I have updated my No Credit Needed Network Chart so that it reflects my progress as I rebuild my non-retirement savings.
I managed to add a little to my savings account, bring my total saved for 2007 to $2638.
Contrary to popular financial advice, I actually ‘pay myself last’. I deposit our paychecks at the first of each month. I then pay all of our monthly bills and we live off of whatever amount is ‘left over’. If we have money left at the end of the month, it gets ‘swept’ into our savings account on the last day of the month. This goes against most conventional ‘wisdom’ – But, it works for us.
Quick note: Not every dollar that gets deposited into our checking account ‘sits’ there for the entire month. I transfer to savings the portion of our income that is allocated for annual, planned-for, expenses like automobile insurance and life insurance. And, if it becomes evident that we have ‘over-funded’ a particular budget category, I’ll make a mid-month transfer to savings. The main point, however, is that we keep enough cash ‘on hand’ to cover monthly expenses. One of the keys to the ‘No Credit Needed” lifestyle is to avoid a situation where I am ‘low on cash’.
I understand paying yourself last. I see saving as going both ways. Some savings you (probably) want to do right up front. Figure out what you should be able to save this month and put that in the budget, transfer half with each paycheck or something. But then the leftovers of any budget go into savings for me. Or debt repayment. Like snowflaking with budget scraps.
I understand that strategy. I do the same thing. I’ve already paid all of the bills for February that are not paid electronically. I find that pre-paying the bills works great to avoid extra interest charges and also gives a good idea about how much will really be available for savings. I think that it is much more important to consistently spend less than you earn. If you can manage that, the savings almost happens on its own.