How To Automate Saving
The most common reason so many saving strategies fail, is because there is no clear plan or consistency.
By: Nick Massie / 2018 / PayYourRent.com
The most common reason so many saving strategies fail, is because there is no clear plan or consistency. While there are many different ways to go about saving, it’s best to pick a strategy and stick with it. It’s easy to lose track of spending without diligently watching your bank account. So how do we make it easy and stop overspending? Our answer is, automate your saving.
Why Saving is Hard
My first attempt at a budget began when I started my first salary job out of college. I had been working low wage jobs since I was legally old enough to work, and I had grown used to living paycheck to paycheck. So when my salary job nearly doubled the income I was used to, I figured I should be able to save half the money right? Well, that’s not how it worked out. Here’s why.
Living from paycheck to paycheck for years programmed me to live accordingly. Even though I was now making nearly double the wage from my previous jobs, my mindset didn’t change. When I saw money in the bank, I somehow found a way to spend everything in the account until I was nearly broke before the next paycheck.
I was spending the surplus. I would make plans to save, say $200 from each check, but because I had access to the money, I often failed.
After a few years of this, I got into reading money management blogs, and formed a plan that actually worked. The plan? Automate my saving.
Eliminate Temptation – Put The Money Away
Although I always seemed to spend any surplus before the next paycheck would come, I would very rarely, if ever, bounce checks. That’s because when money started running low, I would be strategic with spending and live frugally. (You know, actually budget). This habit was built into me from years of being used to living on low wages. So here’s how I used this programming to my advantage.
I removed the surplus. Each time a paycheck would come, I would immediately deposit my chosen percentage into a savings account. This way, my spending money was more reasonable and the surplus was no longer available. Rather than fight temptation, I eliminated it all together. This allowed me to save money consistently, and within a year my savings were well under way.
Automated Saving Technology – Phone Apps
There are a a few phone applications that can be used to help with your automated saving. Acorns and Stash are clever apps that allow you to save without thinking about it, and they will even automate your investing. Here’s how it works.
You link the app to your bank account, and the change from any purchase you make is automatically deposited into the investment account. Over a few months, depending on your spending, you can accumulate hundreds of dollars while having that money work for you in passive investment.
You can apply this strategy the old fashioned way as well. Just keep a change jar, and each time it fills put the savings into an IRA or other investment account. This can be a great way to passively build savings without having to overthink it.
So Now You Have Money – What Do You Do?
Don’t touch it! Look at savings the same way you would look at a time capsule. You bury it, and dig it up in the future. If you would like, you can allot a portion of your savings to be liquid so you can withdraw the money for big purchases like a house, car or education.
After you’ve saved some money, the best thing you can do is compound it. This can be done with many types of investments. Stocks, bonds, real estate and many others.
At PayYourRent, our favorite is obviously rental properties. 🙂
But first things first. Before you can invest, you need to build a reasonable security blanket with your savings. Follow these steps, and a few years of positive saving habits will turn your life around.