In July 2002, I opened an account at ING Direct and created a scheduled transaction. Every two weeks, when my day job paycheck was deposited, a portion of this money was automatically passed through directly into my new Emergency Fund.
A few months earlier, I became eligible for investing in my company’s 401(k). This is an automatic investment. I started off with the minimum investment necessary to take full advantage of the employer matching benefit. Now many companies enroll employees in the 401(k) automatically.
Since then, the details including amounts and accounts have changed, but I never see a good chunk of my paycheck.
The idea of making saving automatic is Fortune Magazine’s sixth rule for building wealth. Here’s what the magazine has to say:
No one wants to think about saving—so don’t. Already more companies are making 401(k) enrollment automatic… If you’re already maxing out your 401(k), see whether your company can transfer money directly from your paycheck into your Roth IRA or a taxable account. Or ask if your bank can transfer a set amount (even $100 a month) from your checking account into a high-interest-bearing online savings account…
David Bach is an author who highly encourages making saving automatic; in fact, he’s written a book that describes how doing so can make anyone a millionaire over time, The Automatic Millionaire.
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I couldnt agree more….we automatically put away 10% of our take home pay every time we get paid, before we can do anything stupid with it! Of course, this is in addition to retirement and the like, but its easy to just take a small amount every week and put it away. Eventually, it will add up to quite a bit without even missing it in the first place.
I did that once, but then I didn’t have enough money to cover all my bills. I let the utility bills slide for a few months until I started getting shutoff notices, then I took all the money I had “paid myself” and brought the utility bills current, then quit trying to pay myself first.
I consider my 401k contribution my automatic savings, but I also automatically save a little out of each paycheck for my emergency fund too. I’d love to save 20% in the 401k and and other 10% in the emergency fund, but saving 30% of my income just doesn’t work into my budget. YET.
I GET PAID WEEKLY AND I HAVE 65 AUTOMATICALLY DEDUCTED FROM MY PAYCHECK INTO A SEPARATE SAVINGS ACCOUNT AND 15 A WEEK BEING AUTOMATICALLY DEDUCTED FROM MY CHECK THROUGH SHARE BUILDER I PRETEND THAT THE SHARE BUILDER IS A BILL AND I JUST LOOK AT THE 65 IN SAVING AS IF IT WERE NEVER THERE TO BEGIN WITH I’VE BEEN DOING THIS FOR 5 YEARS AND I NOW HAVE A LITTLE OVER 20,000 SAVED. ITS ALL A MENTAL ANOTHER GOOD TIP THAT HELPED ME IS NOT TO KEEP CHECKING YOUR BALANCE TRY TO FORGET ABOUT IT.