So, how do I hide money from myself and act like a personal finance blogger who knows what she’s talking about?
Every two weeks, when that fat, juicy paycheck lands in our checking account, it feels like we’re rich!
Fancy dinners, new craft supplies, and silly cat costumes, here we come!
But wait, that would be a bad idea. I have bills to pay and responsibilities. Ugh, that sweet padded checking account is just sitting there, waiting to be spent!
So, I must hide money from myself, before I even have the chance to see it.
Hide Money Before Even Getting Paid
Like many employers, Mr. Bean’s cushy government job offers direct deposit. Actually, they don’t just offer it, they require it!
But before the direct deposit even gets made, we automatically have bits of his paycheck sent to different benefit accounts his employer offers. Making sure our money is put to work before we even see it.
FSA (Flexible Spending Account)
I know not every employer offers one but a Flexible Spending Account (FSA) allows you to put pre-tax dollars into an account specifically for medical and/or child care expenses.
There are annual limits: in 2022, we can put up to $2,750 for medical expenses.
This account lets us pay for medical expenses with PRE-TAX dollars. Doctor’s co-pays, dental visits, new glasses, menstrual products, bandaids, prescriptions, and so much more! All, tax-free! Which allows your paycheck to go further.
The only bad part of an FSA is that it is “use-it or lose-it” for any given calendar year.
If you put $2,000 in for the year but only use $1,000, you risk losing that extra $1,000. So it’s important to look at your upcoming medical expenses and only put in as much as you think you’ll actually spend.
(Some years, with some companies, the FSA has allowed a certain amount of carry-over, like $500. But unless it specifically says it when you apply for it during open-season each year, expect to lose any unused dollars.)
With my RA and two kids who always seem to have cavities, no matter how much they brush, we opt to put in the maximum every year and have always used it all. (Hacks to Reduce Medical Expenses)
But if you’re rather healthy, with no kids (or kids who never need more than a basic dentist visit) make sure to only put in as much as you think you’ll definitely spend. And don’t forget to renew your opt-in every year during open-season in November/December.
Employer-Sponsored Retirement Account- 401k, TSP, 403b, Whatever your industry offers
As I’ve mentioned in many previous articles, putting money into your employer-sponsored retirement account should be one of your top priorities to set yourself up for financial freedom. (Path to Wealth, Late-Start Retirement)
Your employer can automatically deposit your designated amount into your account for investing each and every paycheck before you even have time to blink.
And the best part is that most employers offer some sort of employer match. This employer match is free money your employer includes as part of your salary. If you turn it down, you are essentially taking a pay cut. “No, thank you bossman, I don’t like extra money.”
As soon as you start a new job, or as soon as you qualify for your retirement plan, tell your Payroll department to put in at least the employer match.
This money will come out before you ever see your check and build throughout your career. Allowing you a much cushier retirement in your old age.
How We Do It
When Mr. Bean started his job, 15 years ago, he started contributing to his TSP with just the 5% employer match.
As the years went on and he got raises, we decided to up his contribution by 1% every year. If he got a 3% raise, we’d have payroll up his contributions 1% and enjoy the rest for cost of living increases.
In recent years, we were able to keep our living expenses stable while he still received annual pay increases. We decided to increase his contribution by more than 1% so that his TSP can grow even faster.
Without ever seeing that money, or even thinking about it beyond a 5-minute computer session to increase his percentage when he gets a raise, we are building a stable retirement account for our future.
(I did the same when I was working full time too. Now that I only work part-time, we have transferred my old 401ks into a Traditional IRA and max out my Roth IRA every year.) (Traditional vs Roth IRA)
Direct Deposits into Savings Accounts
One of the unique things Mr. Bean’s company offers is the ability to direct deposit into multiple accounts. (My old jobs never offered more than one direct deposit, so I had to set up my own transfers.)
We make sure to keep a fully-funded emergency fund of about 6 months, so we have money specifically deposited directly into that account each paycheck. We never see it. So we can’t think to touch it.
Back when we did have a car loan (How Much Car Can I Afford?) we had direct deposits go into a savings account with our credit union to make automatic payments.
Now that we no longer have a car payment, we still allow that direct deposit to go through each check to build a future car purchase fund. Again, we don’t see it happen, so we don’t even think of that money as ours each month. It just secretly grows, waiting for the day one of our cars decides to die.
Hide Money With Automatic Transfers
Once paychecks finally come through, every 2 weeks on Friday, I don’t even look at the bank account until Sunday.
Because Mr. Bean has pretty regular checks, I have set up automatic transfers to occur the Saturday after payday. (Minimalist Banking)
Expected Expenses
Each year or so, I go through our major irregular expenses (insurances, vet, medical, etc. ) and figure out how much we need for Expected Expenses. I then divide that by 24 (usually 2 checks a month) and automatically have that amount deposited into our different accounts.
Household Bills
I do the same with our rent and utilities.
Half of our rent is automatically deposited into our “household bills” accounts along with half of our utility payments. Bills like electricity go up and down with the seasons but we have an average monthly bill. By automatically putting in half of that average bill, every check, the extra saved on lower bill months means there’s extra money available for higher bill months and I don’t even have to think about it.
Retirement and Investing
Since I stopped working full time, 8 years ago, I no longer have access to an employer-sponsored retirement account. But we know how important saving for retirement is so we make sure to make automatic contributions to our Roth IRAs every paycheck.
By setting aside our investment contributions automatically (every Saturday after payday) we never see that money.
In addition to our automatic transfers set up through our bank (Ally), we also have automatic contributions set up through our brokerage (Vanguard). All our money gets put where it needs to go before I even look at it on Sunday.
Spending the Money We Get to See
After all of our money has been automatically sent where it needs to go between Friday and Saturday, I finally check our bank accounts on Sunday to see what we have left to spend.
From what’s left, I am able to budget out our groceries, gas, eating out, and any other expenses.
By never even seeing those big dollar-dollar bills in the bank on payday, I prevent myself from the temptation of going on a Target bender.
But, if there’s money left over in the budget, I can go on a mini bender, without feeling any hint of guilt!
Knowing that all our bills and necessities are being taken care of in the background gives me the freedom to spend what’s left of whatever we want or need.
“Hello, my precious dark chocolate bars.”
Wrap-Up
Trying to be a responsible adult, and knowledgeable personal finance blogger requires me to hide money from myself. I admit it!
Just leaving a stash of money in our checking account and hoping it will pay all the bills while remembering to save and invest too every month is hard.
That fat juicy bank account just begs to be spent!
If you get that same tickle to spend every time you get paid, try hiding some money from yourself too. (Where to Put Your Savings) And watch your bank accounts grow.
(Actually, don’t watch them, that’s the whole point. Just check on them every once in a while and smile.)
What do you think? Do you hide money from yourself? Do you think it would help you prevent Target binges? Leave a comment below and join the conversation.
I contribute to retirement at work, but that’s a great idea to transfer money for bills right away too.