As part of my realization of getting out of debt being like a rehab program, I’m trying to be as open as possible. To that end, here’s an update on my savings program.
Before 2009, I was transferring a paltry $50 per month into savings. And that was my savings account, at the same bank as my checking account, which was readily available due to ATMs and instant transfers. In short, I didn’t save much.
As I mentioned before, I switched my W-4 withholdings from 0 to 2. To the foreigners out there, I was basically overpaying the government in each paycheck, and getting it back in one lump sum at the end of the year. By switching to 2, I’ll be pretty close to even on my tax withholdings, so I’ll only owe or get back a few dollars at the end of the year. This resulted in a net increase of take-home pay of $76.06 per paycheck (bi-monthly). That money is being transferred to my money market account. I’ve also switched my regular $50/month transfer to go into my money market account instead of my savings account.
It’s worth noting that this account is relatively inaccessible. There is no ATM access (they offer a debit card, but I will not get it), and transfers take a good 3 days to process. Keeping this account at arm’s length will help me avoid the temptation to use it. Basically, I’m only planning to make a withdrawal under one of two conditions: if I lose my job, or if I’m ready to buy a home.
So that’s $202.12 per month. In addition, I have calculated that I’ll be getting an extra $22 per paycheck in take-home pay under the new stimulus changes starting April 1. That money will be going to my regular savings account. All in all, that’s $246.12 in savings per month. And the best part is, I didn’t have to “sacrifice” anything. The initial $50 is still there, and everything else is either stimulus money, or “time-shifting” money I’d be getting anyway.
(Besides all of that, I also have $500 socked away in an old Sierra Pacific Employee Credit Union account that I would have to physically go to to access. That’s literally last-resort, living-in-the-gutter money. (No, I never worked for Sierra Pacific. Long story.))
I’m currently paying $720 per month in credit card debt (yikes). When that is paid off (October 16 is the magic day by current estimates), I’ll be splitting that money. Half ($360) will go toward extra principle payments on the car loan, and the other half will go into the money market savings account. So that’ll make $606.12 in monthly savings, with an accelerated payment schedule on the car.
Now, I know you’re saying, “So if you have credit card debt, why aren’t you putting this $250 per month toward it to get it paid off as quickly as possible?” In a good economy, I probably would be. But times are tough. I’ve got a pretty secure job at a company that doesn’t seem to be hurting, but things can change very quickly. I’m paying a low APR on my debt (3.99%), and while that certainly won’t be offset by the interest I’m pulling in from savings, I’d rather be unemployed with debt and savings than unemployed with zero debt but no savings.