The hardest part of saving money is not spending it. I know that sounds pretty obvious, but it’s an obstacle we all have to overcome. So how do I avoid spending the money that I want to save? I make the saving automatic.
By setting up portions of my paycheck to automatically go into my retirement and savings accounts, I almost don’t even realize that the money is missing. It’s pretty hard to spend money when you don’t have easy access to it. This is the beauty of paying yourself first. It’s like spending money on your future self.
Here’s a quick overview of the system I have setup for my current situation. Since everyone is different, this system may not work for everybody, but hopefully, it gives you an idea of some of the options available out there.
Roth 401(k)
A 401(k) is the best example of automatic savings. You specify a percentage of each paycheck that is put directly into the account, and that’s it. I’m currently putting a small percentage of each paycheck into a Roth 401(k). While it’s not as much as I’d like to eventually save, the percentage I’m contributing is enough to get the maximum match from my employer.
Roth IRA
I used to have to mail in checks to contribute to my Roth IRA. This was the only option for the brokerage I held it through. Having to mail in a check left me with so many opportunities to change my mind in the process that I never ended up contributing as much as I planned.
Luckily, I got smarter and transferred my Roth IRA over to Vanguard. With Vanguard, I’ve setup an automatic investment plan which regularly takes money from my bank account and invests it in my Roth IRA. At the moment, I have this set up so that I’ll max out my contribution for the 2008 tax year.
Student Loan Payments
Unfortunately, I haven’t figured out a way to automate my monthly student loan payments. However, blogging about them five days a week serves as a pretty good reminder. Even though the payments aren’t automated, each month I transfer $834 into a high-yield savings account which I use to hold funds to pay back my student loans. This way the money is separated from my spending money, and I also earn a little interest while it sits there until I make the payment.
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I have the same setup. I have 401K withdrawn directly from my payroll. And I have automatic contribution to my roth ira and HYSA. I’m also saving for my vacation which is automatically transfered from my payroll since I can setup two direct deposits from my job.
I tackle it differently. I direct deposit my paycheck every other week into my savings, and transfer a set amount into my ING for student loan payment and to my for checking. This way I can gain a little interest on extra money being in my savings for a few days and I keep the most in my savings.
Being in college and being on a limited income helps me save more and pay off loans quicker. I transfer a set amount to my checking so for every two week period I CAN NOT spend more than what is in my checking account.
This is a great way to save with out thinking about it.
You can not unless the program supports it. I have never seen a program that does this. Office usually has an automatic periodic save feature that has nothing to do with printing..
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