1. Forgo using your central heating system and opt for space heaters (this is especially effective if you have a larger house and are really only in a few rooms during the day anyway).

2. Use ceiling fans instead of the air conditioner.

3. Use cold water to wash your laundry.

4. Use a clothesline.

5. Use compact flourescents in lieu of regular light bulbs. This is a quick fix and the payback is there.

6. Hibernate your computer when it’s not in use.

7. Replace your AC filters when required (or use a permanent filter and simply wash it monthly).

8. Close the AC vents in rooms you don’t use.

9. If you have an old AC unit (10+ years old), replace it! The newer models use up to 50% less electricity.

10. Use a programmable thermostat for a central air unit and turn the air off while you’re at work.

11. This main seem simple, but make sure your fans are all spinning the right way :) You want to be pushing the air DOWN.

12. Knock the thermostat up a few degrees and see if you notice a difference. If you don’t, you just saved yourself 2-3 percent.

13. I love plants and gardening, so I’m also down with planting shade trees strategically (this can knock temperatures down by 20 degrees in a now-shaded room!).

14. Insulate your attic. Poor insulation may mean you’re losing 30-40% of the cool air in your house.

15. Make sure your ducts aren’t leaking anywhere.

16. Keep an eye on windows and doors to ensure they’re sealed properly.

17. Block sunlight with window coverings (drapes, blinds, shutters, etc.).

18. Install reflective film on windows that take a lot of sun. Payback on this is three to five years (though that may vary based on your own energy costs in your area). It doesn’t block the light — just the heat. Very cool.

19. Use rugs on bare floors to keep a room warmer.

20. Throw on an extra layer and lower your thermostat during colder seasons.

21. Use a special tank blanket to wrap your water heater’s tank (if you don’t use tankless). It’s not a huge savings though — about $20/year. (From Anthony, a commenter below: “There’s a huge, huge, ‘it depends’ here. Newer water heaters (we replaced ours in 2007) are much more efficient and don’t need this. More importantly, check your warranty – many say that the warranty will be voided if you use one of these blankets.” — Thanks for the caveat Anthony!)

22. Fix any leaky faucets.

23. If you’re shopping for a new dryer, get one with a moisture sensor. You’ll never run it longer than you need to!

24. Consider a front-loading washer. They use less water and they leave less water in your clothes (which means less work for your dryer).

25. Clean your lint filter after each load.

26. When the dryer’s running in the summer, close the door (keep the heat out) and in the winter, open the door (let the heat in).

27. Use motion sensors for outside lighting (payback’s usually 3-5 months).

28. Use motion sensing lights for the interior as well!

29. Increase the temperature of your fridge/freezer to the highest recommendation. You’ll save 5-10% of electricity that way and won’t notice a difference.

These tips won’t make you rich, but I find it very fulfilling to not be wasteful. Your own mileage may vary.

The time is fast approaching where people will start thinking about, planning, and going on vacation. If you’re looking for a way to have a great time and save a bundle, you need to learn about staycations.

Urban Dictionary states that a staycation is “a vacation that is spent at one’s home enjoying all that home and one’s home environs have to offer.”

To be honest, that doesn’t sound to appealing, but if we dig down a bit, a great case can be made!

First of all, let’s quickly examine the normal vacation:

- You leave your “comfort” zone.
- You’re stressed about forgetting something, being on time, losing things on the way, going fast, waiting, etc.
- The hotel bed’s not as nice, clean, soft, cold, or warm as you’d like.
- The food is high-calorie, low-density, straight-to-the-hips type stuff!
- According to the American Automobile Association, the average North American vacation “will cost $244 per day for two people for lodging and meals… Add some kids and airfare, and a 10-day vacation could top $10,000.”
- Let’s face it. Vacations are exhausting!

Staycations are done from your home (usually taking day trips), where you don’t need to pack, wait at airports, or make unusually long drives. You get to sleep in your own bed and you can pack healthier food that is far less expensive!

Here are some tips to make your staycation a raving success:

- Shut off all communication. Do not be reachable by your employer if at all possible.
- Set a specific date and time.
- Take plenty of pictures.
- PLAN YOUR ACTIVITIES
- Avoid your normal routines.
- Consult tourist guides for your area and go into “tourist mode”. You’ll be amazed at all of the great places surrounding you!

