Savings rates The rate at which people are saving is on the rise which is a great thing, but if you have been struggling trying to get yourself to save or even just to save more I have three great ways you can increase your savings automatically.
Direct Deposit
The best way you could increase savings with minimal impact is to take it out before you ever get it. Psychology has more to do with your ability to save than your actual financial situation. If your employer allows it you should partition out your paychecks to put your savings away before you ever really get it. Commit to an amount, set it, and forget it. It really is that easy and you will probably never even miss it. David Chilton in “The Wealthy Barber” recommends saving 10%. When it never hits your checking account you are much less likely to spend it.
Automatic Debits
Next to the direct deposit your best bet is going to be setting up automatic ACH to either deposit the funds into your savings account or pull it out of your checking account. You need to make it automatic and you need to try to forget it is happening. The down side here is that you are going to have to keep up with this as an additional item in your check register and you may be tempted, when times are tight, to cut out that line item to make things easier on the checking account.
Flexible Spending Account
Many people credit Flexible Spending Account’s for their tax breaks but there is an added advantage. You spend money and then you have to submit your receipts et. al. to get reimbursed for it. The key here is that you already spent the money, it’s gone. Set your spending account to pay back directly into your savings and you have instant savings. If you have a dependant care account that is $5,000 a year in added savings. Because you already spent it you probably aren’t going to miss it, make that money work harder for you and save it or invest it.
The key to all three of these options is to set it up and forget about it. Make it a subconcious act and you are going to see your savings increase like you never have before.
Photo: (krasi)
{ 4 comments }
Great post and awesome tips.
I love my FSA, but totally underestimated the amount of money we’d be spending on medical stuff this year. My wife gave birth in February and we’ve already used up our entire balance for the year!
On my site, I advocate finding money within your current budget to “pay yourself” If you made coffee at home rather than buying it at the local coffee shop, “pay yourself” that $4 straight in to your savings account.
One of my favorite ways to save is to put everything on a cashback rewards credit card, and pay it off in full. I get 1% back on everything, plus not using cash keeps all that loose change in the bank!
@ @MattWilsontv
I understand your incentive for doing that but you need to be careful, credit is credit regardless of your intentions. Murphy’s Law doesn’t discriminate.
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