Build Your Savings Account With 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 and mandatory manicures, 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, aptly coined "ghost payments," can be started when you finish paying something off—maybe a credit card, medical bill, or car loan.

The ghost payment method consists of these two simple steps:

1) Pretend like you never finished paying off the aforementioned debt (medical bill, credit card, or loan).

2) Continue making the monthly payments, but pay yourself instead of the creditor. Put the funds you would have normally sent to the creditor 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 it.

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.

Back in 2017, before the coronavirus shook up the financial world like a cheap souvenir snow globe, I paid off two debts around 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.

So, that was $149 per month that could have gone back into my pocket. Believe me, I was tempted. Visions of designer handbags danced in my head!

The gods of financial freedom must have been looking out for me, because before I had a chance to hit "Add To Cart," I heard about the ghost payment savings method.

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.

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.

If you're a sucker for a good sale like me, take a quick look at the App Store/Play Store for an expense tracking or budgeting app to help keep you in check. With many of the money management apps, you simply link your bank accounts and the app does most of the heavy lifting.

I asked a friend who also used the ghost payment method if she would be comfortable disclosing how much money she saved using the technique.

(She said "yasss!")

My friend 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.

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.

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!