Whether you’re a great saver, or need some help saving, you can benefit from some automation to help you spend less time managing your money and more time enjoying your life. A big part of doing savings and investing right is doing the upfront work to determine how much you can save each month and then automating the process so it’s not something you need to think about. This post doesn’t go into the upfront work to determine how much you can save, but assumes you already know that part and covers some of the simple tactics that can help automate savings and investing.
Round transactions for savings.
There are a few companies and apps out there founded on the digital ages version of taking the change home from your cash purchase and putting it in a jar for savings. Bank of America’s Keep the Change and Acorns are two more well-known options.
Have your paycheck direct deposited.
If your employer offers it, have your paycheck direct deposited into your checking account. Many employers offer the ability spread that deposit among multiple accounts. Erred on the side of having the full amount of the check deposited into one account, your main checking account. No more having to go to the bank or ATM to deposit your paycheck.
Employer sponsored retirement plans.
If your employer offers one, utilize an employer sponsored and tax incentivized retirement plans to save direct from your paycheck. Some of these allow percentage and fixed dollar amount contributions per pay period. Not only is it tax advantaged, but this is savings that you don’t even touch – what’s easier than that!
Automatic transfer from bank account to IRA
Once you’ve determined how much you want to contribute to your IRA annually, divide that amount by the number of pay periods you have per year (ex $5,000 over 24 pay periods is ~$210 per period). Next, setup an automatic transaction with your IRA provider so mirror that amount. Ideally that transaction would occur on the same cadence as the paycheck for consistency, but it doesn’t have to, say if you wanted to make your IRA contributions once per month instead. Two options for how to make this contribution, either of which can work: 1) To money market or cash on the IRA account (that can be later transferred to specific stocks or funds) or 2) Directly to specific funds.
Automatic transfer from bank account to brokerage
Similar to the automatic transfer to IRA, setup an automatic transfer to brokerage for an amount you can contribute per paycheck.
Automatic transfer between bank accounts
Many people have multiple bank accounts. Sometimes it’s just checking and savings, others have more. More – why you ask? Some have use-case specific accounts to keep spending streams separate, such as one for real estate, one for a traveling account, one for family living expenses. If any of those accounts exist in your portfolio, consider scheduling an automatic transfer to them.
By using the above tactics, one can all but automate the ongoing effort to save and invest. Now spend that gained time wisely!