How to Automate Your Savings

I’m excited to have Elizabeth here to help us figure out how to save boatloads of money in the upcoming year.  It can be tough to save especially when you feel you have no money left at the end of the month.

Hey, y’all!  I’m so excited to be writing on Cents + Purpose! Thanks so much for having me, Kristin!  New Year’s is right around the corner, and we all know what that means. Smaller hips, bigger bank accounts, and the year we all become millionaires.  Hey, a girl can dream! 

But seriously, beefing up your bank account can easily be within your reach!  I’m going to let you in on a secret, my number one way I’ve been able to save $6,000 over the past year:  automated savings.  Two words that have seriously turned my relationship with money around.  If you’re looking for a way to save money in the new year, think of this as a sign.

Pay Yourself First

The number one person you should be paying every month is yourself.   This means before you pay any monthly bills (rent, mortgage, car loan, etc…), or even before you go grocery shopping you need to put money into savings.  This might be a rude wake-up call if you have a house that’s too expensive or a car that’s too fancy.  

But remember, just because you have a monthly bill doesn’t mean that you can’t get rid of it and buy something cheaper. If you don’t tell your money where it needs to go, it has a funny way of disappearing.

Trust me.  Been there, done that.  

What is Automated Savings?

Simply put, automated savings is saving money automatically each month.  The easiest way to save, in my experience, is to set up your paycheck to be direct deposited into two different accounts – a set amount in savings and the rest into checking.   

When I first started my automated savings I decided to save $250 a month.  My husband and I want our son to go to a specific school for Kindergarten, and this is the amount we need to save to make that dream come true in a few short years.  

I didn’t slowly work up to it, I just ripped it off like a band-aid, and let me tell you – IT HURT!  I thought “there’s no way I can’t live without this money.  I have bills I need to pay, I need this money to get groceries, etc…”  I honestly thought I was going to save this money for a month or two because I thought I needed it, not in a few years, but now.

But then a funny thing happened.  I looked at my monthly bank statement amount, slowly but surely saw my savings creep up, and the pain started to dull down.  That $250 has since grown to a little over $600/month that we save.

I could not have done this if I didn’t just automate my savings and have my money automatically deposited.  I definitely do not have that much self-control.  

READ MORE: How to Use a Net Worth Tracker and Why You Should

How to Decide What to Automatically Save

Figure out how much your time is worth and pay yourself for one hour every day.  I like to think I’m worth $20/hour, so in a month with 30 days, like November 2017, that’s $600.  Pretty spot-on for what I’m depositing. 

If you want to be more exact though, then just take your annual salary, for this example, we’ll say $60,000, divide it by 1,000 = 60, then cut that in half = $30 <– your final rough hourly rate.  (I say roughly because this doesn’t include any taxes).  

It’s up to you if you want to pay yourself for the weekdays, weekends, or both. Obviously, more is better though.  At the rate of $30/hour per day, for the month of November 2017, you’d save $660 just for the weekdays, $240 just for the weekends, or $900 for both.

I know these sound like big numbers.  I’ve been in your shoes before, standing on the edge of saving, and I can promise you – the sooner you start saving, the better.  If you’re starting later than you should have, you’ll need to start saving an even higher amount.  

I’m not going to lie, it will probably take you a little time to adjust to saving, but I guarantee you, this grass is most certainly greener on the other side

Why You Need Automated Savings

Long story short – you’re telling your money where to go, not the other way around. There are so many reasons you need to start saving today if you don’t watch out for your future self – who will?!  

If you don’t believe me, then believe David Bach.  This concept of paying yourself first is one that many millionaires have been preaching for a long time, including David.  

Not only does saving help you to not live paycheck to paycheck, but there are so many psychological benefits.  According to a 2017 survey by GOBankingRates of more than 8,000 Americans, 57% have less than $1,000 in their savings.

That’s a little scary.  

Instead of spending $5 in the morning on coffee, try making your own every morning for a week. That’s it, just commit to one week.  You could save $35 a week, or $140 a month, which is $1,680 a year.  

Wow!  Then turn around and put your first $1,000 in an emergency fund, and depending on your circumstances, either put the rest on your debt or save it.  And if you save, don’t forget about your retirement.

How to Encourage Yourself

OK, so this all sounds great in theory.  Yay, saving money.  But, when it gets down to it, how do you keep yourself moving forward and saving more money?  Glad you asked…

1. Surround Yourself with Encouraging People 

Have you ever heard of the saying “it takes a village?”  This saying is so true for many things in life, including saving. I can’t tell you where I’d be if I didn’t grow up with my parents beating their words of saving wisdom into my head, but I can tell you one thing – I wouldn’t be here.

2. Set Reasonable Goals

I have a grand total of about $146,000 of debt to pay off.  And that does not include our home.  I bet you’re feeling better already about your debt, right?!

If I set a goal to have all that paid off by two years from now I would lose faith very quickly, just because it’d be nearly impossible for me to keep that goal.  Emotionally I would be drained! Instead, I have a goal to pay off $20,000 chunks, at a minimum, every year.  For me, this goal is attainable because I know I paid off $15,000 last year.

No, really.  Do something to take your mind off spending money.  How many of us are guilty of wandering around Target, then walking out with a $150 bill thinking “what just happened?!”  Instead, find something to focus your energy on.  

I have my blog, I sew, I work a full-time job, I have an Airbnb rental, and my son keeps me pretty entertained between all of that.

3. Get a Hobby

Three Bird Nest on Etsy makes $70,000 a month.  That’s not a hobby, that’s a business.  But, she started it as a hobby, and that’s pretty amazing.  The goal here is to find something you enjoy, and if it can make you money, even better.

With New Year’s being right around the corner this really is the perfect time to jump in and save. If you’ve been successful with this resolution before, tell us your secret.  

What helped you to save? If you haven’t been successful yet, what’s holding you back?  Don’t forget to sign up for my Begin to Budget 5-day mini-course to get started budgeting today…it’s free!