$5 a Day?

J.D. over at Get Rich Slowly linked his readers to a very thought provoking experiment two days ago. No Credit Needed set up automatic transfer of $5/day onto his credit card for a month. Having this small daily transaction, much like any other transaction he might have made, allowed him to realize that he could put $150 more ($5 x 30 days) onto his credit card then he had previously been doing.

And of course, this got ME thinking.

I feel like I would definitely notice if $150 were gone from my allowed spending money. However, if $1/day disappeared I probably would notice. Wait… wait… back up… (I thought to myself)… If you wouldn’t NOTICE $1/day leaving your bank account why don’t you DO that?

And holy crap my synapses were flying – sure it was only $30 more per month I would be putting on my credit card. Only $30, right?

No!

Every dollar adds up. And little payments reduce my daily balance and the amount of interest I have to pay!

Then I realized… well… would I feel $2/day? Maybe not… I could easily find ways of cutting back $2/day out of my budget I think. That is $60/month!

So I put some numbers into CNN.com’s debt reduction calculator (a FANTASTIC tool, btw).

With $1,000 per month payment (what my base payment currently is) I’ll be debt free in 1 year and 4 month and pay $2,363 in interest.

With $1,030 per month ($1/day) I’ll be debt free in 1 year and 4 months and pay $2,273 in interest.

With $1,060 per month ($2/day) I’ll be debt free in 1 year and 3 months and pay $2,186 in interest.

That’s right – by STEALING $2/day from my daily habits I’d be out of debt a month sooner AND save myself almost $200 in interest.

And what if I COULD manage to squeeze $150 from my budget by taking $5/day? Well, I’d be paying $1,150/month and end up debt free in 1 year and 2 months (WOW! – that means I could be debt free before 2011!) and manage to only pay $1,964 in interest.

The bottom line is that every dollar counts. And if you think that you could shave $1/day off your budget and not notice – THEN YOU SHOULD!

So rather than set up a daily $2 transfer, I’m taking $14 out per week. If $14 a week can save me $200 AND get me out of debt a month sooner – well – that is $14 well spent! If I don’t notice the $14/week gone then I’ll raise it to $3/day the next month ($21/week). Essentially, I’m going to keep raising the amount I pull out of my expense account per day until it starts to become noticeable – and then I’ll pull back. That may be $1/day – it may be $6 (or $10?!) – either way I’m getting out of debt faster and saving myself money in the long run!

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16 Responses to $5 a Day?

  1. Jessie says:

    This will be a fascinating experiment…. I’m really looking forward to seeing how it works :D:D

  2. That is such a good idea. I might do something similar when I have my mortgage where I have an account that I can transfer several extra dolllars a day to. Keep us posted on how its working for you.

    • SS4BC says:

      I think the general idea can work not just for debt but also for savings. Slip yourself a little extra cash each month into your savings account and watch it grow!

  3. Airam says:

    Great idea but what about bank fees? Do you not have a set amount of monthly transactions you can make for free before they charge like $.60/ tranaction?

  4. Ninja says:

    Amen. Preach it sista!

  5. mo says:

    another great post. I like reading your blog – it is very thought through and informative and inspiring. Hmm. I wonder, not that I have debts, but £1 a day – towards…….

  6. Christine says:

    Sometimes, people come up with really fabulous ideas and posts. Love this one. I wouldn’t miss $2 a day – I spend could easily spend that on coffee in the morning or lunch in the afternoon.

    I think one of my brain cells is trying to comply with this idea and give it a go. Pretty sharp thinkin’ on your part. 🙂

    • SS4BC says:

      I’d love to say it was my idea, but it certainly came by the post from NDN. However, his post really made me think about if I would miss that money – and how much money could magically disappear each day before I started to realize it.

  7. eemusings says:

    What a fantastic idea. Let us know how it goes 🙂

  8. AprilFire says:

    I’ve been using the $5/day method to save AND pay off my credit cards. By putting $35 a week into a savings account, it allows me to put $20/week of that onto a credit card but still have $15/week ‘just in case’.

    I would strongly suggest that everyone tries it – even something as small as $1/day.

    • SS4BC says:

      Oh I love the idea of saving some for “just in case” – I think that might give me the courage to do more than $2/day!

      Thanks for your voice of experience!!! =D

  9. Simplelivin' says:

    My bank (Wachovia) has a program called Way 2 Save, and it transfers $1 out of your checking account into a high yield savings account for every transaction you make. I was nervous at first, but since it’s automatic I don’t have to think about it and I have been enjoying watching that account grow! Accruing over 5% interest also helps.

    • SS4BC says:

      Yeah, Bank of America has a program called “Keep the Change” where they round up each transaction and then deposit the difference into your savings account. I had that until I closed my savings account of BofA for one at ING. Perhaps I should go through each week and “keep the change” on my own and transfer it over. Couldn’t hurt!

      I bet that $1/transaction roughly equals about $2-3/day, so that is great!

  10. Pingback: Debt Free in 2010? « Small Steps for Big Change

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