Saving money is about setting up a routine that works for you and having the discipline to execute it every time you get paid. It can be much harder than it seems since it’s human nature to want to spend an extra money we may have. That was one of the hardest lessons that I learned in my own experiences. All of my extra money was being spent, and I was never able to use it to build my finances and reach that next level. When you’re scraping by it’s hard to justify not spending the little extra you have on something you enjoy. That’s the catch-22 that a lot of people have a hard time dealing with when it comes to saving.
One way that I was able to get passed that is to take the control of the money out of my hands. The “out of sight, out of mind” principle works wonders when it comes to saving. By paying yourself first and using the automated tools that we have available to us you can set up a savings system that you almost never have to manage, rarely have to think about, and increases your ability to save by leaps and bounds. Here are some ways to automate your savings and help you get to that next financial level.
Put away more in your 401(k)
There are 4 great things about putting more money in your 401(k). First, you’re putting money away for your future tax-deferred. Second, it comes directly out of your paycheck before you even get any of your money, so there’s no temptation to spend it. Third, the early withdrawal penalties make you keep the money in there. Fourth, it lowers your taxable income so you pay less in taxes! The more you are able to put away for later, the better and at the very least you should be contributing enough to get your full employer match. The way that most companies handle making 401(k) contributions for their employees works well for making you save, and it’s really the basic model that we’re following in the subsequent tips.
Open an account that is not readily accessible
Sometimes the simplest solutions are the most effective. If you’re having trouble spending excess money that you should be savings, put it into an account that you can’t readily access. Whether it’s just a different savings account at your primary bank, or an account at a totally different financial institution, putting your money somewhere you don’t have easy access to helps a lot. Over time you’ll get used to not being able to spend it and it will become less of a challenge. The only caveat…don’t dip into the account from time to time. It will only mean you’ve broken that access barrier and it won’t be effective in stopping you in the future.
Use direct deposit to your advantage
Most companies have direct deposit available, and you can use it to help you save. Instead of depositing all of your paycheck into your primary checking account, you can split it up into percentages and put some into other accounts (possibly the one you created above). This helps prevent you from ever even seeing that money in your primary checking where you’ve have the temptation of spending it. Just make sure you don’t go crazy with splitting up your check into 5 different accounts. Keep it simple with 1 or 2 accounts and there’ll be less risk for mistakes. Otherwise you might have to go in add up all your different accounts every payday to make sure you got it all.
Set up automatic transfers
I love online banking. Being able to do all my transactions from my laptop is amazing to me. Use the technology we have available to us as a resource to help you save. Most banks offer the ability to set up automatic transfers at recurring intervals, and they provide a fantastic way to automate your savings plan. If you’d rather not split your direct deposit, you can have everything deposited into your primary checking account and set up an automatic transfer to execute every 2 weeks corresponding with your payday! Moving the funds to a different account keeps it out of sight, and you’ll still have the flexibility of stopping the automatic transfers whenever you need to.
I know you might be thinking “won’t I feel the loss of the money I’m saving in my budget?” The answer is yes, but only at first. It’s amazing how our perspective changes after a few months of a new routine. Once you get used to having a lower amount of money in your budget, you get used to working with that amount. That’s the crucial part in all of this. Convincing your mind that you’re making less money reduces the chances that you’ll give into temptation with money that you should be saving. By putting it away early and not making it readily accessible, you force your mind to adjust to a new (lower) income even though you’re saving more money than ever before. Continue to increase the amount of savings as you get raises and promotions and you’ll be well on your way to building your financial freedom.
