Saving Tips + New Interviews

Hey everyone, Kent here with the regularly-scheduled Saturday update (the second week in a row that I’m doing it on time!). This one’s going to be a little less game-specific than normal. It primarily focuses on some saving tips for people who are thinking of trying the indie thing and want to put some money away, but if you want to get the latest news there are a few good interviews to share this week.

  • Giant Bomb (Article): I talked to Patrick Klepek about all sorts of things, and he wrote a great article about the history of the game and how I’ve tried to capture the experience of being a parent despite not having any kids.
  • Giant Bomb (Podcast): If you want to hear the full interview, you can check it out in podcast form! Listen in on my conversation with Patrick for more details.
  • VentureBeat: This is part of a larger series that focuses on why so many developers are leaving AAA for indie development. There’s some information about the game in there, but the larger focus is on contrasting AAA and indie dev.

And that’s it for interviews!

Now on to the main topic, which is life-focused and has nothing to do with the game. Earlier this week, my friend JP tweeted a question that sparked a lot of conversation:

It’s a good question, and I did my part to shame Chris Plante into researching the subject and writing an article about it (here’s hoping he decides to do it!). Anyway, in the course of the conversation I mentioned that a few years ago I learned a technique that helped me save money, and I figured it would be helpful to share it here.

But before I get into the nuts and bolts of the post I should give a little bit of background: I was a full-time employee in the AAA industry for ten and a half years before I went indie. Other than a few gaps between jobs, I had regular paychecks and the time and opportunity to build a savings account. I didn’t actually take advantage of that opportunity most of the time, but I’ve been fortunate enough to have a steady living situation since graduating college. I don’t want my advice to come off sounding like a perfect solution for all financial situations, because it isn’t, but hopefully it will be useful for some of you.

Anyway. Enough disclaimers.

One of the best things you can do as an indie is have money in savings. You may be able to live off your savings long enough to make a game, or it may supplement a part-time job or bridge the gap so that your partner can support you both for a set period of time. But no matter what you do with the money, it’s never bad to have a savings account.

The Novelist doesn’t have any outside investors, I didn’t use Kickstarter, and a big reason I’m able to make the game is that my wonderful wife has a good job. So I can’t really comment on how to raise funds, and advising people to go get married to someone with a job probably isn’t too useful either. But it’s definitely the case that if one person in a relationship has a job it can be the difference between lighting your savings account on fire or merely watching it slowly melt away.

I’ve always been terrible at saving money. Well, that’s not exactly true; in the past, when I saved money it was always socked away in places I couldn’t touch it, like an employer 401k account. I thought, “Hey, I’m putting money away and being responsible, so whatever’s in my checking account is there for the spending!” I never spent more than I made or got into credit card debt, but I did my best to spend exactly what I made, leaving me with no liquid savings. If I ever had an unexpected expense (car repairs, doctor bill, etc) it was hugely stressful because I had no safety net whatsoever. I would kick myself for not saving money, but I never did anything to change the situation.

Then about four years ago I realized I wanted to change this behavior, in no small part because my wife is a much better saver than I am and we wanted to start building a nest egg for adventures like one of us quitting our job and working independently. So we started looking for ways to set money aside, and a financial advisor showed us a great methodology: have your paychecks deposited directly into your savings account, and then set up an automatic payment for a smaller amount into your checking account. It sounds simple, but it fundamentally changed my ability to save.

Maybe an example would help.

Let’s say that you get $1,000 per paycheck every two weeks. If that was me, I would look at each paycheck and say, “Cool, I have $1,000 to spend before I get my next paycheck!” If my expenses were only $700, I would say, “Great, I have $300 for fun stuff!” and figure out a way to spend it all. If rent/food/gas didn’t use it all up, I’d go looking for Blu-Rays or albums to buy. And if I was ever lucky enough to get a bonus at work or an annual raise I never saved the new money, I just said, “Awesome, now I have more money to buy stuff with!” In short, if I had money I was gonna spend it.

So let’s look at the same hypothetical $1,000 paycheck with a new goal: saving $100 per paycheck (which would be $200 a month and $2,400 a year). What you’d do is change your bank setup so that your $1,000 paycheck goes directly into your savings account, and then you’d set up an automated rule that transfers $900 into your checking account, leaving $100 in your savings account from every paycheck. It’s easy to set this kind of thing up with online banking, especially if your employer offers direct deposit.

It sounds really simple, but the effect it had on me was profound: I realized that no matter what was in my checking account, I would try to spend it. It had nothing to do with the amount of money itself. I would simply spend what I saw in my account. So when that $1,000 changed to $900, I just spent $900 instead. I didn’t miss the $100, because I never saw it in the first place.

They say that to break a habit it helps to remove the trigger: if you want to stop eating so many cookies during the day, hide them in the back of the pantry instead of leaving them out on the counter and tempting yourself every time you walk past them. It’s the same thing here.

Now, obviously there are practical realities to having less money to spend each month. It’s pretty easy to set up this kind of automated savings plan if that $100 is non-essential, but if the full $1,000 is required to buy food and pay rent then you can’t just cut out $100 without consequences; you’d need to find other ways to save if your necessary expenses are that tight.

But even if your budget is tight, you might want to give this technique a shot anyway. I found that when I committed to saving money it was easier than I expected to look at how I was spending my paycheck and find places to cut back.

We started cooking at home more, b/c money goes a lot further at the grocery store than it does if you eat lunch and dinner out; The Novelist has been fueled by reheated leftovers. I haven’t bought any clothes or shoes for almost two years. We got rid of cable, which saved us $100 a month right there (and arguably raised our IQ scores). Those are just random examples, but if you make an effort you can find a million small ways to save money.

Ultimately, you have to make it a priority to save. Putting your paychecks into a savings account and automatically setting some of it aside without ever seeing it is a great tool, but only if you make the changes to your budget necessary to live on the smaller sum; if you still spend the $100 you’re supposed to be saving and put the balance on a credit card, you’re worse off than if you hadn’t tried to save at all.

But you know where this technique really helps? You get so used to living on a fixed amount of money that it rewires your thinking. Any sum above your normal paycheck goes into savings by default. So if you get a 2% cost-of-living raise at your job, that 2% goes directly into your savings. In the past, when I got raises I instantly figured out what my new paycheck would be and started planning how to spend the new money. But if you get into the habit of living on a fixed sum and you never see your paycheck at all, then a raise or a bonus just increases your savings by default instead of tempting you to blow it on something you don’t need.

Anyway, this has turned out to be a much longer post than I planned, but in light of JP’s question I wanted to do my small part in answering the question. This advice won’t work for everyone in every financial situation, but if you’re steadily-employed and have room to cut a few expenses it can be really powerful to remove the Spend More Money trigger, set up an out-of-sight-out-of-mind automatic banking rule, and start building the kind of savings that can open up all sorts of exciting doors in the future.