Four Simple Ways to Make Savings Automatic
By Ayesha Haider, MBA, AFC® Candidate, FINRA Military Spouse Fellow
Setting money aside for savings is easier said than done. Often times, life events get in the way of our achieving savings goals and sometimes it is our own spending habits that prevent us from starting or contributing to a savings account. Below are four simple tips you can begin implementing today that will make savings an automatic and routine part of your daily life:
1. Have separate savings accounts: Establishing one or more separate accounts for savings prevents your savings fund(s) from getting mingled with the money that you use for day-to-day purchases. Keeping the two monies separate ensures that you know exactly how much money you have in savings and also prevents you from spending this money on routine expenditures. You can also have separate accounts for each savings goal. For example, you can have a 401(k) or TSP for retirement, an emergency fund for those unexpected financial obligations, and another account to set aside money for a wedding, family vacation, or large purchase.
2. Enroll in your employer-sponsored plan: Employer-sponsored retirement accounts deduct pre-tax dollars from your paycheck automatically and apply them towards your retirement fund. Besides the benefit of preventing you from spending this money on something other than savings, by making contributions you’re also saving money by deferring current taxes to a later time period. Also, if your employer has a matching contribution plan you will be earning free money to put towards your retirement.
3. Turn any “surprise” funds into savings: You may be fortunate enough to receive funds you were not expecting to receive perhaps in the form of a large bonus, tax refund, or court settlement. Since these funds were not anticipated and not a part of your monthly budget, they can automatically be put towards savings.
4. Change your savings mindset: For most people, saving money is something to do once all your other needs and wants have been met. Try reversing this mentality by treating savings as an obligation that must be met every month instead of as a nice-to-have. Use your budget to determine how much you can set aside every month towards accomplishing your debt or savings goals and treat this amount like a utility bill or any other financial obligation that you must pay every month.
The four strategies discussed above are useful ways of getting into the habit of making savings automatic and a routine part of your daily financial life. When implementing your savings strategy, remember to set specific, measurable, and relevant goals that will lead towards your being financially stable both in the present and in the future.
- Written by Guest Blogger
- Category: Blog
- Published: 16 February 2016