1) Split Your Direct Deposit
A great service that many payroll departments offer is splitting your deposit. This is something that not every payroll department will do, but if yours will, you should take full advantage. Simply have a portion of your paycheck sent directly to your savings account. This is the absolute easiest and most foolproof way to save.
The benefit of having your paycheck split is that you never even see the money. The only money that hits your checking account will be the money that you have to spend. If you never see that money meant for savings, it is much harder to miss it.
2) Schedule Checking Transfers
But what if your employer does not offer split deposits? If your employer does not allow for split deposits, you can set up your own transfers. Most checking accounts will allow you to schedule reoccurring transfers. Simply set one up for the day that you get paid and you are all set.
The downside to this is that you actually see the money hit and then leave your account. If you are new to savings, it can be tempting to take back some of this money or cancel a transfer. Just stay disciplined and get that money out of there ASAP.
3) Max Out Your 401K
If your company offers a 401K program, you should take full advantage of this as a way to automate your savings and take advantage of immediate tax savings.
A 401K is a great way to save, especially if your employer offers to match a portion of your savings. If your employer offers a match, max it out. Save as much of your salary as they will match. Not doing so could cost you thousands of dollars over the course of a year.
4) Round Up Your Purchases
A great service offered by many banks is the ability to round up your debit card purchases. The best known program is the “Keep The Change” program from Bank of America.
It is a simple concept but one that work very well. If you make a purchase for $4.50, your bank will round up to $5. They will then place 50 cents in your checking account. This is not a lot of money, but in the aggregate, you can be talking about some real money.
5) Save All Your Windfalls
A windfall is a large amount of money that you were not expecting. In many cases it will be a big tax return but it could be a bonus from work or maybe an inheritance from a distant relative. Whatever the case, you should automatically save it.
The great thing about a windfall is that it just comes out of nowhere. Since you will not be expecting it, you will likely not have much time to think about ways to blow it. Have the mindset that any extra money simply gets put into savings and watch your balance grow.
Other Saving Tips
So, now that you have five ways to automate your savings, what are some other ways to really make your money grow. Here are some ideas.
- Use An Online Savings
I am a huge fan of online savings accounts for several reasons. The chief one is that they pay much more interest. You can easily earn 10 times the interest your local bank pays, often much more. Also, saving money online makes it just a bit harder to raid your account. Instead of withdrawals being instant, they take a full business day.
- Have Reasonable Goals
If your only goal is to retire a millionaire, it is going to b a long boring road. Instead of having one huge goal, set up smaller goals along the way.
Smaller and more attainable goals will help you stay motivated. As you reach them you will get a feeling of accomplishment and will stay motivated to continue.
- Avoid Lifestyle Creep
Lifestyle creep happens when you spend every extra dollar that you make. If you get a nice raise every year but still find it hard to save, you are probably experiencing it.
Instead of spending extra money, divert it into savings. If you get a raise, put the money right into savings. Resist the urge to start going out more or to treat yourself to a nicer car.
- Record Your Spending
Having trouble finding money to save? You might be surprised at just how much you are wasting.
Take a month and record every dollar that you spend. At the end of the month add up your spending and you will probably be very surprised. Little expenditures can add up big over the course of time. Even something as simple as a daily cup of coffee can add up to over 1000 dollars in the course of a year.
Take your newfound knowledge and now make some changes that will allow you to save.
- Have A No Spend Day (Or Two)
Sometimes you need a spending reset. Take a day or two and dedicate it to not spending money on anything that is not absolutely necessary. This can help you re-devote yourself to saving and realize just how trivial those little purchases are.