Your staycation will bomb if you wake up and aimlessly begin watching The Today Show instead of getting out and doing something in your local area that you’ve never done before. Be relentless about planning. (Even if you’re planning to sleep until 10, eat breakfast until noon, swim in your backyard until 3, and catch a matinee then dinner — see how easy that was?)

Remember, this isn’t necessarily about not spending any money, it’s about spending a lot less and exploring the area closer to home. It’s about intentionally relaxing :)

I am no expert gardener.

To be brutually honest, I killed the first eight tomato plants of this season. This is my first attempt at a garden and I am definitely a walking example of learning (woops!) by doing.

However, now that I own a small piece of earth (alright, the bank has the title, but I’ll get it from them soon enough…) I’ve become increasingly intrigued by this whole “gardening thing.”

We reserve Sundays in our household truly as days of rest — trying to make it a day separate and special from the other six hectic and unbelievably busy days. As of late, my Sunday schedule has looked something like this:

1. Go to church.
2. Read about gardening.
3. Go to bed.

This Savings Tip is dedicated toward the economics of gardening. Is it economical at all? If you don’t kill your plants, and do a few other things right, I think it is. I’ll definitely report back at the end of the season (and thanks be to YNAB for allowing me to track each and every gardening expenditure).

With that said, I have a laundry list of things you should consider if you want to make your garden economical:

The Direct Costs

1. You’re dealing with nature here, and since so much of nature is still free, you have an advantage. Don’t fall for the fancy marketing at your nearest Big Box Home Store. You can score free fertilizer if you ask around. Collect rain water. Forgo the power tools (you’ll burn more calories to boot).

2. Time. I’m finding out that this is a big one for me. Since my learning curve is still so steep, the time I’m investing is significant. However, this is time I would be spending relaxing in some other way — it’s not time I’m taking off of work or anything like that.

3. I’ve done quite a bit of driving around, fetching things I needed for the first year of planting (mainly to build the boxes) and that’s consumed some gas. Not a ton, but that’s still there and should be considered.

The Direct Benefits (Vegetables You Can Eat)

1. You have to eat what you grow. If you don’t eat vegetables, then you shouldn’t plant vegetables. If you can only handle a few tomatoes per week, you should only plan to harvest a few tomatoes each week. Wasted produce will drive down your return on investment. (Yes, leave it to an accountant to take one of nature’s true miracles and brutally whittle away at it until it’s simply an equation giving you your return on investment. I apologize in advance.)

2. You don’t have to go HUGE to get some economies of scale. That’s where this natural miracle really shines. One pot. One sunny spot. Some water (collected in a rain bucket because that water’s still free last time I checked — and better for your plants than the treated stuff). A tomato seed. Some soil. That plant will produce dollars and dollars worth of tomatoes for several months. Your total investment could easily be south of $3.

(An aside: I was ordering some soil at our IFA store the other day and committed an atrocity. I called it dirt. Speaking of dirty, you should’ve seen the look I received from the lady at the register.)

The Indirect Benefits

1. I’m getting additional exercise beyond the extremely dull self-punishment I dole out to myself every morning in the form of pushups, pullups and running.

2. It’s not a tomato-to-tomato comparison when you’re looking at saving money on produce. The closest comparison you’ll get is by comparing organic produce to what you’ll be growing in your own garden. Even comparing it to organic is a stretch. The taste of your own produce (both psychological and actual) will be so much better!

3. There’s something intrinsically pleasing about growing your own food. I can’t whittle it down to a dollar figure. It’s impossible :)

Getting Started

There are some great resources in getting started. I plowed through Square Foot Gardening by Mel Bartholemew and highly recommend it. It’s an intense gardening method that lends itself toward being economical much quicker (more produce, less space, tools, and time required). This is not a “quick hit” savings tip, but it’s still there for you to consider!

I ate a radish from my garden yesterday — first bit of produce from the garden this year. Best radish I ever had. Also, for a very in-depth analysis of the economics of gardening, you’ll want to check out this post on Revive Your Life.

