Many people do their best to save money every month. But sometimes, life gets in the way. If you’ve had a hard time meeting your savings goals, then financial expert Suze Orman suggests you make one change in the way you manage your money. And it could end up making a huge difference.
Put your savings on autopilot
Many people look at saving money as something they’ll do when the circumstances work out that way. You might, for example, tell yourself you’ll try to not spend your entire paycheck so you can stick $100 in your savings account at the end of the month. But if you’re invited to a concert out of the blue and you haven’t yet parted with that $100, you may be tempted to spend it on a ticket.
That’s why Orman insists that setting up automatic deposits into your savings account is so important. That way, money lands in savings off the bat, thereby taking the option to spend it off the table.
Going this route also means changing the way you look at savings. Instead of viewing saving money as something you’ll try to do when it works out, you’ll be prioritizing your savings above other expenses.
In our example, say the $100 you want to save every month gets automatically transferred out of your checking account. If, by the time that concert invite rolls around, you’re out of spending money, you may decide it’s not worth raiding your savings to be able to go.
What’s more, the amount of money you save automatically every month doesn’t have to be large. Maybe you’ll start with $10 a month, or $20, and work your way up over time. Orman insists that this is perfectly acceptable. The key, though, is to put your savings on autopilot so you’re not tempted to spend more and save less.
A good approach for retirement, too
Just as many people struggle to build up their savings accounts, so too do many people have a hard time setting funds aside for retirement. But automatic contributions are a good bet in the context of retirement savings, too.
If you have access to a 401(k) at work, that’s actually how your plan will work. You’ll sign up to contribute a certain amount each year, and your employer will automatically deduct those funds from your paychecks.
Now if you don’t have access to a 401(k), worry not. Many IRAs also offer the option to transfer funds automatically, so if you set yours up that way, you’ll be more likely to stay on track with your retirement savings goals.
And as is the case with a savings account, it’s okay to start small when it comes to building retirement wealth. You can begin by contributing $600 a year to a retirement plan, because that’s better than nothing. And then maybe the following year, you’ll save $1,200, and then $1,800 the year after that. But once you change your approach to saving money by making it automatic, you’ll be more likely to be successful.
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