Struggling With Savings? Try Automating Your Savings
We all know that life today is fast-paced. It’s hard to save money when you’re constantly on the go. Between work, social obligations, and trying to save some money, it feels like there’s never enough money to go around.
Many people find it difficult to save money. According to recent surveys, 40% of Americans do not have enough money to cover a $400 emergency, and just 39% have enough money to cover a $1,000 emergency. Sad. Right?
Regardless of how much money you make or how safe your overall financial situation is, most individuals could use a little more support and inspiration when saving money.
However, saving money doesn’t have to be as daunting as it seems. In fact, there are some easy and painless ways to save money without feeling like you’re depriving yourself. The simplest and most effective way to save money is to automate your savings.
Understanding Automatic Savings
Automating your savings means setting up a system where a fixed amount of money is transferred from your checking account to your savings account at specified intervals. This means that you dont have to deposit your funds into your savings account manually- it will happen automatically.
For example, you could set up an automatic transfer of $50 from your checking account to your savings account every Monday. This way, you won’t have to think about or remember to do it- it will just happen.
Automating savings makes it easier to stick to your personal budget and achieve your long-term financial goals because the money is transferred before you even have a chance to touch it.
This technique also assists investors in maintaining long-term savings contributions to their investment portfolio, which can be emotionally challenging to maintain after experiencing losses on a few investments or other events.
So, how do you automate your savings?
How to Automate Your Savings Account
You’re more likely to make saving a continuous priority and see your money increase if you automate your saves. How do you go about it? There are a few options you can use to automate your savings. Let’s take a look.
Paycheck
Automating your savings start with your paycheck. According to a survey conducted by National Payroll Association’s annual Getting Paid in America, 93% of Americans get paid via direct deposit.
There is a classic saying in personal finance–“pay yourself first. ” This simply means that you should make saving a priority. It would be best if you planned to deposit a portion of your salary into a retirement savings plan or a cash savings account before it reaches your bank account. If you’ve already saved it, you can’t spend it.
Enrolling in your employer’s tax-advantaged retirement plan, such as a 401(k) or 403(b), is one of the best methods of saving automatically. You may be allowed to save a portion of your pay, and your company will match your contributions up to a specific amount, depending on the rules and regulations of your retirement plan.
Suppose your employer does not provide a tax-advantaged retirement plan. In that case, you can still save for retirement by opening an individual retirement account (IRA), SEP IRA (if self-employed), or Roth IRA.
IRA accounts also offer the benefit of being able to be automated through many financial institutions.
Recurring Bills
Setting your bills to get paid automatically will vastly improve your life. Automated bill payment offers two significant advantages.
First and foremost, it saves you time by eliminating the need to pay payments manually. As if that weren’t enough, it will also preserve your credit score (because you won’t be late on payments).
So, what can you automate? While this isn’t an exhaustive list, here are a few of the most popular bills that we recommend auto-paying:
- Utility bills
- Rent
- Insurance premiums
- Credit card payments
You should check with the firm or organization that is billing you. In most cases, you must agree to the recurring fees and give payment information.
Automatic Saving Tools
Thankfully, technological advancements enable us to remove personal responsibility from the equation. Round-up applications, for example, allow consumers to automatically conserve their spare change by “rounding up” the amounts from daily transactions.
Automatic savings applications are a simple, dependable, and foolproof way to increase your savings.
Many of these apps include various financial solutions and account varieties to assist consumers in achieving their short- and long-term savings objectives. Consumers saved roughly $5.6 billion in 2018 using fintech platforms like Acorns and Stash.
There are also several tools available to track your savings progress. Other than reviewing your account balances, it’s not always simple to locate ways of measuring your progress toward savings objectives. Personal finance tools like Mint and You Need a Budget (YNAB) give you an overview of your spending and saving habits.
Dividend Reinvestment Plan (DRIP)
A DRIP is an automated saving and investing plan that allows you to reinvest your cash dividends to purchase more shares of stock. Similar to your IRA, you may set up regular monthly payments in your investments based on recurrent monthly transfers or direct payments to any investment account.
It would be best if you considered enabling automatic dividend reinvestments in any account to keep your money working for you. If you have a long time horizon ahead of you, focus on a recurrent investment in various assets regardless of market situations. You should maintain investing irrespective of what the market does because you have the time to withstand a downturn and ride the wave back up on the other side.
If you have a shorter time horizon or a higher risk tolerance, you should create a portfolio that suits their requirements. If you have any doubts, get advice or help from a reputable investing professional.
Conclusion
Automating your savings is no longer a radical notion. It’s something you shouldn’t overlook. It works. It’s a process that will serve you well in life. And, it’s a lot easier than you think. All you need is to set it up and forget about it!
However, you should check in once in a while to ensure everything is operating well. You can always tweak your system to make it function better for you.
