Having trouble saving? This tip from Suze Orman might help you break that cycle
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Many people do their best to save money each month. But sometimes life gets in the way. If you’ve had difficulty reaching your savings goals, then the financial expert Suze Orman suggests that you make a change in the way you manage your money. And that could end up making a huge difference.
Put your savings on autopilot
Many people consider saving money to be something they will do when circumstances work out that way. You might, for example, tell yourself that you are going to try not to spend all of your salary so that you can keep $100 in your savings account at the end of the month. But if you’re unexpectedly invited to a concert and haven’t yet parted with that $100, you might be tempted to spend it on a ticket.
That’s why Orman stresses the importance of setting up automatic deposits into your savings account. This way the money lands in savings from the start, thus taking the option of spending it off the table.
Committing to this path also means changing the way you look at savings. Instead of looking at saving money as something you’ll try to do when it works, you’ll prioritize your savings over other expenses.
In our example, let’s say the $100 you want to save each month is automatically transferred from your current account. If, by the time the concert invitation arrives, you’re not spending any more money, you may decide that it’s not worth dipping into your savings to be able to go.
Plus, the amount of money you automatically save each month doesn’t have to be large. You might start with $10 a month, or $20, and grow over time. Orman insists this is perfectly acceptable. The key, however, is to put your savings on autopilot so you’re not tempted to spend more and save less.
A good approach for retirement too
Just as many people struggle to build up their savings account, many people struggle to set aside funds for retirement. But automatic contributions are also a good bet for retirement savings.
If you have access to a 401(k) at work, that’s actually how your plan will work. You will sign up to contribute a certain amount each year, and your employer will automatically deduct these funds from your paychecks.
Now, if you don’t have access to a 401(k), don’t worry. Many IRA also offer the ability to transfer funds automatically, so if you set yours up this way, you’ll be more likely to stay on track to reach your retirement savings goals.
And as is the case with a savings account, there’s nothing wrong with starting small when it comes to building wealth for retirement. You can start by contributing $600 a year to a retirement plan, because that’s better than nothing. And then maybe the next year you’ll save $1,200, then $1,800 the year after that. But once you change your approach to saving money by making it automatic, you’ll be more likely to succeed.
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