transfer money each month from my current account to my savings account. However, I got so used to making additional, varying amount, payments as well that I stopped the SO and just worked out the total amount and made one payment manually each month. I also transfer "most" of my monthly pay as soon as it arrives and set up payments back as needed to tally with outgoings - so that as much of my money as possible is earning something.

I do, of course, use standing orders to bounce money between various other current a/cs (which I use/treat as savings a/cs) to meet the monthly funding requirements so that I get the interest

jimjames

Depending on your rate it's not automatically the best thing to pay off your mortgage. It might give more security but you could get better return elsewhere if your rate is low. Really depends if you want that risk or certainty of mortgage being cleared.

savingfortomorrow

i remember reading about it years ago and followed it. concept of pay yourself first sounds illogical but saving a small amount before any bills come in the door guarantees a cushion.

sometimes a direct debit to your saving can be beneficial as i regard that direct debit as important as any other bill. it is disciplined and simple. I tend to save any left over bits also. if you have to make a conscious decision to save it may not happen at the rate and frequency you require.

Eco_Miser

Regular Savings accounts generally need to be paid by Standing Order so automatically paying yourself first, or at least at the same priority as your bills.
RS accounts pay up to 6% AER so are very worthwhile having. See this post for details.

N1AK

Rosie_D wrote: »

I'm really taken by this method & I've just set up a standing order for £700 per month to go into our offset mortgage savings account. Does anyone do automatic savings? I've never thought of this before, it seems too easy not to have to think about it!

No, although I consider our primary current account (Santander 123) to be a 'savings' account so all our money goes straight in there. As that exceeds the limit they pay interest on money is transferred elsewhere.

A huge part of saving is dealing with anything that leads to what you consider wasteful spending, and making saving as easy as possible. If automatic payments help with that then it'd make a lot of sense to take advantage :beer:

Rosie_D

Thanks for your replies everyone, I'll take on board what you've all said.

I'm definitely going to set a standing order up so it can all be done automatically, then I don't have to think about it anymore. Also once that money has been transferred, along with the direct debits, we know that what is left in our account is for us to spend & if it's all gone at the end of the month, then we won't feel guilty as we know we've already saved something x

Playing_with_Fire_2

I do automatic savings, and I set a minimum balance in my current account so that I'm not running it down to zero and risking fees. So when I see £3005 in my account then I think of that as having £5 left, and if it is £2995, then I have overspent by £5 so need to earn some more money or give something up next month. If you have a cheap/free overdraft then you can run the account down to zero.

Rosie_D

That sounds a good plan PWF, whatever works for you is the best option! I want to just set up an automatic savings & forget about it & just concentrate on spending what's left in the current account, & if theres anything left over put that over into the savings too!