Opening a high-yield savings account online made all the difference in paying off $33,000 of debt

• When my husband and I decided to get serious about paying our $33,000 of debt, we started by making automatic transfers into our savings account.
• Then, we opened a high-yield savings account with online bank Ally, to keep our savings accessible, but not so accessible that we’d dip into them for regular spending.
• We ended up loving the extra interest we earned with Ally, and applied the same separation of accounts to my business, too. Now, we’ve paid off that $33,000.
• See Business Insider’s picks for the best high-yield savings accounts »

A few years ago, my husband and I decided to get serious about paying off our debt, which included $19,000 in student loans and a $14,000 car loan. It seemed like a fairly insurmountable amount at the time, but creating a working plan with visuals put us on the right track, and we paid it all off. Four specific techniques helped us stay on track.

1. Transfer regular spending to debt payoff, then regular savings

One of the critical pieces to paying off our debt, then building savings, was to transfer regular spending to those goals.

When our youngest daughter started kindergarten, that freed up $600 per month. When paying for childcare, these payments were made every Friday in the amount of $150. Instead of that payment just ceasing (creating the potential to spend more — or lifestyle creep, as Dave Ramsey calls it), we rerouted those payments. Instead of a charge out of our checking account weekly, I set up an automatic transfer for that same amount to our savings account. I then used that money on a monthly basis to pay off debt.

We followed the snowball method (paying off the smallest debt first to build momentum), paying the minimum on the student loan while attacking the car loan with the extra $600 and whatever other savings we could scrounge up. Once the car loan was paid off, we switched focus to the student loans, then to building our savings.

2. Make your savings accessible, but not too accessible

After we paid off the debt (which felt like an urgent task) I found myself taking money out of our regular household savings to justify a fun splurge, then wondering why our savings weren’t growing very fast. Our regular savings account was just too convenient, since I could transfer money from savings to checking in less than 30 seconds in my online banking portal.

I started researching what it would look like to have a savings account at a different bank so it wouldn’t be so easy to transfer money. In my research, I remembered seeing ads for high-yield savings accounts online. That made me a little nervous at first, wondering if I was just sending my money off into a black void never to be seen again.

I found Ally Bank and opened an account. The account had no balance requirement and, even though it’s all online, it’s still a FDIC-insured, meaning Ally is protected against losses for depositors, just like a brick-and-mortar bank. The withdrawals on the account were limited to six per month, so I wouldn’t be tempted to transfer money in and out as regularly as I had done.

3. Interest earned on savings feels like free money

My regular bank pays only .015% on savings accounts, a fact that was also on my mind when looking for another place to house our savings. Currently, our Ally high-yield savings pays 1.6%, but paid 1.9% when I first opened the account. These decimals can add up, meaning that Ally would pay me $160 every year on $10,000 savings, compared to just $15 my regular bank would pay.

If you don’t have any savings, this might seem like an unattainable number, but remember that we didn’t have any savings either when we were paying off debt. It grows (especially when making money with interest), so start somewhere — anywhere.

4. You can apply the same approach to business accounts, too

Having a slightly less accessible savings account is useful in business, too.

After doing this personally for several years, I came across a similar approach in the book “Profit First” by Mike Michalowicz. He recommends separate accounts for various aspects of the business: income, operating expenses, owners compensation, taxes, and profit, with an additional separate profit account in a different bank.

Whether you are more focused on your business accounts or your personal accounts right now, it’s always a good time to start saving. Start by paying off debt, then stockpiling what you’d previously been paying on that into savings. You’ll be able to earn interest money on your (accessible, but not too accessible) savings before you know it.

Shanna Goodman is the creator of Ampersand Business Solutions.

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