One of our most dedicated FZ Daily readers asked me that after last week’s post. Thanks, G-Man!
I’m riffing off that question to explain our current savings strategy – “Faucet First, Surplus Second.”
First, let’s establish the definition of terms.
Faucet savings is what we call the money you pay yourself first with.
It’s money that’s transferred on autopilot usually the day after you’re paid.
Surplus saving is whatever’s left over at the end of the month.
So save first and then save some more.
THE SET UP
STEP 1: Calculate your monthly living expenses. That’s the baseline to keep in checking.
STEP 2: On the 1st of each month, move anything over your baseline into savings. Rinse and repeat for 3-6 months.
STEP 3: Take your average monthly savings and divide by 2. Then set up an automatic transfer the day after payday by that amount. THIS IS YOUR FAUCET SAVINGS.
STEP 4: Repeat Step 2. Transfer anything above your baseline into savings. THIS IS YOUR SURPLUS SAVINGS.
STEP 5: Every 3 months consider cranking up the FAUCET based on any recurring SURPLUS savings.
The goal is to get your surplus savings to as close to zero as possible.
Saving money before you see it is like a Jedi mind trick for your brain.
Soon enough, you’ll magically save more than you ever have (and might even convert from a spender to a saver.)
So I saved $912.45 over 4 months by paying myself first.
