The Simplest Way To Start Saving More
Everyone struggles with savings.
"Saving more" tops the list of many New Year's resolutions, but then life happens and that resolution gets tossed aside.
The reality: saving is hard. If it wasn't, all of us would have huge bank accounts, no debt, and be set to retire at age 50.
Savings is hard because it requires you to:
Trade current enjoyment for future benefits that may seem far off or unknown
Create a savings plan and then consistently follow through
Refuse to touch the money for things outside your long-term goals
The good news is research has found a way to help minimize these problems:
Automation is the magic elixir of successful savings. No matter what you are saving for, automated savings can help you get there.
For short-term goals, simply creating an automatic transfer from your checking account to a savings account can help create the habit. Even better, set it up to happen one day after each paycheck is deposited into your account. It'll move the money before you've even had the chance to realize it's there, minimizing the likelihood you make an adjustment in a moment of weakness
For longer goals, investing the savings may be a better option. For goals more than a few years out, inflation can eat away at the value of your money. But investing it smartly can help offset the impact. Nearly all investment companies can set up a link with your bank and automate a regular deposit on your schedule.
Automate Your Retirement
For many, saving for retirement is the ultimate test of consistency. For most, the easiest way to save for retirement is through your employer plan. For many, this is a 401(k), and for those in the non-profit sector, a 403(b).
You make a choice once about how much money you want to be contributed to the 401(k), and your employer does the rest. Better yet, you get tax advantages and a possible employer match to make it even more attractive.
And the best part? After, a few weeks you won't even notice the money deducted from your paycheck.
But years later, you will notice the value of consistent and habitual savings, along with the power of compounded returns.