How to Create an Automatic Savings Plan
Redirect a Portion of Your Paycheck From Checking to Savings,Then Forget It
Do you have a savings account, yet find it difficult to consistently contribute to it? Do you have the best of intentions every month, only to find you don't have enough left over after your bills are paid to pay yourself in the form of savings?
This isn’t an uncommon problem—most people find it hard to save. Income is generally either deposited directly into your checking account or you make the deposit yourself, either at the bank, through an ATM, or via your phone. Oftentimes, no sooner does money hit your checking account than it begins to exit; gone to pay an endless litany of bills.
It's a vicious cycle, and one that's hard to break. But fortunately, there is a way to at least better manage it: an automatic savings plan.
Saving Money Is Hard
You may not realize this or may feel that it isn't the case for you, but most people save money as an afterthought.
Income (whether from a paycheck, freelance work, investments or other sources) is allocated first to bills, groceries, rent or a mortgage. Payment for these expensive items often seems to leave little to apply toward savings (or fun). The desire to still enjoy a life while under the strictures of a tight budget very often wins over a nebulous 'tomorrow,' resulting in many adding money to savings accounts only when and if money happens to be left over at the end of the month.
Unfortunately, this backward thinking results in little or nothing left to save at the end of any given month.
So how to break this pattern?
The Answer: Automatic Savings
Making deposits into a savings account automatically and regularly relieves the need to think about it—the money is deposited before you have time to worry about expenses or how much money will be left over. In fact, once automatic savings deposits become a habit, you may find you don't miss the money at all.
Modern technology makes it very easy to set up an automatic savings plan.
It's often easiest to open a savings account at a bank where you have a checking account and link the two.
If you currently have direct deposit through your employer, you will find the easiest, most effective way to establish your automatic savings program is to have part of your paycheck directly deposited into your savings account. It doesn’t matter if it is $10 or $500—simply setting this up automatically will ensure you save money every single time you are paid, and the rest, as usual, will flow to your checking account to cover monthly bills and needs.