Using micro-transactions to build the Habit of 10%

When developing a habit, it is important to focus regularly on it and find ways to help solidify it. The more you do it, the more it becomes normal for you to do it. The resistance decreases, and you begin to do it more regularly. Eventually, it's a habit.

Let's look at this for developing the Habit of 10%, and saving more of what comes in. In 'Becoming a smiley saver', we highlighted steps to take to build the habit of savings, and up to 10% of the net income (to start). This works well for diverting a portion of the net monthly income to the Savings Account or High Yield Savings Account (HYSA). The Habit of 10% is good to use for all income streams, not just the regular paychecks.

What do $0.38, $1.59, $1.84, and $0.20 have in common? These were the exact micro-transactions I manually transferred to savings. It was the recognition of the First Law of Gold, which I implemented consciously as the Habit of 10%. These micro-transfers were from incomes (small and automatic), and not the regular paychecks. You've already been doing well diverting a portion of your monthly income to savings.

Here are examples of income streams and using micro-transactions to build the Habit of 10%:

• Dividend Payments

  • For example, you own a stock that pays dividends. You automatically receive every 3 months a little stream of income. This can either be as cash or reinvested to buy more of that stock through a Dividend Reinvestment Plan (DRIP). Even if you reinvest the income to buy more stocks, treat it as if you received a cash income.

  • Say you own Bank of America (BAC) stocks. The dividend paid out in September 2024 was $0.26/share (on the 27th of September 2024).

  • If you owned 100 shares of BAC, then you would have received $26.00 in dividends ($0.26 x 100). Save some of that!

  • When you see that you have received the $26.00 as income, pay yourself and divert $2.60 to your Savings Account or HYSA! This micro-transaction builds your habit.

• Savings Account Interest payment

  • As highlighted in 'Becoming a smiley saver', if you have an average U.S. Savings Account earning 0.46% in Annual Percentage Yield (APY), with a $10,000 deposit, in one year you would earn $46.10. That is approximately $3.84 per month in interest.

  • The micro-transaction to your savings or HYSA would then be $0.38.

• HYSA Interest Payment

  • If you have a HYSA, well done, your money is making more than if it is sitting in a traditional Savings Account. The interest you earn per month on the Savings Account or HYSA can be used to signal a micro-transaction.

  • As highlighted in the LA Times article (last updated October 3rd, 2024), the $10,000 in a HYSA can earn a lot more per year.

  • As shown below, $10,000 in a HYSA with a 4.50% APY, you would expect to earn $450.00 in a year. This is approximately $37.50 per month. Image from "How Much Will $10,000 Make in a High-Yield Savings Account?" (Varvel and Esken, 2024).

  • The micro-transaction to your savings or HYSA would then be $3.75. Not a lot, but a conscious focus on building the habit.

• Found money

  • You're walking down the street, and you find $10.00 on the floor. There's no one around, or someone looking like they misplaced it. You decide to keep it.

  • You have an extra $10.00! Don't spend all of it.

  • Manually transfer $1.00 as a micro-transaction to your savings first. Build that Habit of 10%!

• Sold a stock

  • You've sold a stock for profit!

  • Your profit was $2,000.

  • Before you use the $2,000, transfer $200.00 to your savings or HYSA.

  • In this example, the tax impact of the $2,000 profit is not taken into account, and is for illustration.

  • Again, this is to build the Habit of 10%, through a micro-transaction.

You may think these types of micro-tractions won't do much. You're right, adding $1.00 or $0.38 to your savings will not change your financials significantly. It is to be intentional with the inflows, focus on the habit, and integrate it into your life. If you're consciously using the Habit of 10% every time you get inflow or incomes, soon it will become a habit that you don't have to think much about. You can start using micro-transactions to build the habit today! Let us know your examples of using micro-transactions.

To your success.