Why I used to hate automatic transfers
Automatic transfers and I never used to get along. I’m a Type A when it comes to my money, and I hated the idea of my money moving around without my control. Every month, I would manually make my transfers to each of my savings accounts. I did this for years.
But last year, I finally learned why I hated automatic transfers. I had a scarcity mindset when it came to money. I felt like I had to control my money, because I didn’t trust it to be in my account when I needed it.
With this new information in mind, I ran my numbers, figured out exactly how much money I needed in my checking account to feel comfortable, and how much I could put into savings each month and I set up the automatic transfers.
Now, I love my automatic transfers because I don’t need to do anything to see my savings increase every month. It’s a much more hands-off approach and now I trust that my system is working for me.
Here’s how to set up your automatic transfers:
1. Run your numbers.
You’ll need to figure out exactly what your monthly expenses are (you should keep this much in your checking account) and how much you are realistically able to save.
Before setting up automatic transfers, you’ll need to know your income and monthly expenses.
2. Set up an automatic transfer from your checking to your savings.
After you’ve decided how much you can send to your savings account, it’s time to set up automatic transfers. This is fairly easy to do with most online banking, but you can always call your bank for help.
3. