Raise your hand if your New Year’s resolution is to start paying down those student loans or do a better job at saving money. Now raise your hand again if you swore the same thing last year … and failed. You probably suffer from the same malady as millions of Americans: once-you-have-it-you-must-spend-it-itis. Or, in layman’s terms, there’s always next month to save for a rainy day.
There’s an easy way to save money and it’s so painless and user-friendly that it’s surprising more people don’t take advantage of it. It involves faking yourself out. It makes your brain think you have less money than you really have. Sort of like a shell trick.
Automatic Savings Plan
The concept is simple: use direct deposit to siphon funds into a savings account before it hits your checking account. It doesn’t have to be a lot of money, just a little each pay period.. Since you never see that money hit your checking account, it makes it feel as if it was never there in the first place.
Let’s say you bring home $400 a week. By putting aside $20 from each paycheck, you’ll have nearly $1000 saved up by the end of a year. That might not sound like much, but it could make for a pretty lovely rainy day fund or keep you from taking out a holiday loan in December. What’s more, it’s money you never really see and you’re never tempted to spend. Sort of like faking yourself out.
Ask Your Bank
Many banks offer at least one version of the above. With the Christmas season wrapped up, it’s time to start saving for next year. Almost all banks will automatically “shave” money off the top of your account with just the click of your mouse. Let’s face it, it’s tough to recover from overspending around the holidays. How nice not to have to worry about going over your budget when that budget is already stashed away.
If you choose this method, make sure you know how much you need to deposit each month not to incur any maintenance fees. Bank of America’s Keep the Change program, for example, has a minimum deposit amount of $25/month. If you don’t meet that amount, you get hit with a $5 fee.
Ask Your Employer
To make it so you never see the money at all, not even for a few days before it transfers out of your checking account, ask your payroll department if they can help you out. There’s a good chance that there’s the option to add a savings account to your file with a set amount for them to redirect from your paycheck each pay period.
Round-Up, or Down
There are other ways to increase your checking account’s bottom line using the fake yourself out method. Ever heard of rounding up? When tracking your expenses, don’t log in the actual debit amount, round up to the next dollar … or two … or three. You would be amazed at how quickly those dollars add up.
Another suggestion is to round down. When you make a deposit, record it as a smaller credit to your account. A good idea is to round down to the nearest tenth of a dollar. For instance, if you deposit $128, record $120 instead. These types of “tricks” are a great way to build a slush fund.
A money management tool such as Moneyspire or FutureAdvisor can help you budget your money wisely. Not only that, but you can use these tools to help place money into savings automatically. You can also look into investment advisor tools such as Acorns or Betterment to create automatic savings from your bank account.
The bottom line
Many Americans rank saving money right up there with cleaning the toilet. If you take the choice away from yourself by setting up an automatic savings plan, there’ll be no more excuses. New Year’s resolution number one ticked off your list!