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Automatic Savings

Automatic Savings

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I hear so many stories from people who tell me they want to save money, but they keep going to the department store for some reason and their money just disappears! I like Macy’s as much as the next person, but not being able to save money is a huge issue for us young professionals. I have an idea that may help.

What you need is to somehow transfer money straight from your paycheck into a savings account that you leave alone. By not seeing the money in your checking account, you won’t be tempted to spend it! Now, this assumes that you aren’t spending more than you earn in the first place. If that’s going on, then this won’t help much.

Split Direct Deposit

See if your company offers splitting your direct deposit payment between bank accounts. At one time, I had my paycheck deposited in two different checking accounts as I was transitioning from one to the other. My original bank talked me into keeping some money there, but that’s a different story for a different time. I know for a fact that Paychex will allow you to break up your direct deposit because that is what is used where I work.

Automatic Transfer to Savings

See if your bank offers a service where you can link a savings account to your checking account. Most banks allow this if you open the savings account with them and your checking account is also with them. You can set the amount you want to transfer and the time frame you want to transfer it in. For example, if your paycheck comes every other Friday of the month, then you can set up an automatic transfer of money that occurs on the same day or whenever you want.

Non-Automatic Transfer to Savings

If you can’t do any of the above because you get an actual paper paycheck or for whatever other reason, you still have no excuse. You need to split your paycheck up between a savings and a checking account!

Goal or No Goal?

The amount to split up is another topic for another time and it varies depending on your current financial situation. If you have a goal that you want to get to in a certain timeframe, then the calculation is straightforward. Let’s say you want to buy an $800 iPad 2 and you want to get it in 3 months. Let’s also say you earn 2 paychecks a month so you have a total of 6 paychecks to split $800 into. If you transfer $150 per paycheck to your savings account, then you will be able to afford that iPad 2 plus shipping and handling. If you don’t have a particular goal, then you’ll have to figure out a percentage to stash away that won’t affect your wanted standard of living.

Bottom Line

Sometimes the only way to save money is to take it out of our own hands and make it automatic. Sometimes we need to trick ourselves into thinking we have less money to spend in order to spend less money. Make sense? I briefly mention standard of living above and sometimes we have to review that and make sure we’re not living the high life when we can’t afford to. That is definitely a topic for another time. Now go set up some automatic savings!

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