Welcome to the future!

In the future, you’ll have magic paths for your money to travel through the air so that you never have to place your pretty hands on those filthy dead presidents again! You don’t know where they’ve been!

Ah, we’re living the life, aren’t we? So many easy ways to budget and we still can’t save a dime.

What if there was a simple way to successfully turn around your budget?

First, I’m not suggesting you recite generic mantras like: “know in your heart that you can do it and track all of your expenses penny by penny every day.”

How many times has that approach worked for you? Let’s put it this way: The people with the patience for that approach, you and I wouldn’t have as friends.

I’m not talking about an easy way for busy people to budget, like I did in this piece last week….today I’m focused like a laser on one financial move so simple that it’s been right in front of you forever and I’ll bet you didn’t notice it.

Here it is: do you use direct deposit? Yes? That’s the good news.

The bad news? There’s a big chance you’re using it wrong.

The magic of direct deposit is that money flows in the direction you want it to go. So, why does it always flow to the one place it shouldn’t be? Why does it flow to your checking account?

So, I Was Broke

It was 1999. I was at the ATM machine when I had this a-ha! moment. I couldn’t stop grinning. I’m sure the people behind me thought I was an escaped mental patient.

Standing there, like I had for much of my early career, I was out of money. When I got a few bucks in my checking account, it flowed directly away from me.

My receipt showed that I had three dollars in my account. I was kicking myself when I remembered a cheesy old quote I’d tell clients all the time:

What’s the definition of insanity? …doing the same thing again and again and expecting different results.

Putting money into my checking account was the dumbest thing I could ever do. I’d just spend it all. Something would come up….probably something that at the time seemed really important….and then I’d blow all my cash.

Standing there, I had a revelation: What if I never had money in my checking account?

Wealthy People Practice Good Habits

I thought about my rich clients. They always complained during our meetings about never having any money. It blew me away. Sure, they’d take expensive vacations and lived in palatial estates, but if you asked them to open their wallet, they never had any cash on them, and they were frustrated. One client asked me if he could have some money from his account to get something to eat.

Uh. Sure.

Then I realized the truth. Wealthy people forced themselves to save money by not having it on them. Leaving cash where you could spend it was a habit that created spending. Being in the store created purchases.

That’s when I began moving money to my savings account instead.

The Airport Trick

Here’s what I discovered: with money direct deposited into my savings account, I’d be able to better monitor the flow of funds. I’d be like the air traffic controller at the airport–money would fly in and out of my control, but I’d have a good handle on where it was going. No longer would I feel that money was in the wrong spot, or that I just needed to concentrate a little harder on counting pennies to save money.

My new budget success plan worked like this:

1) I redirected pay checks into my savings account. I made sure that the account had online access but no ATM privileges. I couldn’t risk my system to an ATM card. If I was in a tough spot, I’d force myself to find another rescue.

2) Following the advice is this piece, I reworked my goals and set up automatic flights out of the account to meet them into my cash reserve, retirement fund and Upromise accounts.

3) I then worked through the amount of money I’d need to get through a month. If you need a spreadsheet, here’s a great one from the National Endowment on Financial Education: Budget Worksheet.

4) I transferred monthly budget money automatically from my savings into my checking account. I didn’t do this manually, because I might start making “exceptions” to my plan.

5) Any automatic payments that were the same amount each month were automatically sent directly from savings and reduced from the amount we’d send to checking.

This one move–direct deposit into savings instead of checking created my first real budget success. Suddenly:

– Money was accumulating on it’s own.

– I had a specific amount of money to spend each month that was different from what my job paid me. Instead of my job dictating my budget, I was in charge.

– I wasn’t whispering “I can do it” mantras or hoping to do a better job next time. I threw all the “touchy-feely” budget advice from well-meaning broke people out the window. I now was using the same method that rich people were using.

Simple Doesn’t Mean Easy

This time-tested approach to money management is wickedly easy to implement, but shockingly, many clients I’d recommend it to were afraid.

“I can’t do that.”

“What if I have an emergency?”

“It’ll be so hard to change!”

Three points.

– You can do it. Once you take control of your financial future (not hope for better, but change your systems to accomplish more), you’ll reap the benefits of sound money practices.

– If you have a real emergency, the money is in your savings account. Although you don’t have ATM access, there are still multiple ways to retrieve funds from the account.

– Change is never easy. It’s especially hard when you’re following antiquated advice like “write down every penny you spend.” Yawn. Get effective, time saving systems to help you move ahead.

Although motivation isn’t the heart of this plan, I will admit one point: You’ll be far more motivated to save when you practice a system that works. I promise you that once money starts accumulating in your savings account, you’ll look back and laugh about the trips to the empty ATM machine.

I do.

Have You Tried Direct Deposit to Your Savings Account? If so, did it work? If not, are there other tricks you use to automate your process? Let’s talk tactics in the comments.

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