3 Ways to Automatically Save Money
As a young person, what is one of the hardest financial tasks? Saving money. It is not common for children to learn about money and how to save it. Teenagers get jobs to pay for their entertainment. Then they become young adults with an empty account.
It is not easy to become responsible about our finances but it is not impossible either. To achieve it, people need a job, a goal and determination. People often start projects they cannot finish. It is normal to quit as soon as they face a real challenge. This attitude will not work for those trying to save money.
Saving money will improve anyone’s finances and this should be your goal. There are three ways to make saving money automatic:
1. Set Up Your Account
It is possible to schedule transfers from one account to another. Every month, on the same date, schedule a transfer to the savings account. The transfer should happen as soon as you receive your paycheck. Having money in a savings account helps your credit record. Also, it is a way to prepare for the future.
A schedule will make saving money automatic. There is no need to worry about making the transfer. Also it is not tempting to spend the money. If the account has money and the paycheck gets delayed, the transfer will happen.
It is possible to schedule other kind of payments. Make saving money automatic establishing a schedule. Move more than the small amount you are saving. Examples of automate financial systems are available online.
2. Direct Deposit
Make saving money automatic by not having the money at any point. Employers could make direct deposits to a saving account. They will take as much as the worker requires. Those without self-control should consider direct deposits as a way to save money.
Saving a small amount should not be a sacrifice. If a person has a balance on their incomes and expenses, they will have enough to save. Direct deposits save a lot of time and trouble if a person cannot schedule the transfers. It also works for those that receive checks or cash because they do not have a regular account.
3. Make it a Habit
The key to make saving money automatic is to include it into the routine. In the beginning it will be difficult. Some people will try to save more money than they can afford. One moth, people will forget it. Worst case scenario, there is an emergency and they used the saved money. No excuse is good enough when it comes to financial stability. Consistency will take anyone far. After a couple of months it will become a habit.
For those without bank accounts, creating a budget will help. Set a monthly or yearly goal, works towards it. Set a minimum and a maximum. The minimum will guarantee that you are saving something every month. The maximum will prevent neglecting other responsibilities.
Benefits of a Saving Account
Parents can set up a saving account for their children before they are even born. It could be a college fund or a trust fund. It shows that these type of accounts are for everybody. Some people would rather keep their money at home. These people should consider the benefits. Make saving money automatic and profitable with a saving accounts:
Interest: Every saving account generates interest based on the initial amount. Before choosing a bank, find the one with the best interest rate. Find information about the compound interest and other options available. As a rule, you cannot touch the money in your saving account. It could affect the interest you receive but it is also an exercise to improve your commitment.
Retirement: It is never too soon to start thinking about retirement. How much money you have at the end of the day, depends on how soon you start saving. A contract could include a 401(k) plan, take advantage of it. If the employer do not offer it to their workers, they could qualify to a Roth IRA.
Credit Record: Nothing speaks of a person like their credit record. Banks look at these records before approving a loan. Landlords consider it before renting a place. Many doors will close to a person with bad credit record. A saving accounts shows consciousness about one’s finances. Make saving money automatic as soon as possible and enjoy your new opportunities.
How Much Should You Save Monthly?
“As much as possible” does not apply when it is about saving. People spend most of their money on food, utilities and rent. After the essentials got covered, then it is time to save. Some recommend to save 20% of the monthly income. Others consider that 15% is enough. How much you save will depend on your income. Do not turn saving into a burden. It will make you loath the whole process.
Once you make saving money automatic, it will get easier to raise the amount. Establish the minimum at 5% of your income and 15% as the maximum. Work every month between those amounts but never go above or below. With a raise in the income, increase the amount you are saving. The logic says that you are receiving more money with the same expenses.