Set Up Automatic Saving For Success
The biggest reason anyone fails at their finances is because they never really start. Sure, they may get through a few weeks. But then it falls off. We lead busy lives and sometimes we let things slide. So it becomes tomorrow’s problem.
It happens with exercising, dieting, curbed spending, and how we save. It’s something that we have all done at some point and it’s a weakness everyone deals with at some point in their lives.
So, instead of trying harder next time, lets take advantage of what’s available, to do the work for us now.
An automatic saving plan will successfully end all the worry and procrastination we have with our finances and force habit change. Let’s work smarter and start automating our savings.
The Automatic Saving Plan
Most people get paid by direct deposit and it happens on a regular schedule. Either once a month, twice a month or every two weeks tend to be the norm. Since you know when you get paid, there is your timeline to set up an automatic saving plan.
First off I’ll start by saying the plan is FREE. That is, until banks figure out just how much people will pay for the convenience.
Any good bank allows automatic transfers and if your employer offers a retirement plan, those deposits are built-in automatic saving also. All we need to do is set up everything so it coincides with when you get paid. By doing that you skip any chance of getting hit with a fee.
Set up all the automatic saving deposits to go through a few days after you get paid. Leave enough leeway to deal with holidays, weekends, or a late paycheck.
Checking Account
Have any paychecks and other money directly deposited in the checking account. The reason is simple. So we get used to only spending what we have in this account. There is no cheating with savings account withdrawals to buy a new pair of shoes. Any money going out of this account is on a one way trip to somewhere else.
The checking account pays the bills, buys groceries, and pays the savings, retirement, and brokerage accounts. If you have the habit of withdrawing from those accounts for spending money, leave a little cushion in your checking account. We want to break those withdrawal habits. As far as we’re concerned, the only money we have is in the checking account.
Savings Account
If you don’t have a savings account with your current bank, you can set up one or open a savings account at another bank. Some people choose to keep them separate just to make it harder to spend that money.
This account consists of rainy day funds, emergency funds, vacation money and any other savings goals. You shouldn’t have to open a different account for each goal, but you can if it helps to keep it all separate and organized.
Once again any money in your savings account is only used for the goal set for it.
Retirement Accounts
Notice that retirement accounts is plural. This includes your work retirement account (if you have one) and any IRAs.
Your work retirement account, should be set up to automatically withdraw money from your paycheck. If it’s not, talk to the human resources department and fill out the paperwork. The bare minimum amount should equal any company match. Set it as a percentage of your income. This way any pay increases will also increase your retirement savings. This is the easiest way to save for retirement.
Any IRAs you have should be set up for automatic saving also. If you’re not already making contributions, it only takes a few minutes to open an IRA. You’ll need to set up your IRA for regular electronic (ACH) transfers and connect it to your checking account. Your scheduled IRA deposits will depend on your payday and bill payment dates. So, setup your IRA deposits around those dates but make sure it won’t empty your checking account in the process. Your IRA provider should give you enough options to fit any scheduling needs.
If you need to set up an electronic (ACH) transfer, have your checking account information handy. When I set mine up several years ago, it took a couple of minutes and was approved in a couple of days. It makes depositing money easier and you will never have to set it up again.
Brokerage Account
For those who have a brokerage account, automatic saving can be set up for this account as well. It’s not necessary, but if your income allows or your savings account goals are maxed out, you can set regular deposits for this account too. You will set it up just like the IRA deposits, through an electronic (ACH) transfer which will connect to your checking account.
Your Savings Are Automatic
Once you have it all setup, your automatic saving plan will run like clockwork. Making adjustments will be effortless and there will be no more worrying whether you saved enough for that winter vacation. On top of that you can convert the process to automate your expenses as well. Set up your mortgage, car, credit card, and utility bills for automatic payment and simply your life.
Stop making your savings tomorrow’s problem, start your automatic saving today.
Image: Flickr – GuySie
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We are almost completely automated…and I love it!