Put your savings on autopilot.

Having trouble building a savings account? Can’t seem to make yourself put any money into savings? Many of us have experienced this problem. What I have found truly works is to make your savings automatic. This takes the emotional decision making out of your hands. It assures you will begin building something for an emergency, rainy day or your future retirement dreams. Whatever the reason you have for wanting to save, start today!

It is very easy today to set up an automatic savings plan. If your place of employment offers a 401k or the like, I highly recommend signing up. Not only will your savings be deducted automatically from your paycheck, but it will be taken out tax free. And many employers offer matching funds to your contributions, free money! Also, many employers can electronically transfer funds to your savings or brokerage account. Initiating savings at the paycheck level is in my opinion the best way to do it. It leaves you no opportunity to change your mind and use the money for something else. Unless of course you decide you just can’t live without that new $200.00 widget and withdraw the money from your account. Self control is a topic best left for another post! In all seriousness, you will need to think about how much money you can actually afford to put away in a retirement account. If you need the money and withdraw it, you will owe Uncle Sam the taxes, based on your rate, plus a ten percent penalty for early withdrawal. For those just starting out, it is probably best to build an emergency fund first. This can take a while to do and is usually 3-6 months worth of living expenses.

It is also possible to have automatic transfers made from your bank account to another savings or IRA retirement account. I would recommend setting up a separate savings account specifically for your “do not touch” money. You can have money automatically transfered from your regular checking and savings accounts every week or month to this account. I have an on line bank account at ING Direct, known as Orange Savings for this purpose. There are several advantages to opening an online account. First they have notoriously low or no fees. That’s a plus! Second, online banks typically pay a much higher interest rate than your neighborhood brick and mortar bank. Sorry Mr. Local Banker! And third and possibly most important, it is harder to get at your money, increasing the probability you will save.

So, that pretty much sums up putting your savings on autopilot. Of course if you don’t take the first step and set things up, nothing will happen and five years from now you will still not have any savings. You have to start somewhere. Start putting away something, anything, no matter how small and insignificant you think it is. It will begin to add up, interest will compound and a few years from now you will be very pleased with yourself for listening to me. Haha. I hear friends talking all the time about not having enough money to save anything. Of course they’re telling me this between bites of Crispy Creme donuts and swigs of Starbucks coffee. Go figure.

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