Saving money is a difficult task for a lot of people. We have bills to pay, charities to give to, events to attend, and family members to care for. Where can we possibly find the money to sock away for retirement, a new home, and vacations?
I’m a big believer in creating systems that give you the opportunity to thrive, without allowing you to get in your own way. By taking a few of the tips below one step at a time, you could be saving hundreds, if not thousands, of dollars a month before you know it.
If we don’t create ways to save money without thinking about it, we will ultimately default to spending our money today, instead of realizing the benefits of delayed gratification.
Saving for retirement - When you sign up for your employer’s retirement (401(k), 403(b), etc.) plan, you may have the opportunity to enroll in Auto-Escalation. This feature, which is not available in all plans, allows you to elect that your contribution rate will increase each year, until you reach the annual contribution limit of $18,000 (in 2017). For example, if you start out saving 10% of your income to your retirement plan, next year you will Auto-Escalate to 11%, then 12%, and so on. If your plan does not allow this, be sure to manually increase your contribution percentage each time you receive a raise.
Save your bonuses - If you are fortunate enough to have a bonus structure in addition to your annual salary, put 100% of the bonus towards your short, mid, or long-term goals. By having a predetermined destination for your bonus money, you will be less likely to make impulse purchases.
Increase your mortgage payment - If you pay $1,250 to your mortgage on a monthly basis, consider increasing that amount to $1,300 per month. This will help you pay down the principal that much quicker and save yourself some interest.
Snowball your debt payments - When you make the final debt payment on a loan, immediately apply that monthly payment to either the next loan or directly to savings. You are already in the habit of making that monthly payment, so either continue paying down remaining debts or start saving toward other financial goals.
Keep a monthly budget - We talk about this often, but it still applies. By keeping a monthly budget, you will be able to see exactly where your money is going each month and spot areas of overspending. By simply being aware of your spending, you will soon spot opportunities to cut back where your spending doesn’t match your values or goals.
Automatic savings - Contributing to your 401(k) is streamlined, as the money comes straight from your paycheck and automatically invested in your account. You also need to take the time to set up this same system for other accounts, like your emergency savings, Roth IRA, HSA, and other financial accounts. By setting up an automatic transfer from your checking account after your paycheck is deposited, you will save to these other accounts on a regular basis without lifting a finger. Taking it one step further, for an account like your Roth IRA, you can setup an automatic purchase of the funds you are invested in, so you don’t even need to make manual trades each month. It doesn’t get much easier than that.
These are just a few quick tips on how you can systematically save toward your financial goals. By chipping away at these opportunities, you will have a financial system working for you while you sleep.
Do you have any systems that help you save money each month without having to think about it? Let me know! I love hearing your stories - @rossvmenke