Hello Savvy Saver!

This isn’t mean to scare, or alarm, or start a panic.

My wife and I are both signed up for Lifelock now. Lately I’ve felt fairly exposed on the internet and wanted some peace of mind. Lifelock basically puts a fraud alert on your credit file — forever. If someone attempts to apply for credit in any way, the file is shown as flagged for a fraud alert and the person providing the credit is required to call the number on file and verify.

The other day, months after we had signed up, I bought a new mobile phone. They were doing the usual credit check and then the clerk handed me the phone and said,

“The person that runs credit checks for us said they’re required to speak with you and have you answer a few questions.”

Well, it turned out to be several questions and I was lucky enough to be able to answer them correctly. They were about previous addresses, the name of our mortgage provider, etc. — things that an ID thief most likely wouldn’t have.

I’ll admit I felt pretty good about things.

Be advised that, as far as I can tell, you could just reissue fraud alerts with all three credit reporting agencies by yourself. Lifelock does it faster and they have the whole thing streamlined, where it’d probably take you an hour or so each time you needed to renew the alert. I decided the service was worth it (and, if your ID ever is stolen, they basically have an insurance policy where they’ll do the work cleaning it up for you).

I don’t really like Lifelock’s advertising their CEOs SSN everywhere, but I recognize they’re trying to prove a point :)

How will this save you money? The same way insurance saves you money. Your insuring against an event that you otherwise couldn’t (or don’t want to) afford.

This link to Lifelock will get you 10% off. (I looked for steeper discounts and couldn’t find any — though 10% off a monthly subscription does add up I suppose).

Alright, so with Lifelock you have prevention. It’s basically like the alarm being tripped when a burglar opens a window.

Frankly, I’d rather have the burglar never come so close! Read on to see what I mean.

Last week while traveling I read a book called, How to be Invisible by J.J. Luna. I have no desire to be James Bond or Jason Bourne, and I’ll admit that some of the tactics in the book did feel a bit like I was working for the CIA. However, what impressed me personally was the emphasis on taking some key steps toward increasing your privacy and protection. If you do just a few of these things, you’ll be safer than 98% of the population:

– Stop receiving mail at your home (use a PO Box or, better yet, build a relationship with a bookkeeper or other paper-pushing business that will accept your mail for you). Do everything possible to dissociate your name from where you physically reside.

– Secure your wireless network in your home. If you can live without wireless (I can’t), then keep the connections wired.

– Store critical documents/valuable objects in a fireproof safe and do not put the safe in the master bedroom. That’s the first place a burglar will look for valuables. You may even consider setting up a decoy safe in the master bedroom with a few hundred dollars in there and some cubic zirconia.

– Only provide your social to government agencies and, even then, push hard to be able to get around providing it. If your social is needed for a credit check, then you should seriously consider whether you really want that credit. (You likely know how I feel about debt, so I won’t go into that here).

– Never provide your birth date, except to a government agency, and do that only when there’s no other way to get around it.

– Consider having your vehicles owned by and registered under a separate LLC (or have each owned by an entirely different LLC). Register the LLC in a state that doesn’t require you to disclose your personal information (New Mexico is one specifically mentioned and I’m looking deeper into that this week).

– Be vigilant in giving out any personal information to anyone for any reason. Best Buy rewards? Skip them or use an alias (J Smith instead of James Smith). Your grocery rewards program? Give them fake information. The dentist for a routine checkup? They don’t need to know all of that information! They just need to look at your teeth!

– Here’s a very simple tactic for increased computer security. Have all personal data be removed from your browser when the browser is closed. In Firefox (a browser I whole-heartedly recommend if you aren’t yet using it) you can do this very easily. Go to the Preferences -> Privacy tab and check the “Always clear my private data when I close Firefox”:

Make sure you click on the Settings… button and check every option:

I don’t check the box to have it Ask me before clearing the private data — mainly because I’m already certain that I want it to :)

What exactly does this do? It clears everything out. Have you ever noticed that on some (poorly designed) order forms, you can double-click on the Credit Card Number field and see all of the entries that have been made to that field? Having the “Saved From and Search History” box checked means that won’t happen again.

