The idea of a 'payday splurge' is well-known to basically anyone who has ever had a job.
It's a great feeling when you see all your hard work for the week, fortnight or month payoff and hit your bank balance, but its all too easy to spend big and spend the rest of the month scrounging for change.
So, here's how you can automate your finances to stop that spending temptation and increase your savings exponentially.
A simple solution: pay yourself a wage
The easiest way I've found to reduce my overspending habits is to make sure I never really know when payday is.
The first step in the anti-splurge strategy is to set up a new high-interest savings account (HISA) with a new bank and deposit a small buffer to reduce the risk of overdrawing.
By redirecting your regular paycheck into this new account, you won't have that sugar hit of receiving a big chunk of change on one day and struggling to ration it for the rest of the month.
Importantly, you won't need a debit card or regular internet banking access to this account as we're really trying to go with the "out of sight, out of mind" principle.
While that's all well and good, the next step in levelling up your finances is to pay yourself a regular wage. The regularity of this will really come down to your level of self-control and the nature of your expenses.
I personally like to pay myself a weekly wage, so I can standardise my budget and plan my expenditure accordingly.
The end result: simpler finances
This system means that provided you're not tempted to look at your new HISA, you won't notice when its payday and therefore won't be tempted to overspend. With a weekly budget, you know exactly what you can afford to spend every single week.
Meanwhile, provided you have allocated your spending money to be less than your entire wage – which seems likely for people looking to improve their personal finances – your residual income will be building up in your new account and increasing your savings.
For those who really want to streamline the process, this weekly wage strategy can be expanded into multiple accounts to automate your emergency fund savings, principal for that home loan and your regular expenses such as rent and internet bills.
I've found that my spending has reduced massively since I instigated this system and it also frees up more time to focus elsewhere knowing that your financial situation is taking care of itself.
