When you pay off a car loan, student loan, or credit card, keep sending the same amount to savings on the same date each month. Your budget already works without that money, so you won’t miss it. Set up the automatic transfer the week the last payment clears, before the money drifts into everyday spending.
That drift starts the first month the loan is gone, because the freed-up money feels like a raise. It sits in checking with no job, and small upgrades absorb it, like more takeout or a pricier phone plan.
Within a few months, saving that amount would mean cutting back. Right now it costs you nothing. Most ways to save mean giving something up. This one asks you to keep doing exactly what you’ve done every month for years.
- Schedule a recurring transfer from checking for the exact amount of the old payment, on the same day of the month it used to leave. Every other bill already fits around that date, so nothing else has to move.
- Give the money its job before the first transfer runs. If you don’t have an emergency fund, start there. If a credit card still charges you interest, clear that balance next, since no savings account pays what the card costs you. After that, send it to a retirement account or a fund for your next car.
- Keep each savings goal in its own account, named for its job, so the balance never looks like spare cash.
Say you just made the last $450 payment on a car loan. Redirected to savings, that payment adds up to $5,400 a year before interest. In three years you’d have $16,200 plus interest, a large down payment on the next car.
Set it up before your first payday without the loan, and make it the rule for every debt you finish. The payment keeps going, and only the destination changes.
Editorial & Advertiser Disclosure: The editorial content on this page is not provided, commissioned, reviewed, approved, or otherwise endorsed by any advertiser. Opinions expressed here are ours alone, not those of any advertiser. The offers that appear on this site are from companies that compensate us. That compensation may influence which products we cover and where and how they appear on a page – including the order in which they appear – but it does not influence our evaluations, ratings, or opinions. We do not include every company or offer available in the marketplace.
Related:
