Make Saving Automatic
Set goals and make a plan to achieve them
Saving money doesn't have to be hard. You just need to make it a priority and use the right tools. The key: set a goal, and make saving for it automatic.
Save with a goal in mind
Effective saving is all about setting goals. Do you want to take a vacation this year? What big purchases do you see in your future? A car? A house? How do you want to live when you eventually retire? Now’s the time to think about setting short-and long-term goals like these and making a plan to pay for them when the time comes.
Here's how to get started:
- Write down some short- and long-term goals, and come up with a dollar amount for each
- Decide how much you can save toward each goal every month
- Figure out how long it will take to reach your goal
Setting a goal gives you something real to work toward. And achieving it—taking that vacation or buying that new car—feels like a real, well-deserved reward.
Put it on autopilot
Now make it easy on yourself. Decide how much you can realistically save each month, and set up some automatic transfers. There are several ways to do this:
- Make a direct transfer from your checking account into a high-interest-earning savings account each month.
- If your employer has direct deposit, see if you can divide it between your checking and your savings accounts.
- Contribute to your 401(k). Make sure you contribute enough to get the company match.
- Set up a monthly automatic transfer from your checking into a tax-advantaged retirement account.
- If you have a brokerage account, you can even arrange to have a certain amount of money invested automatically each month.
You can't spend money you don't have. With an automatic savings program, you set money aside without having to think about it. This is the best way to stay on track.
Watch it grow
When you save money in an account that earns interest, it will start to grow automatically. The money you earn from interest adds to your total savings amount, which in turn increases the account's growth potential. The money you save, plus the earnings on that money, grow together over time, which is called compound growth. It creates a kind of snowball effect—the longer the money has to grow, the bigger the payoff.
our two cents
Don't know where to start saving?
- If your company offers a retirement plan, contribute at least enough to get the full company match. Don't pass up the extra money.
- Pay off your credit card debt. Why pay interest to the credit card company when it could be money in the bank?
- Start building an emergency fund with enough to cover up to 3 months of essential living expenses.