How to Set Up a Stress-Free, Automated Savings Plan Before You Go To Bed Tonight

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How To Set up a Automated Savings Plan

Melanie blogs about breaking up with debt at DearDebt.com and invites others to write breakup letters to their debt as well. She’s accumulated a total of $81k in student loan debt between two degrees. Currently she puts more than 50% of her income towards debt, while living a frugal, fun life. Melanie enjoys travel, art, music, adventure, and of course, personal finance.  If you want to be featured at Vosa.com, please contact me today.   

Oftentimes when people think about saving money, they think about it as this big, arduous, stressful task.

That little voice inside your head screams:

“Saving money is more work.”

“I don’t make enough to save.”

“I want all my money in one place.”

“Who cares about saving money? YOLO.”

But I’m here to tell you it doesn’t have to be that way. Saving money doesn’t have to be time consuming, let alone stressful. Let your savings work for you! Here is how to get started:

Automate Your Saving, Even If It’s 1%

Most personal finance experts recommend at least a 10% savings rate. So if you make $2,000 a month, you would save $200 a month. However, most people in the personal finance world want to save even more, and are saving at rates of 25-75% of their income. That is truly awesome and amazing, but I can understand how it can be overwhelming to think about it.

If the prospect of saving money is stressing you out, start with 1% of your income.  In this case, if you are making $2,000 a month, you would save $20 a month. This concept is called “paying yourself first.” Starting at 1% is very doable. I recommend automating your savings, so that every time you get paid, a portion of your paycheck goes directly to savings. Why? Because you won’t touch it if it’s not in your checking account. It’s likely you won’t even notice that the $20 is gone. 1% is for the savings-averse folks out there. But if you like to live on the wild side, challenge yourself to save as much as possible. Start at 25%, and see how that feels, and slowly increase.

For both savings percentages, you are likely to get used to it and won’t miss the funds being directed to savings. Like anything else, once you are comfortable, change it up! Start increasing the savings rate. Get out of your comfort zone.

Change Matters

Big Piggy Bank Savings PlanI went to a coffee shop recently and ordered a latte. The order came out to $2.25, and I handed her two one-dollar bills, a dime, and three nickels. The cashier looked at me and said, “We don’t take anything less than quarters, so no dimes or nickels.” I was flabbergasted, fumbling through my purse and responded, “I don’t have any quarters.” The cashier took my dollars and let me have the latte for $2. I saved 25 cents. I couldn’t believe this as a business practice. You don’t take change?!

Here is the thing: change matters. It adds up.  If you start a change jar and put all your loose change in there, over time, you will have ten, twenty, or maybe even a hundred dollars in there. Don’t think you are above keeping change.

Try to be old school and put change in a piggy bank. Have that be your starter savings account. Every time you receive change from the coffee shop, the store, etc., put it in the piggy bank. Or as extra motivation buy a change jar that counts the change as you make your deposit so you can easily keep track of your savings. Keep it safe, for when you need it.  You never know, you might just buy James Bond’s $4,980 watch with this loose change, like Brent did here.

Cut Back, But Only Slightly

I’ve mentioned before that I prefer to make more money, than to cut back on expenses. However, I do think doing both in tandem is a great way to ensure  financial health and security. If you go out to eat three times a week, try going twice a week instead. Put that extra money that would have been spent going out, into savings. Moderately cutting back can be really effective, in comparison to an all or nothing strategy.

If you’re not sure where you can cut back, try a little experiment. For a one-week period, track all of your spending. You’ll probably be surprised where the money goes and it will help focus on areas where you can cut back.

Set Savings Goals and Targets

I currently have four savings accounts: emergency fund, general savings, travel, and taxes.

Savings Buckets - How To Save For A VacationTo help me reach my goals, I set up sub savings account so that I can create specific targets and make it easier to manage my money. When all your money is lumped into one place it can be easy to lose sight of what your goals are. My emergency fund is for emergencies, of course. I don’t touch it. My general savings account is sort of a buffer for life. My travel savings is to help me fund my dreams of travel, and my tax savings is allotted for my freelance income, so I don’t get caught in a bind next year during tax time.

For each of these savings accounts, I have specific goals I am trying to reach. In addition, every single month I automatically transfer money to all four of these accounts from my checking account. Most of the savings rates are pretty low, as in about $20-$50 per month, as I am aggressively paying off debt. However, it makes me sleep better at night knowing that I am still funding my dreams, even if I am starting small.

