I’ve never really gone into many details of my savings plan besides it surpassing the $1,500 mark and $30/week gets automatically transferred into it. Keep in mind that I’m a 20 year old student with a part-time job so what works for me might not work for you. Here’s 3 simple steps to get started.
Step 1: Determining the amount.
My take home pay after taxes every week from my part-time job is roughly $250. The recurring amount I chose was $30 or 12% of my net pay. This is an amount I feel comfortable with and strongly advise you to choose a number you feel comfortable with. Generally you should aim for a number that’s at least 10%.
Step 2: Setting up the recurring transfers.
My current setup is that I get paid via direct deposit to myING Electric Orange account which also has a $250 overdraft line of credit. I then setup a recurring transfer that gets initiated once a week from FNBODirect (currently pays 5.05% as of date) that’ll automatically withdraw from my Electric Orange balance.
Why do I have the transfers withdraw from my ING EO checking? It’s all because of the overdraft line of credit they offer. In case you didn’t know, ING’s Electric Orange account has no overdraft fees. They offer you a overdraft line of credit and when you “overdraft” you simply pay a competitive interest rate on the money you owe. I’ve overdrawn a couple times and paid only a few cents in interest at most. Avoiding overdraft fees is essentially since this recurring transfer is automatic and will occur every week in the background. Sooner or later you WILL forget about the whole thing. Things could get nasty if you went on vacation for a couple weeks and your checking account keeps getting hit with overdraft fees. I strongly suggest you go with a bank that doesn’t charge you overdraft fees.
Step 3: Forget about it.
The amounts you add each week to your savings account will be rather small but they will build up over time. I let mine run on auto-pilot for over a year and I’ve already passed the $1,500 mark with simple $30/week contributions. Check your savings progress once a month at most and don’t be tempted to spend it.
On a side note, my emergency fund just passed $1,700 and still chugging along with $30 additions a week.
