I had lunch with a former co-worker, who always had interesting ideas which didn’t always pan out, but they always seemed so very interesting to me. During the lunch I was reminded about an interesting case study/idea that he had when we worked together (many years ago), and I think it is yet another brilliant saving idea if you implement it the right way.
This gentleman was one of those folks who simply allowed his spouse to take care of the money and he simply tried to stay out of her way. Over the years, he wanted to have some of his own money for his hobbies and so he didn’t have to feel like he was begging his spouse for money, if he wanted to go out.
With this as his problem he devised an ingenious system using the tools that he had available to him. The tools he used were:
- The ability to split pay cheques to different bank accounts (that our previous employer allowed us to do, up to 5 different bank accounts).
- A good income which at some time during the year, meant his EI and CPP payments would reach their maximum and not be collected on further pay cheques that year
- The pay splitting system could use either a Percentage of pay to each account, or a set amount.
I’m sure some of you have already read ahead and have figured out what was done, but for those who want the full explanation, the method my former co-worker used to give himself a little mad money was actually brilliantly simple.
Each year, he saw how much his net income was per pay cheque (on his first full pay cheque of the year), let’s say it is $X.xx is this amount. With this information, he would fill in the forms to have $X.xx deposited into the account his wife used for every pay cheque (for the rest of the year). The form then had another line where you ticked off a box, to put the rest of the money into a separate account. This meant that his wife saw the exact same amount go into their bank account every pay cheque (we didn’t have to worry about Overtime, since we were never paid it), and once the CPP and EI was paid off any extra money would go into the Mad Money account.
Is that not simply brilliant?
No, I am not espousing hiding money from your spouse (pardon the pun), but you can use this system to hide money from yourself!
Use this same method to put the same amount in your working account every pay cheque and the rest of the money can go into a rainy day account, and you can (and should) then forget about this transfer, and go about with your life (checking occasionally your Rainy Day account is growing).
Voila you are now saving money in spite of yourself.