What we’re trying to prevent here is having your identity stolen. This is probably the heaviest-hitting savings tip I’ve written yet — mainly because preventing it will save you hundreds of hours of headaches that can sometimes last for years.

I hope you appreciate where I’m coming from with this. Lifelock is a great service — a great preventative alarm — but keeping even that from happening will also give you a lot of peace of mind. If you have any questions at all, don’t hesitate to ask!

Last week I ate at a restaurant called the Ocean Café (I don’t recommend it for the food, regardless of what I’m about to tell you). At the end of the meal they brought back my card with the receipts. Armed with my new privacy knowledge, I used the pen to scratch out the last four digits of the credit card number (used to idenfity you for various things quite often). To my shock and surprise, all 16 digits were shown in plain sight. I don’t consider myself paranoid, but that was something else!

Update (7/31/09): I received the following email from Greg:

You should consider making your subscribers aware that Lifelock is
being sued by Experian for violation of the Fair Credit Act and that Experian has received an early judgment in its favor (See this story).

Also, check out www.identityprofiles.com for a low cost SS# protection service that will also remind you when you need to renew fraud alert requests if you are managing them on your own.

I haven’t check out identityprofiles.com yet, but wanted to make everyone aware of what looks like a viable alternative.

I wrote a while back about an eating-out strategy that involved restaurants.com’s gift cards, along with sharing an entrée (cutting calories), etc. I received a few responses regarding tipping, and thought it’d be worth mentioning before I get into the actual money savings tip for this week.

First, to all of you who have worked for tips before, I share in your experience. I twisted balloons at restaurants when I was a junior/senior in high school and lived or died by the tips. (By the way, you can make very good money as a balloon twister).

So, my point is this. When you go into a restaurant and save a bundle with all of your coupon strategery…make sure you tip the server for the work they performed, not based on your extremely discounted bill. Be a smart tipper. Tip for good service and be aware of your discounted ticket.

Alright, onto the savings tip, which has everything to do with eating out again. Hat tip goes to Kristen out of Boston for this one.

Register at OpenTable.com. Every time you eat at a restaurant reserved through OpenTable you’ll earn points — between 100 and 1000. For every 2,000 points earned, you receive a $20 gift card. The points can accumulate, so you can eventually treat yourself to a very nice meal where the only thing you really have to pay for is the tip :)

Remember, you need to already be planning on going for this to save you money. If your sole purpose in going there was to earn points then you are fighting a losing battle my friend.

There you have it though. A very practical, tactical tip that you can implement immediately.

I won’t waste your time with this tip today!

Quick example of this savings tip in action. My friend Adam was purchasing Adobe Fireworks just a few minutes ago. The list price: $299. He googled the term “adobe coupon code” and immediately found one that gave him 15% off. He saved $45 in about 10 seconds. (For you number crunchers, that’s an hourly-rate equivalent of $162,000.) :)

A few of you are a part of the Savings Tips because you already know this tip, but I thought I’d pass it long to those that don’t.

Just remember, when you’re purchasing something online and you notice the shopping cart has a field to enter a promo, promotion, coupon, or discount code…google “[brand/product] [promo/coupon/discount] code” and take a look at the top few results. If you don’t find one, all you lost is a few seconds.

Hello Savvy Saver!

This will be my shortest tip yet. I’m certain of it.

For years different cultures have employed the idea of fasting — more for spiritual reasons than anything else. I’m going to suggest you go on a spending fast for financial reasons. The tangible benefit will be that you’ll save money. The intangible benefit? You’ll empower yourself.

Pick a day this week and don’t spend any money. (If you have automatic payments set up for the day you’d like, don’t worry about that). There are a few things you’ll want to do to make sure you don’t fail. Make sure you have enough gas in your car and food in your fridge — other than that though, you’re probably pretty set.

Now, it’s plainly clear that you could simply purchase everything you want today and then fast tomorrow, of course. And you can always have in the back of your mind that you’ll be spending tomorrow, so you don’t need to fret about not spending today…that’s perfectly true as well. Whenever I fast, I’m acutely aware of when I’ll be able to eat again — for some reason I still feel hungry and it’s still tough to discipline myself not to eat :)

So let’s do it this week. Pick a day. Don’t spend any money on that day. Just take 24 hours to tell your money that you decide when it leaves your life. That ultimately, you’re the one in control.

Oh! Also, I had someone ask last week if it was okay to forward these tips along to friends…ABSOLUTELY! Please do! Actually, with a spending fast in mind, it’s a great idea to forward this along to three or four close friends, decide on a date, and do the fast together!

Undoubtedly, some of you will be thinking, “Oh, well I’ll just spend tomorrow what I didn’t spend today…so I won’t actually save any money.” Yes you will. There’ll be purchase opportunities on your fasting day that won’t come up again later. That’s money forever saved.

Hello Savvy Saver!

Kids do not need your money to have fun.

This here is Porter.  Every parent brags on their kids, so I’ll brag on mine.  He throws a perfect spiral.  He adjusts to any ball thrown to him just like Jerry Rice.  He has potential, and my job is to not stifle it for the next 14 years.

He’s four years old.

A couple weeks ago I thought I’d be the best dad ever and bring home a surprise.  A massive Lego pirate ship.  Porter was ecstatic.  We began the unveiling on the kitchen table and had to re-veil it an hour and a half later because I wasn’t even done constructing the first half of it.  That night Porter made me promise we’d finish building it the following night.  First thing in the morning he pops out of bed and is devastated that I have to go to work before we can finish it (he knows when I go to work I’m gone all day and that there are only a few hours from when I get home to when bedtime hits).

Well, we did finish it, and Porter and his brother had a blast with the pirate ship — for about two days.

Legos are PRICEY!  I saw this as an investment in my kids’ entertainment and it very quickly was not paying any dividends.  It’s already begun gathering dust.

A few months ago we were playing dodgeball in the house.  I was using virtually any ball that isn’t hard, but I throw them hard, so things around the house (including the boys, my targets) were in danger.  They didn’t care about the danger at all.  We’d run circles through the house.  We have a large family room, so it’s perfect for dodgeball.

Anyway, I won’t go into details, but I got in trouble for doing the dodgeball thing.

For Christmas, Santa brought the Mecham household six colored balls that are the perfect size for dodgeball.  They’re also soft, so things and people won’t get hurt.  I asked Santa, and those balls cost almost nothing.

Two days after the grand entrance of the pirate ship we were back to playing dodgeball.

I’m no parenting expert, so take this observation for what it’s worth.

One thing I have learned regading kids and money “invested” in their entertainment…everything seems to be so much more entertaining when I’m directly involved with whatever we’re doing and it is never related to what I’ve spent.

So the next time you’re sitting there debating about whether or not to drop XX amount of dollars on this or that electronic gadget, widget, etc… just remember that YOU are much more entertaining than anything you can buy for your kids.  Save yourself some money and give them your full, undivided attention.  Let’s not let the Wii replace the ‘We’!

Hello Savvy Saver!

This is why knowing what’s going on with your money is so important. Armed with excellent information, you make excellent choices.

I don’t know if I’ve mentioned this yet, but I read this terribly interesting book called The Omnivore’s Dilemma. This is a savings tip, so I’m not going to go into the book much at all. Suffice it to say that once I had read about half of it, I decided that I wanted to drink milk that came from cows not on antibiotics or growth hormones. I’ll leave it someone else to explain the why behind it.

The why isn’t even relevant for this extremely short, and surprising savings tip.

So, I approach Julie, “Hey, what would you think about having our milk delivered? It’s special kind of milk that is fresh, and doesn’t have any growth hormones in it.”

She responded, “Is this because of that BOOK you’ve been reading?”

[Silence]

She continued, “How much does it cost?”

And then I really knew I’d probably lose if this came down to cost. Here’s why. Utah has very inexpensive milk. We regularly get it three for five dollars (Costco). At $1.66 per gallon, that’s a great price. Well, I’d been looking at Winder Farmsand saw their pricing: $3.49 for ahalf gallon of their skim milk in a glass jar.

