If you’re like most people, saving money is easier said than done. You know you should be putting away a few more dollars each month, but things add up and life happens. Maybe you have a budget, maybe you operate more by feel. Either way, it may be a good idea to start charging yourself a set dollar amount each month.
What do I mean by “charging yourself”? Imagine your paycheck hitting your checking account, and before you even have time to see the new funds, $500 has been automatically moved to your savings account (or another account that is considered off-limits). Pay yourself a set amount each month, and keep it in your savings account – somewhere that you vow not to touch. The key to executing this plan is to make the payment automatic. Use technology to your advantage. Set your default behavior to your ideal self. If you’re going to deviate, make yourself go to an effort. It’s too easy to say, “ehhh… I’m just going to do $400 this month, I will make up for it next month.” If you’re going to skip a month or contribute less than your normal amount, force yourself to go to the effort of opting-out of the transfer.
There are numerous studies showing the impact that defaults have on human behavior. 401(k) plan participation skyrockets for companies that auto-enroll employees and put the onus on them to opt-out should they so choose. You can do the same thing by auto-enrolling yourself in monthly transfers. Another benefit of separating your money into two accounts and keeping one “off-limits,” is you can better track your savings over time as you see the savings account grow.
There are a ton of strategies that people take to help them save more. It’s simple to tell yourself, “don’t spend as much,” but the actual execution is tougher. So set-up an automatic transfer and watch your savings steadily pile up.
How do you handle your paycheck and money? What’s worked an what hasn’t? I’d love to hear from you.
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photo: Hanalei Bay – Kauai – March 2018
MoneyStuff 