Whether you get paid every two weeks or on a monthly basis, regularly setting aside money for a savings account, emergency fund, dream vacation or a retirement fund can feel nearly impossible on limited cash flow. It is no wonder that investing often takes a back seat to the other life obligations. Many people fall into the habit of saving only what is left over from paying living expenses and covering the price of discretionary purchases. But making the shift to paying yourself before paying all others is a tactic with the power to transform your current financial wellbeing. Even if saving money is not your strong suit, you can still get ahead in the savings and investment game. The easiest way to save and invest more money? Put them on autopilot.
Perks Of Putting Your Saving and Investing On Auto
Automating your savings and investments can turn your deposits into another monthly expense helping you prioritize those contributions while reducing the temptation to spend the funds. Turning your contributions into a recurring monthly expense also means you don’t have to keep spinning your wheels about how much you should save, when to make the deposit or transfer and whether you are meeting your savings goals. Automation frees you up to focus on other things. Having your contributions transferred as soon as your paycheck hits your bank account also means that you’re making the commitment and will hold yourself accountable for honoring those deposits month after month. When automating your savings and investments, remember to always pay yourself first.
If you’re determined to pay off student loans, credit card balances and other debts, automating monetary contributions into an account specifically for that debt can help accelerate the pay off in a big way.
How to Effectively Automate Your Funds
There are several ways to automate your savings but it all starts with calculating how much you can reasonably afford to set aside each month. Once you have a grasp on those numbers, you can decide how aggressive you want to be with your savings and investment goals.
If you already have a bank and want to automate your finances, you can set up an automatic deposit from a checking account to a savings or investment account. If your employer offers direct deposit, you can have a portion of your paycheck deposited directly into any additional accounts of your choosing. While some banks offer to waive monthly maintenance fees if you keep a minimum balance, always be mindful of bank fees that can chip away at your saving and investing efforts. And always keep your money safe and protected by banking only with FDIC-insured banks.
Be In It to Win It
If you want to increase your chances of staying consistent with your savings and investment contributions, start small and then increase the deposit amount when you feel confident that you can set aside more without sacrificing other necessities.
Start small. Just save something and save that something every paycheck. Even if it’s $10. Make it a habit to automatically (and automatically is key) set aside a fraction of your income into interest-generating accounts. While you’re at it, take a hard look at how you’re spending. Are there some expenses you can cut? Can you negotiate your way to a discount with some of your expenses such as cable or your gym membership? Track your spending on an ongoing basis to see where you may be going overboard and can cut back. Don’t underestimate the momentum that can come from sealing some spending leaks that can really add up.
Set It and Forget It Until You Make More Money
A positive change in your financial situation such as a raise at work, a windfall of cash, a lump sum from a tax refund or a birthday gift means that it may be time to modify your original plan.
Ojos Que No Ven, Monedera Que No Siente
Automating your savings and investment contributions can make money management and crushing your financial goals that much easier. Take the time to set some realistic goals and choose monthly contributions that you can sustain through the year. You’ll find it easier to adjust your spending to accommodate for this expense while building up your accounts with minimal effort.
Take the Next Step
Now that we’ve introduced automation as an option that can make it possible to save and invest, even without much cash to spare, the next step is to jet set your own financial journey right where you’re at. Whether you’re off to the drawing board to devise your own debt demolition plan, taking a pause to check back in with yourself in order to chuck the limiting beliefs, actively putting Google to work in your search for the ideal financial advisor, or making the necessary moves to get your money flowing into the right receptacles, remember this timeless Chinese proverb:
All great accomplishments begin with inspired action, no matter how small it may seem.
To learn more about this and other money tips, download our FREE ebook “How to Become a Confident Inversionista and Start Making Your Money Work for You” made in collaboration with Ellevest.