Granted, it’s delivered in a cooler right to your doorstep, so the intangible benefits are great, right? It makes me feel like I’m living in some classical novel where I should also have a piece of straw in my mouth, wear suspenders, and build a wrap-around porch for our house — with the accompanying swing. Also, the milk is fresh. It tastes fantastic.

So I did the classic marketer/infomercial tactic on Julie and she wasn’t any the wiser (or at least she pretended not to be).

I said, “Well, let’s just try it this week and if we decide it’s not worth it, we’ll cancel.”

Four weeks later we still haven’t canceled. And that’s a good thing. It has nothing to do with whether or not I’m drinking milk from cows treated or not treated with hormones. It has everything to do with our bottom line.

A few days ago Julie and I were working on our budget for the month. We always go over what we spent last month, talk about it, and then move on to what we will spend this month. I took a gander at our Food : Groceries category and my jaw dropped so far it almost hit the space bar on our laptop: $383.62. I moused over the Outflows column of the Food : Groceries category so I could see the breakdown.

It lookedlike everything was there…

Julie stated the obvious, “That can’t be right.”

My response was full of jubilant surprise: “It IS right! Woot! Milk delivery all the way baby! We SAVED money!”

The blinds on the sliding glass door were closed, so I proceeded to do the Milk Delivery Jig — with our cull-d-sac neighbors none the wiser. You may say it’s a fluke, but I have excellent data to back it up. We usually spend at LEAST $600 on groceries each month. Julie’s an excellent cook, and groceries is an area where we just don’t like to cut back. If she wants to use seven varieties of rare peppers in some new soup she’s discovered…she does. She does an excellent job of seeing what’s on sale and cooking toward that end, but there are times when she just wants to make something, and she makes it.

I’m here looking at our budget file now, as I write this, and am still not quite believing it. In the previous month we had spent over $700. Also, in the month before that we’d spent just a hair below $800 (special occasions mixed into that one a bit). I’m not going to go so far as to say that we cut our budget for food in half, but we came darn close. I grilled Julie on this:

Did you just clean out our pantry?

Did we not eat any meat?

Are you not feeding the kids while I’m at work?

Her answers were satisfactory (she does feed the kids), and she basically summed it all up quite nicely: “Well, I only went to the grocery store twice because I didn’t need to keep going back to get milk.”

I’m going to keep a close eye on groceries for this month, but so far we’re tracking for it to be another record low. Alright, what I’m NOT going to do is tell you to pay four times the normal amount for your milk. But I would like to encourage you to do the following to save trips to the grocery store:

Buy the largest amount you can of your staple foods.

Freeze milk (it works just fine) so it doesn’t go bad. Freeze bread. (Haven’t tried freezing eggs). I’ve heard people say before that you should “consolidate” your grocery trips. I’m talking about taking that to the next level. Extend the time from one trip to the next as far as you can. Make it a game. I guarantee your grocery bill will plummet.

Keep in mind, this is superior to the tactic of making a list and then only buying what’s on your list. Why? Because you only make the list when you know you’re going to the grocery store, and if you’re not going, you don’t need to make the list and you won’t be spending the money (even on those things you “need” that would have been on your list). I’m not going to cancel our milk deliveries. The milk tastes too fantastic. I AM going to enjoy the fact that our grocery bill is much smaller and we are none the hungrier for it. I wonder what will happen if I have our eggs delivered as well?

Hello Savvy Saver!

This week we won’t talk so much about saving money.  We’re going to talk about putting the money to work that you already have.  I’m going to talk about managing your cash flow in such a way that you remove the temptation to spend money that you shouldn’t be spending, maximize your interest income, and minimize your hassle. This principle dovetails nicely with YNAB’s Methodology, specifically Rule Three where we want to Save for a Rainy Day.  I’ll do a quick review of that rule, and then we’ll dive right into the nuts and bolts of this.

A Quick Review of Rule Three

The job of Rule Three is to take your current life situation (you may recognize this from The YNAB Way):

and make it much more manageable. The high points of stress are correlated with low points in your cash flow.  Times where a large (expected or unexpected) bill arrives and you stress out.  When implementing Rule Three, you take those larger, anticipated expenses and you break them down into monthly, bite-sized chunks. If you’d like to spend $600 on Christmas this year, then you budget $50 into your Christmas fund each month.  If your car is old and needs constant repair, then you should be budgeting $100 per month into your Car Repair fund, turning a potential crisis into a mild inconvenience.  If vacation is calling your name, and you’re thinking it’s going to cost $850 — happening just five short months from now, then you’ll need to put $170 into your Vacation category each month for the next five months.

