by It sounds harsh to say that the person most likely to sabotage your financial goals is you however it’s the truth.
Growing up when it was time to buy squirt guns Jamey always had more money for a better squirt gun than I did. Why? You see he was more disciplined and didn’t sabotage his “summer self” by buying excessive items like book marks and erasers at the book fairs.
How does this relate to today and your financial goals? We are going to outline a process that will allow you to have money when you need it and it will prevent you from sabotaging yourself.
Whether you need a squirt gun or want to take a mini vacation we are going to make sure you can hide money from yourself without putting it underneath the mattress.
Online or Internet Banks Make it Easier Than Ever to Set-up Ways to “Hide Money”
There is a certain magic to not being able to get your money right away. Internet banks have a few advantages over traditional banks. Many offer higher interest rates on savings and many have great online web and phone applications because they were effectively born on the Internet.
There are many online banks that you can select from. A few of these online banks are Ally, Captialone, and SoFi. To make this strategy that we are going to outline work we recommend using these online banks in conjunction with your traditional bank or credit union. If your Internet bank is your primary bank it will still work, it will just require slightly more discipline.
Features of Online Banks to Hide that Money
Captialone lets users set-up multiple savings accounts all with no minimums. SoFi has a feature called vaults. Both of these features will allow us to accomplish the desired goal of hiding money from ourselves.
There are a couple of differences between these two features that are worth noting here.
- Accounts – this is exactly what it sounds like. Capitalone lets you open multiple savings accounts. For each one you get to name the account, determine ownership (aka if you share it with someone), and you get an account number. This type of set-up is best if you want to connect other banks or institutions to an account. For example if you want to regularly contribute to a mutual fund from a specific account this structure and set-up is best.
- Vaults – This is a feature of SoFi. What they allow you to do is set-up different allocations of your money. You get to see them in different allocations however they all exist under 1 account number. For example if you were saving money for a mini vacation, a new set of golf clubs, and some new clothes and you didn’t want separate account numbers this is your preferred set-up.
Putting These Features to Work to Hide Money From Yourself
Let’s be as direct as possible. When you have cash in hand or money that you can easily access from a debit card it’s harder to resist temptation for buying that item you saw while shopping late at night.
Using the features of online banks we want you to set-up vaults/accounts that hide money. Let’s look at some ideas you could set-up vaults/accounts for below.
- Hobby
- Clothing
- Coffee
- Mini Vacation
- Vacation
- Car Repairs/Future Car Down Payment
To make things slightly more tangible let’s put some numbers behind all of these items that you might spend on an annual basis and how you can hide money from yourself on a monthly basis.
| Vault/Account | Annual Spend | Monthly “Hide” Amount |
| Hobby | $1,000 | $50 |
| Clothing | $1,200 | $100 |
| Mini Vacation | $750 | $60 |
| Coffee | $1,200 | $50 |
You might be wondering “who spends $1,200 on coffee on an annual basis”. If you visit Starbucks 5 days a week and spend $5 on each trip you are spending $1,250 in 50 weeks with the caveat you don’t go to Starbucks while you are on vacation.
Using the table above as an example let’s look at the rationale for each one. In some categories we aren’t hiding all the money as we will be using it more regularly and in other cases we are hiding all of it to have more discipline.
- Hobby – Whether you golf, do legos, ride bikes, running, or flying kites hobbies cost money. In most cases there are regular items you need for your hobby that come on a monthly basis and others that aren’t regularly occurring. We recommend you set 50% of your hobby budget away monthly in a vault/account. That way when you are in line for a larger purchase you can transfer money down from your Internet bank to your traditional checking.
- Clothing – The reason we set all of the money in this category away monthly is we are making the leap that you…well have clothes right now. So setting this aside monthly will allow you to go on a mini shopping spree down the road or a really big one farther down the line. It may also prevent you from buying clothes you don’t immediately need
- Mini Vacation – Much like clothing you aren’t on vacation now so setting it all aside till you reach your predetermined amount makes sense.
- Coffee – If you really want to take this to the next level the $50 you keep monthly you can put right onto your Starbucks card. That way you can use it till you are out. You will then have to seriously consider how bad you want Starbucks as you have to transfer money in order to get more.
You can take this method as far as you desire. We encourage you to adopt it as you will find that having little squirrel piles of funds around makes it easier to make the purchases you want when you want them. It will also have the positive influence of making you pause before buying knowing you have to transfer money to get the item you covet.
