How to save money effortlessly
The only money lesson I remember my folks ever teaching me was pay yourself first.
Unfortunately, they didn’t tell me *how*. I had to figure that out by myself (through a lot of bad choices).
Our culture certainly didn’t do me any favors. Living below your means is not the American way. Actually it’s the opposite.
The typical American household has less than $9K in their savings account – not nearly enough to cover a few months of unemployment.
Fighting against all the temptations we’re confronted with from marketers and trying to keep up with Mr. Jones across the street can literally ruin our chances of living the American dream in retirement.
Thankfully, there is one trick that will make the difference between depending on your kids to support you and living financially independent from them.
That trick is called automation, and it makes saving money so much easier.
Here are 11 effortless ways to save money and put your savings on automatic.
Want to learn even more ways to save money? Download this free 50 Tips to Save More Money checklist!
Why automating your savings is important
When I was going to college, my dad bought my brother & I a condo to share as roommates. A brand new one.
I remember touring the model and looking at carpet colors. It was exciting! I was ecstatic to move into such a nice place.
But, then I found out there was a bigger model.
So, guess what.
I wanted the bigger one. *Of course.*
I had been perfectly content with the smaller condo. But when I found out there was a bigger one, and my dad was giving me the choice, what do you think I chose?
It’s human nature to want more, bigger, newer, better. But that’s relative, right? If we think we have the most and biggest and newest and betterest then we’re all good.
But as soon as we find out we don’t, we’re not satisfied anymore.
This is why automating your savings is so important.
If you see an extra $2,000 in your checking account, you’ll find a way to spend it all. You’ll fill up as much space between you and the standard of living just above you.
However, if you can trick yourself into believing you only have $1,500 extra, then you can waste your money in whatever way you wish and still be rich when you retire.
That sounds like a really good deal.
When you automate your savings, you basically play a jedi mind trick on your brain that forces you to live on less than you make, without even realizing it.
Saving money before you see it is like paying yourself first without the sacrifice. No discipline necessary.
And, unless you’ve got a will of steel, it might be the one thing you could do to save your financial future.
Effortless ways to save money
The other day I saw a commercial where a woman was giving verbal commands to her dishwasher.
I thought really? You can’t just push a button?
To me, a dishwasher obeying your voice is a little ridiculous.
But a phone app that will help me save more money? Now, that’s right up my alley.
I’m thankful I don’t have to rely on my own will power to stash cash under my mattress or squirrel away birthday money in my piggy bank. With the use of technology, there’s never been easier, more convenient ways to save money.
1. Your employer’s 401(k) plan
This is one of the best ways to automate your savings because of all the benefits that go with it:
- employer matching contributions (free money!)
- taken out of pre-tax income
- could potentially put you in a lower tax bracket
- money grows tax-free
- higher average rate of return than a savings account
- catch-up contributions allowed for those 50 and over
On top of all that, if you sign up for automatic contributions, you’ll be saving money for your retirement without feeling any inconvenience. Your savings are taken out before you ever see the money.
Your paycheck becomes the limit to your spending, while your savings grow and compound into a hefty nest egg for your retirement.
If you haven’t taken the opportunity to sign up with your employer’s 401(k), don’t put it off any longer.
Start with the minimum required to get the full match and have your contribution taken out of your paycheck before it hits your bank account.
Your future will thank you for it.
2. Allocate specific funds
Designate certain income – like from your side job, selling stuff on Craigslist, your spare change – and have a specific place you’ll put it for savings and investment.
The source and the amount don’t matter. What matters is consistency.
Find an interest-bearing account where you can immediately deposit these allocated funds.
The key to this savings strategy is deciding before receiving.
Have a plan in place before you have access to the money. Know where you’re going to put it, and what you want that money to do for you.
3. Save unexpected windfalls
How often have you had money fall in your lap, and then you decided what to do with it?
Instead, you can decide before you come into extra money so you don’t end up blowing it on something you don’t need, and then wondering where it went months later.
Have a plan for unexpected windfalls like a big tax return, monetary gifts, pay raises and bonuses.
Determine ahead of time that you will use money outside of your budget to build your retirement savings.
And don’t discount the small amounts. Even the little rocks have the capacity to get bigger and add significantly to your savings.
4. Divide a direct deposit
If you’re already getting your paycheck deposited directly into your bank, there’s a chance your employer can split it into two accounts.
This way, you can automate savings before it hits your checking account.
However, if your employer won’t do this, you can always set up a scheduled transfer for the day you get paid.
The goal is to take out your savings as soon as possible.
You can decide on a percentage if you have a variable income, or determine a fixed amount.
Automate a deposit or transfer into a savings vehicle that will grow your money over time.
If your checking and savings are linked, you may want to open a separate savings account at a different bank so your access to it is not as convenient.
5. Enroll in DRIP investing
DRIP stands for Dividend ReInvestment Plan, and is a simple method to invest small amounts of money automatically.
If you receive dividends for your investments, you can choose to have these dividends reinvested instead of cashing them out.
So, instead of receiving a small dividend check from the company whose stock you own, that company will use your dividend funds to buy more shares of the company stock.
Unfortunately, fewer companies offer a dividend these days, and even less offer a DRIP option. But if you have the opportunity to invest in this type of program, it’s a great way to automate savings.
