I’ve been asked more times than I can count: How do I save money when I have no money left over from my paycheck? This is important, so I’ll get right to the point (shocking, I know).

First it’s important to establish your goal. When you know why you’re saving, you’re more successful. If you’ve got zero savings and are living paycheck-to-paycheck, your first goal should be an emergency fund, so that if you lose your income source it doesn’t mean losing your home, vehicle, etc. After that, you should work on paying down high-interest debt, but that’s for another post.

You should not even think about retirement, a home purchase, large “fun” purchases, college for your kids, or vacation until your emergency fund is built and high-interest debt is paid.

Your emergency fund should contain 3-6 months of mandatory living expenses. Many people who follow Dave Ramsey start with $1000, focus on their debt, then go back to finish saving the 3-6 months. Its a great way to break it into manageable pieces.

Second, make a list of all your mandatory expenses each payday. Figure out how to reduce some of what you’re paying each month. There IS a way. Many times you can switch to a smaller cell phone package or eliminate cable, etc. You don’t need Starbucks. Cut your extras until your emergency fund is built.

Third, subtract what you HAVE to spend from what you bring in. Whatever is leftover is your disposable income. From that, decide how much you want to pay yourself each payday. You can start small if you don’t have much leftover; $20 or even $10 per paycheck is better than zero! If you can do more, that’s fabulous. I like to raise mine by $5 or $10 every month or so and by a larger amount any time there’s a raise, bonus, or any increase in cash flow, so I don’t really notice it.

All this seems like common sense, right? The next part is where people go wrong and get off track.

Open an account AWAY FROM YOUR REGULAR CHECKING THAT YOU USE. Don’t use the same bank, because usually they’ll have an option for you to do an immediate transfer into your checking. Make this money more difficult to get to than what you use for regular expenses and spending. Don’t even get a debit or ATM card, at least to start. In a true emergency, you can have your money transferred to your regular account within a few days. There are accounts you can open online that have comparatively decent interest rates.

Have your decided amount taken out of your account AS SOON AS YOUR PAYCHECK HITS YOUR ACCOUNT. Schedule it to be done every single check ahead of time. With my personal accounts I have all my different amounts for different accounts scheduled to come out a day before payday, so that the money is actually debited on payday instead of the day after. I don’t leave any space for it to be spent. After a few times of this you won’t even notice it’s being taken. You can automate your savings further by using Digit.

The last 2 points are crucial if you really want to save money and aren’t disciplined. If you wait to save with whatever is leftover after you pay bills and start spending, you will never have any left.

Wealth-building Rule #1: Pay YOURSELF first. Always. You will never achieve financial security if you allow yourself to be caught off-guard with no emergency fund. After your emergency fund is built, learn why saving money is a bad idea.

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