Why Automating My Savings Was My Best Financial Move Ever
- Many years ago, I decided to make saving money automatic.
- This decision has had a bigger impact on my finances than any other choice I've made.
- Automating my savings has helped ensure I'm using my money to build wealth.
This decision made a huge difference in helping me build wealth.
Over time, I've tried to make lots of responsible financial decisions such as avoiding credit card debt and tracking my spending to avoid waste. But while my efforts to be smart about my money have helped me in a number of ways, there's one choice that stands apart from all others in terms of the impact it has made.
That decision was automating my savings. I set up automatic transfers from my checking account into my brokerage accounts and into different savings accounts, and this made a bigger difference than all of the other actions I've taken to try to build wealth over the years.
Here's how I automated my savings
When I decided to automate my savings, I wanted to make sure I did this in the smartest way possible.
This meant ensuring I was putting enough money away each and every month to be on track to accomplish the financial goals I set for myself. It also meant making sure I never overdrafted my bank account or went into debt by having money transferred into savings that I couldn't afford.
To do that, I first figured out what my key financial goals were, including how much to save for things like retirement, vacations, car repairs and new car purchases, a home down payment, and so on. After calculating the amount to save and my timeline for doing so, I was easily able to assess how much to invest in savings and brokerage accounts each month.
Then, the next step was to build a budget around that. I made sure to allocate money to each different goal as well as to essential spending and discretionary costs. Once I set my budget, I know that if I stuck to it, I should have the money in my bank account to transfer the requisite amount to savings on a regular schedule.
All that was left was to go to my bank accounts, savings accounts, and brokerage accounts and arrange for funds to be moved to the correct places on the day I was paid so I wouldn't have a chance to use the money allocated toward savings on anything else.
Here's why automating my savings really paid off
This approach has paid off big time for me because once I set up automatic transfers of money, I haven't gone back to reduce the funds I'm putting toward my goals.
If I wanted to stop the transfer of my money into my savings accounts or brokerage accounts, I would have to sign in to my account well before the transfer occurs and make that change. This takes more effort than just leaving things as they are -- and having to do this process gives me time to think about whether it's actually a smart idea.
Every time I've considered canceling a transfer of money into savings, I've decided I'd rather keep working toward my planned objectives. And because of that, I've accomplished all my short-term goals and I’m on track for my long-term ones. Making the initial effort was well worth it, since I'm now using my money to improve my life over the long term, and it requires no effort on my part to do so.
These savings accounts are FDIC insured and could earn you 12x your bank
Many people are missing out on guaranteed returns as their money languishes in a big bank savings account earning next to no interest. Our picks of the best online savings accounts can earn you 11x the national average savings account rate. Click here to uncover the best-in-class picks that landed a spot on our shortlist of the best savings accounts for 2023.
Our Research Expert
We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.
The Ascent is a Motley Fool service that rates and reviews essential products for your everyday money matters.
Copyright © 2018 - 2023 The Ascent. All rights reserved.