6. Take advantage of credit card rewards
In order to compete for your business, many credit cards offer a cash-back incentive or reward points.
This is one way to automatically save money on a variety of purchases, from gas to groceries to restaurants.
My husband has a Southwest credit card and earns points toward air travel, which comes in really handy when my mom wants to come visit. This has saved us hundreds of dollars.
I have an Amazon credit card that rewards me with cash back every time I purchase something on their website. It’s always a nice surprise to check out and find that my purchase is free.
Of course, credit card companies depend on you being an irresponsible credit card user.
In order to win at the rewards game, you must pay off your entire balance every month.
Otherwise, the interest you pay cancels out any benefit you receive – and you end up a loser!
7. Subscribe to your most frequented stores
Signing up for another email list means more email in your inbox. This can be annoying.
But it can also save you some money.
As a “preferred” customer, you can get automatic notifications of upcoming sales and access to coupons and discounts the general public doesn’t know about.
This is an easy way to keep more savings in your pocket.
I personally don’t like my inbox overflowing with store deals and promotions, because it just tempts me to go out and spend money I wasn’t planning on spending in the first place.
So, when I know I’ll be in the market for a certain item in the not-too-distant future, I’ll get on that store’s email list. Then, once I’ve purchased what I wanted, I’ll unsubscribe.
But sometimes we don’t have the luxury of time. Sometimes you need something, and you need it now.
That’s when you head to the store’s website while you’re standing in line and pull up their 20% off coupon.
Every dollar less I spend means another dollar toward savings.
8. Enroll in a spare change program
My bank has a savings program called “E-Save”, which transfers $1 to my savings account every time I use my debit card. This amounts to an average of $100 extra in our savings every month, without any extra effort from me.
Large banks like Bank of America and Wells Fargo also offer these auto-saving programs, while Capital One and USAA have their own twist on helping their customers save automatically.
Ask your bank if they offer something similar, then sign up if they do. It’s an effortless way to add a little extra into your savings every month.
9. Decrease your exemptions
When you decrease your exemptions on your W4, you increase the withholdings from your paycheck.
Since these funds go directly to your tax bill, your potential refund will be larger when you file.
This approach to automate savings has more to do with self-awareness than being financially savvy.
When you overpay your taxes, you’re essentially lending the IRS money, interest-free. This benefits you in no way whatsoever, but gives the IRS free money to invest and grow for themselves.
Why don’t you keep that money and make it work for you instead?
Because you know you won’t.
You know if that extra money hit your bank account, it would never see the other side of next month.
Having the IRS hold onto it for you – until next April – is one way to get around your lack of discipline. Maybe the IRS gets the better end of the deal, but you still end up with a large sum without ever having to save.
And, to that, I say, whatever works.
10. Install an app
Since you paid a hefty amount for that phone in your pocket, might as well use it to save a little money. There are some pretty cool phone apps that will do just that by automating savings.
Acorns is an app that will “collect” your spare change and then invest it in a diversified portfolio. Crazy, right?
Never again can you say you don’t have the knowledge or the money to start investing. Acorns will do it for you, automatically.
Digit is another mobile app that tracks your spending patterns to identify savings opportunities. The app will then transfer small amounts daily from your checking to a savings account as long as you can afford it. This is all done without any action from you.
Qapital is a third option that is unique in its approach to automating savings. Once you sign up and create an account, you set up rules that will “trigger” a savings transfer.
This could be as basic as setting a rule to “round up” to the next dollar for any transaction out of your bank account. Qapital will take the difference between the purchase amount and the next dollar, and transfer that amount to savings.
But you can get as clever and creative as you like.
If you stay under budget for a certain category, Qapital will transfer the remainder to savings.
You can have Qapital save $5 every time you go to Starbucks.
You can even set up a rule to transfer a certain amount every time you’re at a certain location. Pretty slick!
Once you set up your rules, Qapital takes care of the rests. It’s an effortless way to passively build savings and reach financial goals.
11. Use a jar
There are several ways to automate your savings. You could even stack some of the ideas listed here to maximize your efforts.
All of these methods can funnel a few cents or a few hundred dollars into your savings account. Over time, added up, and with the help of compound interest, you’ll build enough savings to reach your financial goals.
But, at the end of the day, you might still have some change in your pocket.
This is when you go old school and use a jar.
At the end of each day, put all your loose change in the jar. Once the jar is full, deposit the money into your savings.
Okay, so this isn’t really automatic. You do have to build a habit. But once the habit is set, you’ll do it automatically.
Some days it might be a few pennies, other days maybe there’s a handful of quarters. Don’t judge the amount, just put it in the jar.
Before you know it, the jar will be full and you’ll be that much richer.
Don’t forget to grab your free 50 Tips to Save More Money checklist!
Make savings non-negotiable (and effortless)
Do not negotiate with yourself when it comes to saving.
You must pay yourself first. When you don’t, you’re putting something else ahead of your future.
The best way to do this (and do it consistently) is by automating your savings. You can use these 11 ways to save money effortlessly and watch your money grow.
If you never see the money to begin with, you’ll never miss it.
But when you’re ready to retire, you’ll be so glad it’s there.
Put your future first by paying yourself first. It’s never too late to start, but the best time is today!
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