Putting a little money away for a rainy day isn’t always easy.
You may have some good intentions, but at the end of the day, there just isn’t any money left. Somehow whatever you make is spent before you make it to the next paycheck.
But the good news is, you can actually automate your savings, so that you will save money on autopilot!
This might seem like a hassle to set up, but it really only takes a few minutes – and over time, you will accumulate savings without having to this about it.
I recommend using this method to build up an emergency fund for unexpected costs such as house repairs. But you can also use it for sinking funds for regular expenses such as Christmas, to save for a holiday, or anything you want!
Make a Budget
Start by making a personal budget. Take a look at what you bring in each month. Next, write down your fixed expenses. These are things like rent, car payments, utilities etc. Figure out how much you need each month for groceries and other essentials. This is your bare bones budget. It’s good to know what you need to get by each month.
Decide How Much to Save
Next it’s time for a little bit of maths. Start with what you bring in each month and subtract all your core expenses. What you’re left with is your discretionary income.
This will pay for entertainment, clothes, getting your nails done etc. And from here on out, part of that discretionary income will go into a savings account.
Pick a number you’re comfortable with. Maybe that’s just £20 per month, maybe it’s £300. Put it in your budget and treat it like any other bill. You should pay this ‘bill’ (i.e. your savings account) as soon as you get paid every month. Then you won’t even notice you had this extra money, and you won’t be tempted to spend it!
It won’t take you long to get into the habit of setting aside that money for savings.
Set Up a System
To make it even more hands-off, talk to your bank about setting up a separate savings account. If you have an online banking account, it can be as easy as requesting a new account online.
Then, set up a standing payment to have the savings transferred to the new account as soon as your pay cheque comes in each month. Again, you can do this online through your internet banking platform, and it only takes a minute to set up.
If you don’t see it, you’ll never miss it, and your savings will run on autopilot.
Over time, you will build up a nice little nest egg in your savings account, without even thinking about it.
Review Regularly
Don’t forget to audit your savings from time to time. Take another look at your budget. Can you increase your savings a little more?
If you get a pay rise, or take on extra work, don’t look at it as extra spending money – increase your savings percentage too.
Another great way to boost that savings account is to take any extra money – thinks like birthday cash, tax return, bonuses etc. – and put them straight into the savings account. Again, you won’t even miss the money (since you never had it before), but it will help you build up your savings quickly.
Maximise Your Money
Make sure your savings are sitting in an interest bearing and tax-efficient account such as an ISA. Since you won’t be touching this money unless it’s a dire emergency, you should be able to earn at least a little interest. Talk to your bank about your best options and start putting your savings on autopilot.
One last tip: Talk to your employer about matching your pension contribution. You may be able to get a contribution from the company you work for towards your retirement savings account. Pension contributions are a little different from the method described in this article since they are taken out of your pay cheque before it even reaches you, and will be stored in an account that you can’t access until retirement age. But it’s a great additional way to put aside money for the future on autopilot.