Blog

The Beauty of Automating Savings

money-g92e50f784_1920

The Beauty of Automating Savings 

Why do people have a hard time-saving money? One simple answer is that savings get treated as an afterthought.

What most people do when they earn money is pay everyone else first. They pay the landlord, the cell phone company, the internet provider, the credit card company, the government, and on and on and think money will be left over to pay themselves after. The reality is if you build this habit of paying everyone else first, then you never pay yourself.

The best way for changing this habit is to put paying yourself first on auto pilot. If you are saving for retirement, make sure the money goes into your tax-advantaged account up front (whether this is a 401k/403b or a type of IRA). If you are saving for your child’s college, automatically put money into their 529 accounts systematically. If you are saving to buy a home or car or any medium-term goals, then send money automatically to your high yield savings account (these pay higher interest than your typical bank savings rate of .01%). The key is to do this before any of the money touches your checking account where bills and living expenses are paid from.

This concept has done wonders for the retirement savings of Americans with the success of automatically moving money from paychecks and into 401ks/403bs before it goes to a bank account. This has helped to create $406,000 401(k) millionaires in America as of the first quarter of 2022, per a marketwatch.com & Fidelity review. Americans even continued to save through the market volatility we have seen this year. One of the many reasons it is successful is because it takes the manual/emotional part of the process out of it. Since it is automatic, people don’t have to think about it, and it helps to drive successful outcomes over time.

Taking this approach with all of your financial goals will set you up for greater success. Now, how do you get motivated to save for your goals? According to a financial psychologist experiment in 2021, it starts with visualizing your goals. Write it down and think about it, create a vision board of the top things you want your money to do for you. It will help to shift your spending and savings habits. The numbers cited by the CNBC experiment were that people who did this boosted their savings by more than 70%. That is a big number.

Take the step to automate your savings for the goals you want to achieve by paying yourself first, and you’ll be surprised how quickly they can be hit.

 

Thanks for checking out the blog. 

Navarone Simpson, CFP®

 

 

Sources:

https://www.cnbc.com/2021/12/29/visualizing-goals-and-automation-can-help-boost-savings-by-more-than-70percent.html

https://www.marketwatch.com/story/americans-are-still-saving-for-retirement-and-becoming-401-k-millionaires-11652927362#:~:text=Still%2C%20a%20%241%20million%20balance,346%2C800%20IRA%20millionaires%2C%20Shamrell%20said.

 


This material is for general information only and is not intended to provide specific advice or recommendations for any
individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive
outcomes. Investing involves risks including possible loss of principal.   Securities and advisory services offered through LPL Financial (LPL), a registered investment advisor and
broker-dealer (member FINRA/SIPC). 
Insurance products are offered through LPL or its licensed affiliates. To the extent you are receiving investment advice from a separately registered independent investment advisor that is not an LPL Financial affiliate, please note LPL Financial makes no representation with respect to such entity.

 

Securities and insurance offered through LPL or its affiliates are:

 

Share This Article

Facebook
Twitter
LinkedIn

You May Also Like

Funding a Buy-Sell Agreement with Life Insurance

As a partner or co-owner (private shareholder) of a business, you’ve spent years building a valuable financial interest in your company. You may have considered setting up a buy-sell agreement to ensure your surviving family a smooth sale of your business interest and are looking into funding methods. One of the first methods you should consider is life insurance.

Read More »

Transferring Your Family Business

As a business owner, you’re going to have to decide when will be the right time to step out of the family business and how you’ll do it. There are many estate planning tools you can use to transfer your business. Selecting the right one will depend on whether you plan to retire from the business or keep it until you die.

Read More »

Retirement Plans for Small Businesses

As a business owner, you should carefully consider the advantages of establishing an employer-sponsored retirement plan. Generally, you’re allowed certain tax benefits for establishing an employer-sponsored retirement plan, including a series of potential tax credits for establishing the plan and a deduction for contributions you make.

Read More »

Creating an Investment Portfolio

You’ve identified your goals and done some basic research. You understand the difference between a stock and a bond. But how do you actually go about creating an investment portfolio? What specific investments are right for you? What resources are out there to help you with investment decisions? Do you need a financial professional to help you get started?

Read More »

A/D Juicebox Ready, Set, Spring! (April 10th)

W​​​​​​​e are happy to present our A/D JuiceBox Webinar Series. JuiceBox will provide current events, financial planning strategies, taxes, investments, and general business updates.

Join us as Autumn fills the air, and the time is quiet and mellow to discuss things in the financial planning world.

Read More »

Understanding Risk

Every investment carries some degree of risk, including the possible loss of principal, and there can be no guarantee that any investment strategy will be successful. That’s why it makes sense to understand the kinds of risk as well as the extent of risk that you choose to take, and to learn ways to manage it.

Read More »

Don't Miss Anything

Stay up to date with our monthly newsletter.