2 Reasons to Set Up an Auto-Transfer to Your Savings

It pays to put your savings efforts on autopilot.

Back when I first started working, I signed up for direct deposit so my paychecks would land directly into my checking account twice a month. Then, at the end of each month, I'd transfer whatever money I didn't spend into my savings account.

The problem with that approach, though, is that some months, I didn't end up with as robust a transfer as I would've hoped for. That's because, like all people, I often fell victim to impulse buys and let myself spend more money than I'd initially intended. That, in turn, often led to negative feelings afterward.

At some point, I decided to change my approach to savings. Instead of sending money into my savings account at the end of the month, I set up an automatic transfer so that money would hit my savings in conjunction with the arrival of my first paycheck. Or, to put it another way, some of my earnings would hit my savings before I even got a chance to spend them.

Going this route has really worked out well for me through the years. And here's why you may want to take a similar approach to your savings.

1. You'll be forced to avoid temptation

As someone who's a firm believer in budgeting, I don't tend to spend money without putting thought into it. But sometimes, the temptation to spend extra can arise.

Years back, friends of mine invited me on a last-minute getaway at a cost of around $400. It was really tempting to go. But, I'd already blown through my leisure money that month, and I needed the rest of my paycheck for bills.

Had some of my paycheck not already landed in my savings, I probably would've gone on that overnight. Instead, I didn't, because the money was already in my savings and I didn't want to have to transfer it out.

If you send money into your savings account right off the bat each month, you may have no choice but to avoid impulse purchases. While that could mean having to give up on some fun things, it also means staying on track when it comes to meeting your goals.

2. You'll feel less guilty about spending money

As someone who works full-time and really doesn't blow money left and right, I should be entitled to treat myself once in a while to different things. But sometimes, I feel guilty spending money when I know I could be using that cash to pad my savings instead.

The upside of the auto-transfer I have in place is that I know I'm doing a decent job of sending money into savings. That helps me feel less guilty when I do decide to indulge. The logic is that the money I'm spending is money I can afford to part with, so why feel bad about it?

If you tend to give yourself a hard time about spending, this system could benefit you as well. You might feel guilty treating yourself to $100 concert tickets -- until you stop and realize you've already met your savings goal for the month.

Of course, it's not just your regular savings account you can send money into automatically. If you're all set with near-term savings, you can find an IRA with an automatic transfer feature and send money into your retirement plan, too. You can also find a brokerage account that accepts automatic transfers. Think about the accounts you need to fund to figure out where your cash should land.