The Financial Cleanse- Make your Savings Automatic

In Part II of the Financial Cleanse, we'll talk about Making it Automatic.

In the Automatic Millionaire (by now, you must think I'm in love with David Bach since I mention him non-stop) he talks about making it automatic.  You pay your cell phone bill, your rent, your utilities, and then you have some money left over.  You spend like usual, and at the end of the month, you have $25 to spare, so you put it away in savings.  The next month- same thing, you have $15 to spare, so you put it away in savings.

I used to roll like this and it didn't work.

I would dip into my savings and take some money out for my trips, and at the end of the day, couldn't really say how much I was putting away per month.  I THOUGHT I had a budget I stuck to…I had AIMED to put away X amount of dollars per month, but looking back at my transactions, this didn't really happen all the time.  I had made excuses like “oh, I just need only a few hundred here, I'll return that amount next month”.  It didn't happen.  It is human nature not to have much will power! The more you tempt yourself to stay away from something, the more you gravitate towards it and succumb to it.  Kind of like that chocolate bar that you told yourself you wouldn't have and ended up eating two..or three.  Or that bad-ass boyfriend who treated you poorly, wasn't returning your calls or texts and you tell yourself you won't text him again for fear of coming off as a loser-stalker but you did anyway… and came off as a loser-stalker (said scenario isn't from personal experience, yeahhhhh……..).

Anyways, so why fight it? Since then, I have made it automatic.  And it's really working. I transfer X amount of dollars from my chequing account into my High Interest Savings Account.  I haven't actually set up “pre-authorized deductions” biweekly because I am the type of person who needs to keep some sort of control (in case I need to keep some money in my chequing account, you know).  Soooo to fix this problem, I set up “future transactions” and set them up on the day I get paid.  I can always change the date or the dollar amount to be transferred.  I set up future transactions for about 2-3 months, then repeat.

I would say this is the hands down EASIEST thing you can do to take control of your finances.  So start off with $50 a month automatically and work your way up to 10-30% of your gross biweekly paycheck.  A budget planner to keep track of where your money's at (credit accounts, debit accounts, bill payments) doesn't hurt either- and it's easy to stick to, if it's automatic too.

Do you make it automatic?  Are you a big fan of automatic savings as much as I am?  Please share!

13 Comments

  1. Money Reasons on April 21, 2010 at 9:27 am

    I love to automate things as much as possible!

    But I confess, I don’t have my savings automated yet (unless you consider my 401(k) contributions as such). But I have certain bills automated, and my kids 529 College Fund contributions…

    Keep up the great work! Sounds like the way to go!!!
    .-= Money Reasons



  2. AnnieA on April 21, 2010 at 3:04 pm

    After I paid off my mortgage I have a few hundred dollars popped an ING account every month, and don’t miss the money a bit. (My financial guru crush appears to be David Chilton…)



  3. Little House on April 22, 2010 at 7:00 am

    I’ve set something up like this for myself. I’m automatically transferring a set amount on my payday from my checking to my savings account. So far so good, and it’s only been a month. I haven’t touched the money in the savings account and didn’t have to worry about having to “save” money from my checking at the end of the month to put into my savings. I have to say that this kind of automation really works!
    .-= Little House



  4. Andrew Hallam on April 23, 2010 at 3:53 am

    Hey Young,

    I can see those net worth figures moving up! I’ll give you a shout when you hit $100K, and we can do our online blog-dance.

    Andrew
    .-= Andrew Hallam



  5. Financial Samurai on April 24, 2010 at 8:27 am

    Craigslists has definitely relieved a lot of junk off my hands. I hate clutter!

    I also give alot of stuff away to my colleagues. It makes them happy, so i’m happy.

    That’s where you should really focus your time. Asking or just giving away your things to your bosses and colleagues!
    .-= Financial Samurai



  6. Money Reasons on April 24, 2010 at 9:02 pm

    Thanks for the mention! Especially the Sexy Nerd part (as I type and smile sheepishly, hehehe).

    But seriously, great contrast of Craigslist vs Ebay vs Consignment shops!!!

    I haven’t used Craigslist yet, and your break down of what to sell on each will help me greatly! I’m definitely going to try to sell something on Craigslist this summer!!!



  7. Simple in France on April 26, 2010 at 9:04 am

    I’m enjoying this series–and yes, getting rid of junk makes a lot of sense. I donate as well, but we sell sometimes if we think it’s worth it. Either way, we don’t get stuck in the ‘we need a bigger place to put all our stuff’ trap!



  8. young on May 2, 2010 at 7:41 am

    @Financial samurai- yes! I love Craigslist too. A lot of my colleagues get rid of their baby stuff (like old cribs, clothes, toys) and give it to other colleagues, it promotes workplace relationships too~! LOL win win situation!



  9. young on May 2, 2010 at 7:42 am

    @Andrew Hallam- you can bet your last dollar that i’d be doing a happy dance when I hit 100K!!! haha let’s celebrate together with a virtual drink hahaha



  10. eemusings on May 3, 2010 at 5:26 pm

    That’s never worked for me, either. There’s never anything left over! Now I bank a set amount each payday. Works like a charm.
    .-= eemusings



  11. Dwight on January 6, 2011 at 6:36 pm

    I really liked this article, I work on making my savings automatic as well.

    Dwight Anthony
    Financially Elite Blog dot Com



  12. young on January 6, 2011 at 10:28 pm

    @Dwight- Great! I loved my “financial cleanse” series too, if I might say so myself! Automatic savings= best invention EVER.



  13. […] I added up my chequing and savings accounts (High Interest Savings Account). I automatically deduct money from my chequing account and have it siphoned to the HISA account (paying yourself first) […]



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