Investing in your retirement may not sound glamorous, but it’s one of the most important gifts you can give yourself. The thing is, it takes time to build a nest egg that you’ll be able to live on during your golden years, so you can’t put this off.
I talk a lot about how advertising — actually, our whole culture — has plenty of tricks to get you to spend your money. Fortunately, you can fight back and build your savings with the best trick of all: automation.
Automating your savings is like writing yourself an extra check each month. It cuts your emotions out of the equation and instead slides the cash into your savings, where it belongs. You don’t have to think about it, which allows you to avoid some common pitfalls:
- You won’t forget to add to your savings account.
- You won’t accidentally spend your money on something frivolous.
- You won’t be fooled into thinking you have more money than you actually do.
- You won’t struggle to build a new habit.
- You won’t be tempted to “borrow” from your savings “just this once” by delaying your transfer.
Modern technology provides plenty of ways to automate your life — and your money. Try these techniques to jump start your savings by adding money like clockwork.
- Automatic Withdrawals From Your Paycheck
If your employer offers a 401(K), open one! This is the easiest way to have money taken directly from your check and deposited into your next egg each pay period. Automating your savings in this way can also reduce your tax bill in April, since any money you take from your check comes out before taxes are assessed. This can help keep you in a lower tax bracket now, which gives you even more money to add to your savings.
- Automatic Transfers
If your employer doesn’t offer a retirement plan, you can always open your own IRA. When you do, schedule automatic deposits to come from your checking account once a month if you can’t get your employer to link your account to their payroll. This is also a good choice for gig workers and freelancers who have mutliple sources of income.
Pro Tip: Once you get your retirement savings set up, you can also open a separate savings account to save up for goals like a down payment on a house. Automate transfers into this account as well to keep it growing.
- Increase Your Tax Withholding
Another way you can trick yourself into building your savings is to have additional money withheld from your check to put toward your income taxes. Don’t worry — this doesn’t mean you’ll pay more in taxes. You’ll just get a bigger refund check once you file your taxes, and you can use that “free” money to pay down your debt. To goose your withholding, fill out a new W-4 form and opt for the lowest number of allowances and exemptions, or simply designate a lump sum to be taken out of each check.
- Set an Annual Reminder to Increase Savings
As you earn more money, you’ll need to adjust your savings accordingly. It can be easy to forget how much you’re withdrawing from your check each month when it’s automatic, so set a reminder on your smartphone’s to-do list or calendar that repeats each year. When it goes off, you’ll remember to raise the amount of your automatic transfers. By setting aside a little bit more each year, you’ll build your total savings even faster — but totally painlessly.
Online banking, automatic transfers and even your smartphone are some of the best tools you have to jump-start your savings plan. Use these tips to fully automate your savings, and you’ll never have to worry about doing the right thing with your money. Instead, you can sit back and watch it grow.
