American Express – Use automation to keep New Year’s savings resolution
If saving money is at the top of your 2021 New Year’s resolution list, here are five of my best money hacks that really work. If you put them in motion, this time next year I bet you will have your first successful New Year’s resolution. The secret sauce is automation and technology.
If only our New Year’s resolutions could be to “spend more money.” We could certainly nail that! Think of all the convenience we have to spend with today’s technology. We can flash a phone for drive-thru coffee and not even have to come to a full stop as the coffee gets passed through the window. It takes longer to think of something to buy from the comfort of our couch than the one click purchase option offered with Amazon. Some companies even offer a convenient “afterpay” option. Buy now, and spend the next three months paying for it.
If 2021 is going to be the year you save money, trust me you will need more than just resolve. You need a plan armed with automation.
Resolve really is the hardest ingredient, which is why this is a particularly important moment to consider taking on a resolution to save money. Resolve a savings goal, and write it down.
“I will save “x” dollars by the end of the year.”
Next, make a plan to achieve those savings. Decide how much you want to save, and set up the accounts you want to save into.
Now for the secret sauce: I want you to lock it in. Make sure your plan doesn’t require constant resolve through the year. Our brains are not good at keeping resolve for more than a month, much less a year. This is where technology and automation step in.
Here are the five ways to save that you can easily let automation do the heavy lifting.
• Retirement. At the risk of sounding like a broken record, the most brilliant way to save is your retirement account. You can decide on a savings rate, contact HR to sign up, and by the end of next year you will have your first account balance. Are you undersaving for retirement? We discussed this in the past — all the people saving only 5% (or less). By the stroke of a pen or keyboard you can increase that to 10% now then bump it up 1%-2% each year to catch up on retirement.
• Payroll deduction into an emergency fund. During an enrollment a few years ago, my team and I kept having employee after employee meeting where they had a decent cash reserve in savings, some with thousands of dollars. Remembering the 2016 Fed survey that found more than half of Americans couldn’t put their hands on $400 in an emergency, those cash reserves were unusual. What was the difference? The company had a credit union onsite, and they set up employees with payroll deducted savings into those accounts. You can do this for yourself! Choose a local credit union or a high yield savings account like those offered at Ally Bank or American Express. If it’s not connected to your main account then you might be less likely to raid it. Then ask payroll to put $50 to $200 each paycheck into that account. Months later when you forget you even cared about or wanted to save, there it is still putting those deposits into that account.
• Round up savings. Y’all, this is real. I have seen it with my own eyes. People with cold hard cash in a savings account, and they didn’t do it (well, did it without noticing.) Here’s how it works. Swipe a debit card for a latte that costs $4.25, and that amount is “rounded up” to $5.00. $4.25 goes to the coffee shop. $0.75 gets deposited into a savings account. Many banks, like Simmons and Bank OZK let you sign up for this round up program. Bank OZK’s My Change Keeper will even let you round up to the next whole dollar or put a dollar amount per every transaction into a savings account. If your bank doesn’t offer a round up account, consider an outside app like Acorns that will allow you to round up into a savings account when you spend money or automate savings directly from your paycheck.
Let’s take a brief time out. You might say, well, big deal — I get cash back or rewards on my credit card. Sorry, not the same thing. Those rewards are designed to get us to spend, and unlike debit cards that have a declining balance that we feel now, a credit card has an increasing balance that we feel later. You could fall into the trap that so many fall into with free tickets for a vacation or cash back savings, meanwhile with thousands in credit card debt that can’t be repaid when it comes due.
• Add a line. Thanks to some great work by Southern Bancorp, you can now have part of your tax refund deposited into a savings account. Why not elect to save at least half? Imagine what an acceleration that could be for your savings. Look for that second account line for your refund, and put your savings account number in it. The extra effort will prevent you from intending to save but getting tempted by all the ways to spend when you see that money hit your checking account.
• Automatic transfers to savings. Set up separate savings accounts to save for larger expenses, like home repairs, repairing and replacing your car, gifts (like Christmas, birthdays, anniversaries), health savings and college savings. Get the bank savings account, the health savings account at your company or the Arkansas 529 plan accounts set up, and then take that next step to automate monthly contributions to those accounts.
2021 could be your year to finally become a saver. Are you going to take one (or all) of these actions this year? Tell me about it! Also, what are your money questions going into 2021? What is your money story that could inspire those at the beginning of their journey? I would love to hear from you. Send me an email to [email protected]
Sarah Catherine Gutierrez is founder, partner and CEO of Aptus Financial in Little Rock. She is also author of the book “But First, Save 10: The One Simple Money Move That Will Change Your Life,” published by Et Alia Press.
Tag: American Express