If you’ve ever tried to save money for something – say, a vacation, or a new TV, or an emergency fund for any unexpected problems that may occur – you’ll know how hard it can be to resist temptation. The temptation to spend hits us every day from a million different sources.
Like, when I’m out and about, I love to stop somewhere and grab lunch. Perhaps even treat myself to a nice new shirt or some snacks for the office. Those little purchases feel great at the time, but they can also sabotage my savings goals.
Frequently buying lunch or small buys that I don’t need at the time will quickly add up. Before I know it, I’ve blown $30 – $40 that could have gone towards my savings.
Fortunately, I’ve found a few ways to automatically top up my savings, and I’m going to share them with you today.
What Does it Mean to Automate Your Savings?
Simply put, automating your savings means setting a specific percentage of your income aside for savings without having to do anything. There are many different ways to do this, some with your bank and others using apps or online systems.
The basic idea is that you won’t have to worry about accidentally eating into your savings while you go about your daily business. With savings automation, you will know that every penny you have in your bank is available to be spent. And by putting aside your savings ahead of time, you can better plan for the future.
Why You Should Automate your Savings
Here are just a few reasons:
- It stops you from worrying about saving – By making your savings part of your monthly budget, you won’t have to worry that you won’t be able to afford it. If you think about it as another bill that needs paying, you won’t give it another thought and make it as natural as paying them.
- It helps you cut debt faster – Whether you’re looking to pay off credit card debt, student loans, or any other kind of debt, automating your savings toward it ensures you will be able to pay it off before the due date of your payment.
- It stops you from cutting into your savings – If the money ain’t there, it can’t be spent! You never have to worry about denting your savings if you can’t touch them.
How to Start Automating your Savings
The process is simple and can be summed up in the following easy steps:
1. Set your savings goal
First of all, you have to know what you’re saving for. Let’s say you’re saving for a vacation to Disneyland, and it’s going to cost $3,000. Given a year to save, you will need to put aside $250 per month for the package and an extra $50 for food and drink money. This means your saving goal will be $300 each month.
2. Choose your saving method
You can choose from several options to help you achieve your savings goal. We will discuss a few of them later, but you can use your goal of $300 to help you choose which one will help you the most.
3. Set your method to put aside your money
Next, you will set up the app or bank account to move $300 worth of your income. This money will be taken on a set day each month (ideally the day you are paid) and automatically added to your savings.
4. Enjoy the rest of your month
With your savings money already set aside, you can continue your days safe in the knowledge you won’t affect them. Whatever remains in your bank after bills will be your disposable income, to be used however you like.
Ways to Automate Your Savings
So now you know the benefits and basics of automating your savings, but how do you do it?
Set up separate accounts for each goal
If your goal is to save for a house deposit or an emergency fund, you must keep this money separate from your other savings or spending. If it is kept away from the rest of your money, then you can’t be tempted to break into it like you would a full piggy bank. There are also many different types of accounts that can benefit these goals. High-yield savings accounts grant you a good deal of interest over shorter periods, while investment accounts put your money to work for longer-term savings.
Use automatic transfers
Setting up a direct debit payment on the day you are paid will automatically send out the money you want to save to whichever of your accounts you are filling. This will immediately deduct that amount from your balance before you even have a chance to see it, so you will never be aware of what you don’t have access to.
Roundup apps are accounts that round up each purchase you make to a whole figure and automatically deposit the extra into your savings account. These are a great way to put aside small amounts over a longer period. Putting aside an extra 12 cents every time you buy a cup of coffee may not seem like much, but you’ll be surprised how quickly it all adds up. Acorns and Chime are two good options.
Gradually increase your contributions
Every time you receive a pay raise or other boost in income, consider adding a little extra to your savings funds or 401K. As it is money you didn’t have before, you won’t have to factor it into your budget and can also reap the benefits of a higher income.
With this money strategy in place, you will find yourself reaching your savings goals in no time. You can also use them to help improve your lifestyle. With a solid budget structure in place, you can relieve your personal finance issues while also building a solid nest egg to enjoy in the future.