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Build Your Savings Account With Ghost Payments

Updated on August 30, 2018
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Rachel is a financially savvy lifestyle blogger who is always looking for ways to save money, buy discounted products, and live frugally.

What are Ghost Payments?

If failing to save money was an Olympic sport, I would be the Michael Phelps of financial fiasco.

I spent most of my life living paycheck to paycheck, making it nearly impossible to save money. Every dollar I received went to bills, groceries, or gas for my car.

At the end of the day, there just wasn’t anything left to put aside.

Throw in an affinity for nice shoes, mandatory manicures, and a fancy gym membership and it’s easy to see how saving money was a foreign concept to my younger self.

Then, one fateful day, I learned about an interesting savings technique that was so simple, I thought, “It just might work!”

The technique, which I like to call “ghost payments,” (don’t bothering Googling, I made it up!) can be started when you finish paying something off. Maybe a credit card, medical bill, or car loan.

How it Works

The ghost payment method consists of these two simple steps:

1) Pretend like you never finished paying off the aforementioned item(s).

2) Continue making the monthly payment(s), but pay yourself instead of the creditor. Put the funds directly into a savings account or other investment account.

That’s it! This method is brilliant because it’s not taking any extra money out of your pocket. You see, you were already making these payments anyway. Your budget has already been set around the payments!

It may be tempting to keep that money in your checking account to use as you please. After all, you’ve spent months or years making these payments and it would be nice to have that money freed up for spending.

I totally get that. However, if your long-term goal is to save money, those funds aren’t doing you any good in your checking account. Chances are, you’ll spend it on Starbucks visits or impulse purchases of items you don’t really need.

I Saved Money for the First Time Ever

A little over a year ago, I paid off two bills at the same time.

One was a monthly bill for invisible braces that I had paid at $99 per month for 18 months.

The other was a past due credit card debt that had entered collections. I paid $50 per month for two years on that one.

So, that was $149 per month that could have gone back into my pocket. Believe me, I was tempted.

The gods of financial freedom must have been looking out for me at that time. Before I had a chance to start burning the extra cash, a great friend told me about the ghost payment method.

I was initially disappointed in having to continue dishing out the money, but a year later, I couldn’t have been happier with my decision.

I put $149 into my savings account every month for a year. It didn’t hurt me at all, because I had already been making those payments for some time.

At the end of the one-year period, I had $1,788 in my savings account from ghost payments alone.

Stay the Course

While $1,788 may not seem like an astronomical amount of money, keep in mind that I never had more than $50-$100 in a savings account in my entire life. I was in my early twenties at an entry-level job and still struggling to find my financial footing.

Now, it’s important to note that I did have to continue being somewhat frugal during that year. Knowing I had money building up in my savings account was an awesome feeling, but I was always tempted to spend the money rather than let it sit.

One thing I did to make sure I didn’t veer off course was research and take advantage of money-saving apps. I’ve tried every money-saving, money-organizing, expense-tracking app out there!

There are apps for finding savings on gas, food, cell phone bills, and more. I, personally, prefer Mint for creating a budget and tracking my spending. Simply link your bank accounts and the app does most of the heavy lifting.

Ghost Payments Add Up

I asked the friend who first told me about the ghost payment method if she would be comfortable disclosing how much money she has saved using the technique.

She has been using this method for approximately 5 years. During that time, she has saved around $6,500. Sometimes she makes ghost payments to herself for just a few months, but she’s been making others for 3-5 years.

Now, it’s up to you how long you want to keep the ghost payments going. I would advise trying it for at least one year to see a nice amount of cash stack up. You can also make partial ghost payments if you really need some of that cash in your checking account.

For example, if you finish making a $300 per month car loan payment, you could put $150 into your checking and make a $150 ghost payment to your savings. The great thing about ghost payments is that they’re super flexible because you’re the “creditor.”

Do the Math

Do you have a reoccurring monthly bill that is close to being paid in full? You can start planning your ghost payments now.

If you’re on the fence about the ghost payment method, simply do the math. Multiply your soon-to-be satisfied monthly payment by 12 to see how much you can have saved up in a year’s time!

If you’ve got more than one bill that is soon to be satisfied, the savings can really add up fast. Don’t be scared—give ghost payments a try!

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© 2018 Rachel Leigh

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