How to Save Money by ’Paying Yourself First’

If even these types of steps seem overwhelming, there are a lot of other actions finance newbies can take to reconfigure their finances to fit any lifestyle—without necessarily going to extremes. For United Kingdom–based freelance marketer and editor Chiara Bullen, living in a lower-cost area and taking a hard look at where she can cut costs has helped tremendously. “I live in Glasgow, Scotland, which generally has a lower cost of living than other U.K. cities,” she explains. “It means the competition for freelance work here is pretty tough—and I often look for remote positions [which are], again, competitive—but the low rent really pays off and makes it worthwhile.”

Ann Gynn, a principal at G Force Communication, says one of the biggest errors she made when she first started working for herself was not factoring in extra expenses—like her computer, software, and printer ink—into her budget. Now she makes sure to calculate those as well as retirement and health savings account (HSA) money into her expenses. “I also have two savings accounts, one for my business and one for my personal expenses,” she says. “The business savings account has two purposes: [to pay for] tools, third-party invoices, [and similar expenses] that will eventually be paid for by my clients, and [to] cover my ‘paycheck’ in times when existing work isn’t sufficient or cash flow has a hiccup.”

And for people who work for themselves or bring in additional income, there are other considerations to make. Stephanie Genkin, a Brooklyn-based certified financial planner and founder of My Financial Planner, LLC, who has worked with many different clients including freelancers, independent contractors, and small-business owners, says she sees the same mistakes from self-employed workers time and again. She recommends first setting aside money for immediate expenses, debt, and bills as well as taxes before you do anything else with your money. “Set up a separate bank account for [tax purposes],” she says. “It helps you detach from the money. You are just holding it for the IRS. Some banks let you give your account a nickname. Be specific. It’s not yours to spend.” While salaried staff employees don’t necessarily need to juggle multiple savings accounts like Ann Gynn does, however, Genkin says they can be helpful for people who are freelancing or self-employed and want to separate items like tax money from vacation money.

If you have money left over, Genkin encourages women to put at least 10 percent of those funds into a retirement account like a 401(k) or an IRA, or a savings account to build up emergency funds. But be careful: Genkin says savers want to keep that money at arm’s length so as not to be tempted to dip into it whenever they want. “Typically, an emergency account is for job loss, medical and dental emergencies, family emergencies, car repairs when you need it to commute to work, forced move on short notice,” she says, “not cheap tickets to the Caribbean for spring break with friends.”

For Jillian, having such an aggressive savings plan came in handy when she had a month between jobs with no source of income and had saved up a year’s worth of money. “To me, the emergency fund is there as a ‘get out of jail free’ card,” she explains. “It’s a sign that my entire life could crumble and I would buy myself time to get myself on track. I will have the luxury to be able to endure almost anything. It’s freedom and security.”

For Sage Daugherty, saving up is about comfort. “My main motivation for saving right now is to just be able to go out and have a nice dinner or go shopping and treat myself a little, and not feel guilty about spending $100 or something like that,” she says. “Sometimes I feel like I am too frugal, and my parents sometimes remind me to ‘put a crowbar in my wallet’ and go have fun! I definitely try and balance it out.”

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