Saving can be a difficult task sometimes, by the time you pay off your bills you may have nothing left at the end of the month to save. This is the situation of our reader “Mike” who emailed me after reading emergency fund this is what he said:

Hi Ray,

I have been a reader for several months now and enjoy your articles, since I have read your article on emergency funds I have been trying to set one up. The problem is that by the end of the month I hardly have anything left to save. I do not have any debt and have a decent income, but I am not sure where all my money goes. Any idea’s on how I can start saving?

First of all thanks Mike for your kind words and I am happy you find our blog helpful.

Would it surprise you if I told you that you are not alone in this situation? In fact almost 85% of the people I have worked with or known have had this problem; the good thing is that you are proactively trying doing something about your situation. First of all I would suggest you try to track your expenses and set up a budget and then start paying yourself first.

What is Pay Yourself First?

Pay Yourself First

It’s a simple savings strategy where the first “bill” you pay when you get paid is yourself. You take this money and deposit it into your savings account or brokerage account to reach your financial goals.

People are often used to paying all bills first and then save whatever is left over, but the problem is that by the end of the month there really isn’t much left to save. Why should you pay everyone else before yourself with your hard earned money? I highly encourage you to try “Pay yourself first” strategy:

1. Open a Savings account or Discount Brokerage account
2. Select a percentage of your income you would like to save
3. Set up an automatic withdrawal plan from Checking to Savings/Broker account
4. Do NOT skip “payments”

It’s just as simple as that. Ones you have the plan set up everything else will fall into place.

What if I fall short?

I suggest you start with a smaller percentage of your income and increase it over time, if you do not have enough money at the end of the month you know that you are doing something wrong. In order to cover the short fall you do not withdraw from the savings or stop contributing to the savings plan; to cover the short fall you will have to do one of the following:

  1. You increase your income. Take up couple of overtime hours, a part time job or any other way to increase your income to cover the short fall.
  2. Cut down expenses. You are obviously living beyond your means so start cutting down on expenses. Think of what you do not need and cut it, reduce your phone and TV bill. To stay within your budget cut wherever you can.

Treat your savings as a bill that you have to pay, under no circumstances should you stop the contributions or make a withdrawal. Once you miss one payment or start withdrawing the whole plan could fall apart.

Paying yourself first is a great way to start saving if you are having difficulties, once you get into the habit the rest will come automatically.

Silicon Valley Blogger also has some great savings tips.

I hope this helps Mike and any other readers who may have similar questions. If you have questions you would like me to answer feel free to contact me.

Do you have suggestions for Mike?


Ray is an ex-financial adviser and the founder of Financial Highway. Currently working in the financial industry and working towards completing his Chartered Financial Analyst, CFA, designation.