For most of us, we spend a lot of time thinking about how to spend less and save more. If you head over to CNN Money, MSN Money, or Yahoo Money, there are articles with titles like "How to Save in 2015" or "Save Money Now." We all know that saving money is important, but for so many of us, the problem is not the concept of saving money, its controlling the person looking at us in the mirror. So often, we make excuses for why we don't save, or we simply don't get around to it. We say things like "I don't make enough money" or "After this happens, I will begin to save." But, for many Americans, that day never comes.
We have all heard that we should "pay ourselves first." All that means is, before you pay your bills or any other obligation, pay yourself. Put money into a savings account first. Obviously, the more you save they more you will have, but even if you can only save a few dollars a week or month, getting into the habit of savings will set you on a path for a more sound financial future. Again, most of us understand the concept, the problem comes when we have to put it into action.
Today, that has literally never been easier. Almost every bank offers automatic transfers for free on their online portal. It takes about 2 minutes to set up a transfer from one account to another. Once it is set up you no longer think about it. It has been my experience that after a few months, you don't miss the money you have saved, and begin to operate as if those funds never existed. Meanwhile, your savings will grow, and you are able to tap into those funds when you need them, be it for an emergency or for a goal you were trying to save for.
Years ago, I read the book, The Automatic Millionaire, and in the book, David Bach argues that automating your finances bypasses the human element (aka the lack of discipline) and makes savings easier. Bach's main thesis is that wealth is not necessarily determined by what you earn, but rather what you spend, and by making savings an automatic process, you will be able to build wealth over time.
My husband and I set up automatic savings years ago, and now, we are accustomed to those funds being transferred on a certain date each month. However, one area of our financial life that we have not automated yet is our retirement savings. My company offers a 401K and I fully participate and receive my company match, but for our Roth IRA's, each month I still write a check and send it in via snail mail. My goal is to make this action automatic as well. I want January to be the last month that I send funds to those accounts by paper, and have them automatically transferred each month.
In the end, I think the more you can automate, the better. It removes the human element and temptation not to save. It bypasses the excuses, and assures execution.
Tell Me: Are your savings automatic? Has anyone out there read The Automatic Millionaire or any other of David Bach's works?
