You may have budgeted, cut back on luxuries, and cut corners, but still: Saving money is hard.
The reason? We only have so much willpower to go around, which means things like having extra money in your account or successfully sticking to your weekly budget can give way to spending on treats and rewards.
That's why the best thing you can possibly do for your savings is to automate it.
Think about it this way: You know how it's really easy to eat whatever you want over the weekend when you've gone to the gym during the week?
The same applies to your money. With a limited gas tank of willpower, we tend to run out of steam just when we've been successful.
That's why it's important to take any form of decision-making out of the equation.
Automatic deductions from your checking account -- or better yet, from your paycheck -- accomplishes just that. By eliminating discretion, you don't have the stress of remembering to move your money or the temptation of spending it in the meantime.
How do I start?
Setting up a direct deposit of part of your paycheck into your savings account is a great way to start. If you don't have that option, most banks will allow you to set up an automatic debit from your checking account into a savings account.
From there, the questions of how often and how much are pretty much up to you.
Avoid the checking account
I personally like the method of bypassing my checking account entirely and setting aside savings directly from my paycheck. Once the money is in your checking account, it feels like "your" money, so it can be painful to see it leaving the account again. Yes, it's still technically yours when it's in your savings account, but you can't spend it.
And that, if you ask me in my more honest moments, is painful.
Behavioral economists call this the endowment effect: Once you have the sensation that something belongs to you, it's a hard feeling to shake. Better to avoid it altogether; by sending it directly to savings, the money never really "belongs" to you, so you never have to deal with the pain of "losing" it to your savings account.
What do you do if you don't have the option to deposit into savings straight from your paycheck? Make it a point to set up automatic transfers on the same day that money goes into your debit account. If you deposit your paycheck on Fridays and the money clears on Monday, make sure your automatic debit is scheduled for Mondays.
It might sound complicated, but it only takes a few minutes to set these things up, and then you never have to think about them again -- thus the beauty of automation!
If you're using your paycheck to fund your savings, this is pretty easy: Either the savings will go out automatically, or you can schedule them according to your deposits.
But what if you have an intermittent income stream that's tough to schedule around? In that case, you might need to face up to your endowment effect and set up a weekly, bi-weekly, or monthly transfer.
I'm personally a fan of the weekly transfer, as it gives you less time to ponder the possibilities of the money in your account. It's also nice because the amount that gets transferred is lower, so you're less likely to notice (and feel sad).
Again, automation is your friend, here: Even if you're not sure how much income you'll be getting in a given week, consider taking the average and just sending it off to savings. You can always get the money back if you really need it, but you might just find that you can live quite comfortably without it -- especially if you've automated your finances so well that you never really even need to look at your bank statement. I'm not there yet, but it's all about goals!
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