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I have tried to put money into savings for years. But for so long I continually failed.
I knew the importance of saving money, but it always seemed that some very legitimate reason would inevitably crop up and force me to spend the money I had set aside to save.
It became quite demoralizing.
I would tell myself that I could start saving just as soon as I made a little bit more money. But even as I started bringing in more income, I still struggled to set any aside without touching it.
Fortunately, I married someone who is naturally gifted at saving money. My wife Meg has the ability to put money into savings and leave it there through sheer power of discipline.
That was helpful, but when her spirit of discipline united with my spirit of creativity, I’m afraid my lack of discipline infected hers more than vice versa.
As a young married couple, we did better than I had done being single, but we still weren’t saving at an inspired pace. We had to do better.
Finally, in year three of our marriage, I took the initiative to start an automatic savings plan. I arranged for $100 to be automatically debited from our checking account and invested in a mutual fund through investment company, T. Rowe Price. I enlisted for the minimum amount of $100 per month.
To my surprise, we didn’t miss the money each month. In fact, we hardly even noticed. Slowly that account began to grow.
After several years of watching that money accumulate, we were ready to jump on another opportunity when it popped up.
Last year, while visiting our local credit union, I noticed that they were running a special deal.
For a very limited time, they were offering a CD (certificate of deposit) at 5% annual percentage yield. FIVE PERCENT guaranteed. In this age of sub-one percent savings rates, they had my attention.
The catch of this limited-time offer was that you could only deposit money into that CD once per month for 24 months at a maximum of $400 each deposit – and it had to be automatically debited from your checking account.
By my math, it appeared that if we invested that $400 each month combined with the generous 5% annual return, at the end of 24 months we would have roughly $10,000 in that account.
We told ourselves that we would set it up initially for the maximum $400 and just see how it went. If it became too much, as we expected it might, we could ratchet it back down to $200 or maybe $100 a month.
That was thirteen months ago. Since then, $5200 has been siphoned from our checking account to that CD and we have hardly even noticed.
How is that possible? Where did we come up with an extra $400 per month?
That is the power we have discovered of automated saving. I really can’t tell you where that money has come from. Somehow, we just seem to have enough to cover that debit every month.
Author David Bach outlines this phenomenon in his book which you should definitely read called The Automatic Millionaire.
He says if you want to save money, “You need to set up a system that guarantees you’ll get paid – a system in which you Pay Yourself First AUTOMATICALLY.”
He explains that this system has worked for his clients because 1) they don’t have to write checks to themselves, 2) it doesn’t take a lot of thinking, and 3) they do it once and the rest is automatic.
That has certainly been our experience as well. When I tried to rely on my own discipline to write a check each month or even merely to log on and move the money out of my account online, I continually failed miserably.
My intentions were always great, but oddly enough, my account showed no credit for my good intentions. I needed real action.
Automation was the key.
We all have a lot going on and tons of thoughts and concerns bouncing around in our heads. If we have to consciously remember to save money each month, chances are slim to none that we will actually do it. Remembering to do it consistently is out of the question. I needed a system that didn’t rely on my memory or personal discipline.
In most areas of life, discipline can’t be automated. You can’t program your body to show up at the gym. Or to eat right. But saving money is an exception.
Having the money automatically sucked out of our checking account ensured that it would be set aside. And since we didn’t have to watch it go, we never missed it.
Perhaps most importantly, automation means you only have to do it once and you’re done. No need to rustle up the discipline every month. As the infomercial says, “Just set it and forget it!”
I don’t want to overstate this, but in my observation, setting up an automatic savings program has produced results that are akin to magic.
Somehow, we always have enough to save. Whereas before it was invariably taken from us at the last minute. Now, the money is miraculously there.
Once you start an automatic savings plan, you will be astonished at how well it works and how fast that savings begins to accumulate.
We’ve amassed over $5,000 in a year. I realize that may not seem like a life-changing amount. And truthfully the amount isn’t life changing. But the habit is.
Solomon said, “Dishonest money dwindles away, but he who gathers money little by little makes it grow.” (Proverbs 13:11)
It’s replicating this habit month after month that can change anyone’s financial destiny.
It can be tempting to think, “I don’t have enough to start saving yet, I’ll start when I can set aside a big chunk.” But that’s not how building a savings habit works. You don’t do it all at once. It’s incremental.
If you want to save a lot, you’ve got to start by saving a little.
It’s ok to start small and test the theory. Remember we started with just $100 per month. Anyone can do that. It will prove to you that the concept works.
In fact, now that you’ve read this far, I have a challenge for you:
In the next 24 hours, set up an automatic savings plan of $100 per month. It doesn’t have to be complicated.
Just go online or visit your bank and arrange to have $100 moved out of your checking account and into a savings account or mutual fund automatically each month.
It should take less than 30 minutes.
Send me an email saying “DONE” (via my contact tab) when you have completed the challenge.
For now, don’t worry about where that savings should be kept. That is a discussion for a soon-to-come blog post. Right now, we are just trying to jumpstart the habit.
Why are we doing this?
Ultimately, if you ever want to be financially independent, you must save money consistently. There’s no way around it. Saving money must become a habit.
If you wait to start saving “when you have money” you never will. Commit to saving and the money will be there.
Don’t wait. Do it now.
You’ll be amazed how quickly this one decision and action will change your financial life.
It’s automatic.
