Money Saving Tip #5 – Save Automatically

Let’s be honest with ourselves for a moment, how many of us are truly good at moving money from their checking account to our investment accounts?  How often do you find yourself pulling money from checking or savings and moving it into the investing category?  There are few of us that are able to proactively save, let alone those of us who are able to do it from memory.  Most people think it takes somewhere around 21 days to make a habit.  Can you say that you have made a habit in that time saving money?  Heck we don’t even usually get paid twice in the average 21 days let alone have the chance to truly make it a habit to save more.  How can we expect it to become automatic?
What if I told you the most recent survey said it took closer to 66 days to make it a habit?

We are essentially hardwired to be challenged to make this a reality without some assistance from the outside world.  Sure there are a few of us who are able to proactively do it, but we are in the minority by far.  This is where auto investing comes in.  To many people saving $5500 in their Roth IRA is a daunting task and is part of the reason why we struggle as a nation to make it to retirement with a bountiful portfolio that will provide for us when we reach the milestone.  However, what if you put your savings on automatic and then dealt with the remainder in your checking account?  Could you actually live on what was left over?

The answer is a resounding yes, when you don’t see it you aren’t apt to spend it.  It’s like that money never existed and since the average person checks their account every 7-10 days, it’s likely that they wouldn’t even know that the money came in or left the account unless they were thoroughly researching it, again something most people aren’t inspired enough to do.

This is when direct deposit comes in handy to your investment accounts.  I have TDAmeritrade pull $200 a week from my checking account which results in me having $800 a month go into my investment account or $10,400 a year into an account over and above my retirement accounts.  Guess what I don’t even miss it, but I get excited when I see it has added up to a sizable amount in my investment account to pull the trigger and purchase another part of a fantastically run company that will pay me to own it.

This is the simplest way to build up your savings, have it disappear before you realize it’s there and then putting it to work in your investment portfolio.  Just with the income moving from savings to investment accounts I can open up at least two positions a year to increase my dividend stream.  In five years that’s over $50,000 and at a 3% yield would throw off $1560 a year not accounting for dividend reinvestment or other contributions.

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4 thoughts on “Money Saving Tip #5 – Save Automatically

  1. For the most part I manually move once a month when I reach a certain dollar threshold into my investment account. It gives me greater access to be flexible in case a big expense hits (here’s looking at you property tax bill). So it works well for us so far but I can see how automation definitely helps!!!

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    1. It definitely does. I have 800 that goes in over the course of the month and I also transfer over more as I get it. Allows me to pull the trigger on things if I see a particularly interesting purchase and I don’t have to wait on the transfer overnight in case there is a large rebound.

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