One of the most difficult obstacles in saving is yourself. How many times do you have to fight your own mind in order to do something productive? This could mean working out instead of watching Netflix, cooking at home rather than eating out, or simply saving that extra few bucks.
The human mind is extremely powerful, and for us to beat our own thinking we have to set up processes to help us achieve our goals. Personal finance is no different, especially saving. An effective way to help increase savings potential is to simply automate the process.
Where to begin automating your saving
You’ll likely want to start with your employer, more specifically, the direct deposit form. With many employers, you can set up to have money go into more than one account. For example, each paycheck you may want $50 to go into a savings account.
Another place to begin is through external accounts as they may have the capacity to transfer money from your checking account on a scheduled time and date. Regardless, you first need to identify how you’ll transfer money.
Pick a separate account
Next, you’ll want to select a separate savings or checking account that is just enough out of your reach that you won’t be tempted to spend it. Many people are choosing to open online savings account through Capital One or Ally Bank. The reason for this is your money is still easily accessible, it just takes an extra day or so to have those funds moved into your account.
Be mindful when selecting your account. Look for a high yield savings or checking account. This makes your money work a bit harder while it’s sitting idle in your savings account. As for an investment account, look for a low-cost platform such as Robinhood or M1 Finance. These platforms offer no commission trading, which can save you hundreds or thousands over your investing life.
Slowly increase your saving
Once you’ve begun to steadily save, increase your savings deposits slightly every so often. Odds are once you become comfortable with your new way of living, you can begin to squeeze a bit more into your account.
Also, keep in mind that when you get a raise at work, try to keep your cost of living the same. Direct those additional funds to either your retirement account or savings.
Automation can be your friend when looking to begin seriously saving. Out of sight, out of mind is a great phrase to go by, especially regarding saving or investing. Remember, this can always be changed or eliminated if the need arises. However, starting to save early will pay enormous dividends later in your financial life.