Setting aside money from your budget for savings can be easy for some people but challenging for others. It’s tempting to spend what you make particularly when struggling with emotional spending. And if you’re living from one paycheck to the next, savings isn’t usually at the top of your budget. So if you’re intersted in learning how to automate your savings strategy so it becomes a priority in your financial plan, read on.
If saving is not something you feel like you’re good at, it can be even easier to get off track and save less than you’d like. There’s always something in the immediate that seems more important than something in the future. But that doesn’t mean you can’t learn better habits and get good at it. It just takes a little practice.
Automating your savings is a great way to get started, once you set it up, it requires very little, if any, work from you and the money never hits your checking account so it reduces temptation. If you’re ready to get serious about saving, automation could be just what you need.
DO YOU NEED TO AUTOMATE YOUR SAVINGS?
Regardless of when you get paid (every two weeks or once a month or whenever a client sends the check), if you have trouble setting aside money every month towards your emergency fund, savings account, or retirement fund, it may be time to think about automating.
Creating a habit of saving is just as important as creating a habit of paying your electric bill. Many people though tend to only save what’s left over at the end of the month.
That is, of course, if there is anything left over. Once you’ve paid your living expenses and discretionary purchases, what’s left probably isn’t much. And it’s not a consistent amount so your savings will be unpredictable.
If you’re struggling with emotional spending and impulse purchases, automating your savings strategy is the perfect way to make sure you’re paying yourself first and taking care of your future.
If you can relate to this, it’s time to automate your savings.
THE BENEFIT OF AUTOMATIC SAVING
By automating your savings, you create a budget category for it and it becomes a monthly expense, not an “if I have money left over” expense. This helps you to prioritize your savings and reduces the urge to frivolously spend on things you don’t need. And it helps ensure that you don’t forget about it.
Automating your savings allows you to:
Save time – It becomes a recurring monthly expense. You can an automatic transfer set up for a specific day or every payday to automatically move money from your checking account to your savings account. There’s nothing to think about or remember to do.
Have peace of mind – You’ll no longer have to wonder if you’ll meet your quarterly or annual savings goal, you’ll already know it’s going to happen. Your savings will steadily increase without any effort from you.
Save more – With automated savings, you’ll save more over time by saving a set amount each month or each paycheck than you’d save if you just set aside what’s left over at the end of the month. If the money moves from your available funds to your savings account right away, you won’t even have the chance to spend it then wonder where it went at the end of the month.
Reduce debt – If you’re carrying too much debt and you’re determined to rid yourself of it, automating your savings and moving money directly to an account set up for debt reduction will help you reach that goal faster. Once you’ve built up enough savings, you can pay off your credit cards, student loans, or car loans in one lump sum and be done with them.
HOW CAN I SAVE MONEY EVERY MONTH?
First things first, you’ll need to decide how much you want to save each month then decide how you’d like to set it aside. One lump sum on a certain day? A little bit twice a month from each paycheck? Or a little every week? Decide on a savings goal, then decide how long you want to take to reach it, and finally decide how much you’ll need to set aside in a month to reach that goal.
For instance, if you want to save $1200 in a 12-month period, you’ll need to set aside either $100 a month, $50 every two weeks, or $25 a week to reach that goal.
Next, you need to budget for it. Especially if savings hasn’t been part of your budget in the past. You need to add a line item to your budget for your new savings goal. If adding “savings” to your budget pushes you into the red, it’s time to look at cutting expenses so that you can make saving money a priority.
What can you cut from your budget to make room for saving? Cancel your premium cable package and switch to a streaming service or reduce the number of channels you pay for? Reduce the amount of money you set aside for entertainment? Cutting back on your grocery budget and learn how to prepare budget meals? Skip the gym and work out at home? Skip the morning coffeehouse and learn to make your favorite coffee drink at home?
There are a number of ways you can reduce your spending in order to have more money for savings. You just need to get creative and you need to decide that saving for your future is more important than something you want right now.
Lastly, decide on your savings goal. This will help you stay motivated to keep working towards it. Do you need to set up an emergency fund? Pay down credit cards? Want to save for a down-payment on a new house? Need to set money aside for your kids’ college fund? Whatever it is, having a reason to save will help you connect with your goal.
HOW TO AUTOMATE YOUR SAVINGS SIMPLY AND SAFELY
There are a few good ways to automate your savings.
Set up a savings account at your bank and link it to your checking account. This way you can set up automatic transfers from one account to the other. Just make sure that your debit card is not linked to your savings account or you’ll be tempted to spend what’s there.
Ask your employer to split your deposit. If you get direct-deposit at your job, you can specify a dollar amount or a percentage of your check to go to a different account. That way, it will never hit your checking account; it will go directly to savings.
Use an app. Using an app is a great way to automate your savings because you can easily stay on top of it and watch it grow. An app like Digit makes it easy because it does all the hard work for you.
First, Digit learns your spending habits. Just put in your expenses for your bills, add in what you spent for necessaries like groceries and gas, and add in anything else you spent for unnecessariness like eating out.
Next, set your savings goals, as many as you’d like, and the dates you’d like to reach them by. For instance, if you want to save money for next summer’s vacation just put in how much you want to save and the date you’ll need the money by.
Digit’s algorithms take all of this information and help you decide how and when to save. It will tell you “safe to save today” amount and how it recommends dividing those funds between your goals. You don’t need to set a specific amount to save each and every month, you just need to state your savings goals and the dates you’d like to reach them. Digit does the rest.
This is the perfect savings scenario if you’re dealing with unexpected expenses or a varying income. These factors can make budgeting for savings every month difficult. But with Digit, you can work with just what you have. If you only have $10 to put aside in savings today, that’s okay. Digit will decide the best way to split that $10 between your goals based on when you want to reach them.
There are some other wonderful features too:
- It automates your savings, not by a specific date but by when you have the funds available.
- You can create as many goals as you’d like.
- It pays you! Yes, you get a 1% savings bonus every 3 months for saving.
- It allows you to pay extra towards your credit cards so that you can pay them down faster and easier.
- You can access your money whenever you want.
- It automatically transfers money back to your checking account if your checking account balance gets too low.
- And if your checking account becomes overdrawn due to Digit saving too much, the overdraft fee is on them.
What’s not to love about Digit?
I’ve been a faithful Digit user since I was introduced to their product in February of 2017.
Originally I signed up just so I could see how the program actually works. But I fell in love with the simplicity of saving in this way and was impressed with the safety of the application.
Automating your savings is the best way to ensure that you’ll have the money you need when you need it, for emergencies, unexpected expenses, and things you want like vacations. You can never go wrong by saving money instead of spending all you have. You’ll be glad you did.
It doesn’t matter how much or how little you save, what your saving schedule looks like, or how you decide to automate it, saving money is the best gift you can ever give yourself. It provides security and peace of mind.
If you’re struggling with emotional spending and saving money is increasingly more difficult or non existent, sign up for my free online course today and get started finding joy beyond spending.