In the midst of technology that enables consumers to spend money faster, now merely requiring a hand-waiving gesture over a magnetic pad, saving can be the last thing on our minds. So, I thought I'd provide a few insights in to my newly adopted approach for putting a few dollars on the side. Actually, the idea came from listening to a radio advertisement about a savings plan offered by Bank of America to round up the cents on any purchase to a dollar, and whisk away that difference to a specialized savings account.
This savings plan works based on the number of transactions you have during any given month rather than the size of those transactions. The advantage to this is that the total amount that you save will not break the budget. It's easier to sock away small amounts of money more often, than it is to try and allocate a large sum of money to savings.
I chose to model my own rainy day savings plan after the Bank of America service by applying it to all of my outgoing expenses, rather than just check card use. Check cards themselves seemed like they would be the ultimate answer to preventing credit card run up because they represented actual money you had in the bank. However, what I have discovered personally in that regard is that your own money becomes vulnerable to fraud every time you use a check card, and the bank is less than enthusiastic about recovering your money lost due to fraudulent use of your check card.
To model the savings plan, simply export your monthly statement to a CSV or Excel sheet, and use the following formula on each charge amount:
=MOD(B2,1)Note that your expenditures should all be negative numbers. This formula will treat positive numbers (payments) a bit differently, but a little extra savings never hurt right? The table below shows how easy this is to calculate monthly:
| Date | Charge | Change | Merchant |
| 10/30/07 | -3.7 | 0.3 | STARBUCKS USA 00056630 MOUNTAIN VIEWCA |
| 10/29/07 | -97.37 | 0.63 | RADISSION HOTEL DUBLIN DUBLIN CA |
| 10/29/07 | -31.97 | 0.03 | SHELL OIL 27440097809 PLEASANTON CA |
| 10/29/07 | -14.13 | 0.87 | KRAGEN #404500040451 DUBLIN CA |
| 10/28/07 | -4.5 | 0.5 | DUBLIN SPORTS PUB & GRILLDUBLIN CA |
| 10/28/07 | -43.29 | 0.71 | TARGET 00020883 SAN JOSE CA |
| 10/27/07 | -74.69 | 0.31 | LOS GATOS AUTO MALL LOS GATOS CA |
| 10/27/07 | -50.14 | 0.86 | SHELL OIL 27425758508 PALO ALTO CA |
| 10/25/07 | -3.7 | 0.3 | STARBUCKS USA 00056630 MOUNTAIN VIEWCA |
| 10/25/07 | -7.99 | 0.01 | QUIZNOS SUB 4407 Q22 SAN MATEO CA |
| Total: | 4.21 | ||
As you can see, in just a couple of days, you've racked up over four dollars in savings! All that's left to do is total up the Change from each monthly invoice you receive, and transfer it to a savings account. Wells Fargo for instance now offers specialized savings plan accounts that make transfers for this kind of savings approach straight forward. Even better is that although the savings amounts transferred each month will be relatively small (unless you have thousands of transactions!), you will benefit from compounded interest which will grow the savings account more quickly (similar to a 401(k) w/o the pretax benefits). If you seed the account with an appreciable amount of money, or choose instead to transfer to a money market fund, you will see even better results. Just don't forget to pay for your monthly expenditures as well, or your savings interest will be a wash (or worse) with your credit card APR. I'm tracking how this approach works over the course of the next year, but I'd be interested if anyone else has historical results from this or a similar savings approach. Please feel free to comment.