Remember, those big, scary goals are just a bunch of tiny goals wrapped into one. Start slow, and move up. One thing at a time. Don’t get overwhelmed by all the things you need to do to be financially healthy. Start small; half the battle is just starting.

Don’t Touch!

When you are first getting started with saving, it can be exciting to see all that money pile up. If you are increasing your savings rate, it is really thrilling to see how quickly the money can add up. Just when you reach that point of excitement is usually when the “want monster” comes in.

You start to think about all the things you want and what you could do with that “extra” money.

“I could buy a new TV with that!”

“Maybe I can afford a new place?”

When you start to go down that path, remember your intended goals for the savings account. If it is not for that purpose, don’t touch it! Your savings account is for saving, not spending. It will be a sweet payoff to use it for exactly what you want, when you want. If you think you might easily fall prey to the “want monster,” put your money in an account that isn’t easy to access.

Start your savings plan by paying yourself first with small deposits that will grow over time. Your future will thank you!  If you’re not saving, or want to save more, set up your savings account before you go to bed tonight and leave a comment below announcing to the world that you’re a saver! 

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Comments

  1. says

    Establishing the habit of saving money is the most important thing, even if it’s 1%! So many people are used to having nothing left over at the end of the month, but it’s possible to find $20 a month somewhere. My friend’s family just emptied their change jar for vacation and found $300! It’s always a nice surprise to see how much your change adds up to.

  2. says

    I’m putting everything in emergency fund right now since I had to dip into it due to lower income in Q1. I need to figure out when I think I will be back on track so I can start putting some savings away for planned spending. Thanks for the reminder to set up those funds so they are visible.

    • says

      Good for you for getting back on track! Once you do, I think it is important to set aside planned savings so you can accomplish your dreams and have other funds available.

  3. says

    What the heck? I can’t believe a real-life business wouldn’t accept coins smaller than a quarter. I mean, I understand the utility of not accepting coins at all because then you can use easier math and only need a small register and small bags to carry money. But why only coins smaller than quarters?

    Perhaps it has to do with the fact that the most they can lose in this system is 24 cents, but the most they can lose giving up quarters too is 75 cents.

    Still weird to me though…

  4. EvolvingCritic says

    Befits I started paying off my student debt I didn’t realize that establishing good saving habits would make the path towards debt elimination less daunting. I opened a savings account at a credit union and started depositing directly from my paycheck to my savings account. While I’m only saving $30 a month (some months I spend less on certain things so that leftover money goes to savings) and while that’s not a lot, I sleep better at night knowing that over the course of a year I’m putting away $360+. My next goal once I’m done paying off one loan company (I deal with 4 different companies) is to establish a general savings account and a travel savings account. Saving money had made me a lot less stressed out about my debt.

    • says

      Yes! Getting started, even if it is only $30 a month is fantastic. That money adds up, and you will thank yourself later. Having a savings account helps prevent further debt, should you find yourself in a bind. Keep up the good work, my friend!

    • says

      That’s awesome that you’re committed to saving $30/month! That’s a great start and the habit that will get established will serve you well for the rest of your life!

  5. says

    We have similar savings goals, but like I wrote about today, I do not automate, instead I take out certain percentages out of each source of income I make. It makes it tedious, but I don’t mind because it keeps me looking at my budget spreadsheet daily. Plus as a freelancer, I don’t make the same amount each month, so I have to make sure the basics are covered first. If I had a regular paycheck I’d so automate! :)

    • says

      What do you think about automating a base minimum amount? Then going in each month and topping that base amount up depending on your freelance income for that month?

      As Infusionsoft says: Automation trumps determination!

  6. says

    That’s bizarre the place wouldn’t take anything less than a quarter – but awesome for you for pocketing it. I agree that subaccounts for different goals are useful when you have various goals in mind. These are really great tips, especially with starting out at 1%. Hopefully that will lead to bigger steps so that savings becomes second nature!

    • says

      I thought it was a tad insulting they wouldn’t take change — but ultimately I was glad I got to keep my change. I think starting at 1% is a way to ease into savings, for people that have never saved, or are just getting used to the idea. Obviously doing that your whole life won’t be enough, but it’s a way to get started.

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