We all go into the New Year with the best of intentions, don't we? Eat healthily, lose weight, spend less, and save more. By February, motivation has waned and we find ourselves back in our old patterns of behavior. Totally normal. If we're going to get serious about our resolutions, though, especially around money, we need to trick ourselves.
We can't trust ourselves to weigh the short- and long-term impact of every financial decision in real-time. To keep ourselves on track with long-term goals, the secret is automation.
Automate Savings
Many of us have a tendency to spend first and save the rest. That approach doesn't help us, especially if we spend the rest and then some (think: credit cards). It's critical that you set up an emergency savings account to cover those unavoidable "unplanned" expenses. We suggest aiming for at least $1,000 in emergency savings before shifting your money to cover other savings goals.
The easiest way to make sure that you prioritize your savings is to automate it. Look for a free savings accounts through a bank and set up an auto-transfer once or twice a month (whenever you get paid). If your employer allows you to auto-draft part of your paycheck into a savings account, even better—you'll never see that savings amount hit your checking account! Your HR rep can help you get the auto-draft setup.
And, remember, no amount is too small. It adds up over time.
Once you have an emergency savings fund that gives you peace of mind, you can set up savings accounts for other specific goals—vacation, college savings, car purchase, home downpayment—and automate monthly deposits into those as well.
Pay Yourself First
Make an increase to your retirement contribution:
If you have a retirement plan through your employer, call HR TODAY and tell the rep you want to increase your contribution by 1% or 2%. Remember, we're aiming for 10% if you're in your 20s, 12-15% if you're in your 30s, and more for those 40+. You can calculate your savings rate and learn more about savings rate by age here.
If you don't have an employer plan, start your own! Open a Roth Individual Retirement Account (IRA) with a financial institution (like Vanguard, Fidelity, or Schwab). Then elect to have a portion of your pay auto drafted into that account and auto invested. Even if it's 1% or 2% right now, that's okay! Get started and increase later.
We cannot give investment advice, but do not fear! Those recommended financial institutions can help you find the right mutual funds for your age, most likely guiding you to a target-date retirement fund.
Once you increase your retirement contribution, you probably won't notice the difference in your paycheck, but an increase by even one percentage point will have a significant impact over the course of your lifetime.
In this new year, set yourself up for savings success. Set it and forget it!
And if you're also working to pay off credit card debt, we have some tips that will help you get ahead of the game.
Take the Save10 Challenge
Take the Save10 Challenge and declare your savings commitment. We'll send you a digital "badge" with your official saver number.
We'd love for you to share your commitment and join us in the private Save10 Facebook group, where an army of thousands of women inspire and encourage one another daily through our financial hopes, fears, and successes.