You take those large expenses and you make them manageable, ensuring that you have the funds when the due date comes.  Your life then looks like this:

Notice there are still ebbs and flows.  Those are the ebbs and flows of Life and they’ll always be there!

Now, let me share a little secret with you.  If you were a bank manager and you could pick to hold the checking account of a YNABer, or your standard Joe Schmoe, you’d pick a YNABers checking account over Joe Schmoe’s checking account every time.  You’d want to pick a YNAB devotee that had been using it for at least six months or so.  Why?  Their account would be brimming!

Seriously, when you’re following Rule Three, you’ll develop some serious padding in there.  Your Christmas fund will grow to several hundred dollars, your vacation fund will be bursting at the seams, your car repair fund (crossing your fingers here) just keeps getting bigger…the list goes on and on.  Where you once had thirty-two dollars (and twelve cents, thank you very much!) you now have thirty-two hundred dollars, or much more.

For some (spouses as well), this can be a rather large temptation.  Here’s how you remove the temptation, and make some money to boot.

The Plan

Step 1: Open a High-Yield Savings Account

I happily recommend ING Direct .  I’ve been using them for the past eight years and they are phenomenal.  Their interface (which you’ll see in a second) is drop-dead simple, they let you open multiple accounts in seconds (you’ll see why that’s important in just a moment), and their customer service is excellent.

You can see from the interface that everything’s very simple (I have my Emergency Fund in there, the kids’ savings accounts, and some old float accounts I previously used):

Let’s say I have a Rainy Day fund category for Christmas and the amount is becoming quite sizable in my checking account…I’ll make a separate savings account for it by clicking Open another account, select Orange Savings Account, then click Open Now, choose the type, the Nickname (I’ll name it Christmas) how you’ll fund it (another ING account, or your linked checking account), and then click Open Account…done!

Step 2: Set Up a Scheduled Transfer

So you can see I have my Christmas account set up in no time.  My next goal is to set up a scheduled transfer:

It’s a pretty nice little setup.  I want to start the transfer at the beginning of March and have $1,200 in our Christmas account by the time Christmas rolls around (it’ll be a lot merrier this way!).  Notice that I entered the End Date of 12/01/2009.  So once I’ve hit my target, the transfers stop.  All that’s left to do is simply budget the $120 per month into my Christmas category and record the transfers in YNAB.

You can set up these accounts and transfers in minutes so there’s really no excuse.  Get started with Car repairs, vacation, property taxes, gardening expenses, anniversaries, car insurance, etc.  It all depends on your preference.  If you’d rather keep it all in your checking account and have a huge balance, that’s okay too :)

The advantage to this strategy is that you’re allowing your saved money to do something for you while it sits there waiting for its job to roll around.  It’s nothing astronomical, but a bit of high-yield interest never hurt anyone.  If your Rainy Day funds end up averaging a balance of $5,000 throughout the year, you’re looking an interest income (for doing nothing except being smart about it) of:

Rate	Income
2%	$100
3%	$150
4%	$200
5%	$250

I don’t think those amounts are anything to sneeze at!  Especially since you’re already doing the budgeting side of things–you just need to change the physical location of the money and you’ll get a bonus depending on your interest rate.  (A bit of a caveat on interest rates, I’ve seen very high yields that require minimum balances, require that open a checking account that receives direct deposit, go lower after some introductory rate, etc.  ING just gives you the rate and calls it good.  It’s never as high as the teaser rates, but it’s always competitive.  Now, I’m an ING fanboy, but I’ve also heard good things from people about HSBC and EmigrantDirect.  Pick your poison!).

Your Money at Work

This isn’t some groundbreaking tip that will save you thousands of dollars, but it’s likely worth a few hundred.  On top of that, the thought process that you’ll enter into is important — the habit of having your money do useful things for you is a great one to develop.