Have you ever experienced the disappearing $20 bill? It was in your pocket one moment, and then somehow it escaped. One cup of coffee here, a candy bar there, a few coins in the meter…suddenly that very real twenty dollars is gone and you don’t have anything substantial to show for it.
What if you just hadn’t put the money in your pocket in the first place? This illustrates a simple but effective means of budgeting – you can’t spend what you don’t have. If your income dropped by ten percent tomorrow you would somehow find a way to make ends meet. Yet, when it comes to savings many people figure they will just save whatever is left over at the end of the month, quarter, or year, and too often there’s just not much left over.
Take charge of your finances by setting up automatic savings. Whether your goal is to establish an emergency fund, pay off your mortgage, or save for retirement, making your savings automatic will help you acheive it faster. Try one or more of the following to watch your savings grow:
Automatic Transfer To A Savings Account
Most financial institutions will allow you to fund an account with automated bank transfers from your checking account. Check on the website for your bank, credit union, or investment company or give them a call to inquire about setting up an automatic transfer. The money could go to a savings account, college fund, retirement account such as a traditional or Roth IRA, or a fund to be used one day for a vacation or down payment on a home. If transferring funds to an account where you could be subject to tax penalties should you access the money early (such as an IRA) be sure that you are comfortable with the amount you are putting away and leaving it untouched.
Add To Your Monthly Mortgage Auto-Draft
One of the most common bills to be set up on automatic payment is a mortgage. Pay off your home loan sooner by setting up your automatic payment to be a little more than your payment each month. Depending on the amount extra you pay you could be mortgage free years sooner and save big on interest payments. Talk to your servicer and request that they apply the additional amount each month to the principal.
Contribute To A 401(k)
If your employer offers a 401(k) you likely have the option to have your contribution withheld from your paycheck and automatically invested in the 401(k). This is the ultimate automatic savings – you’ll never even see the funds (except in the fine print on your paystub) and they will continue to grow behind the scenes. Your savings will add up even faster if your company offers any type of match.