In theory, the effort to save and invest more of your wealth sounds easy as pie. In reality, however, you probably know that it’s more difficult to acomplish.
When life throws responsibilities your way and expenses pile up, it can be tough to save your wealth and allow it to grow. Financial goals, like making contributions to an IRA, seem to get brushed to the wayside.
While reaching your financial goals might not be the easiest thing in the world, there is one tip I’ve utilized and I recommend that can eliminate some of the burden: Automation.
By automating your financial life, you can save and invest more without even thinking about it.
Automating your savings
No matter how much willpower you have, when your paycheck finally arrives, overspending can be tempting. A great way to ensure you actually save and invest more of that money is to set it so a portion of that wealth automatically goes into a savings account. That way, you won’t face the Siren Song of a full checking account come payday.
Out of sight, out of mind: you’ll start saving effortlessly. Don’t wait until the end of the month to save “whatever’s left over.” There are simply too many excuses not to save.
The number that you put in your checking account is entirely up to you (some money saved is better than none), but I endorse the 20-30-50 plan as a way to keep your budget in check, while allowing for both financial betterment and fun.
Automating your contributions
Much better than saving your wealth is actually putting that money to work in an investment account. After you’ve paid off your debts and built a full emergency fund, this should be your next step.
By setting up direct deposits to your 401(k) or an outside investment account, you’ll ensure that your money from work is always going to work for you. You have a million things going on in your life; this will ensure you’re actually investing.
If you’ve already started this, now might be the time to ramp up the amounts you’re investing if there’s still wiggle room in your budget. A little put away now can become a small fortune later on because of compound interest.
Do you have any tips for saving and investing more? I’d love to hear them!
If you want to learn more about investing, check out my firm LexION Capital.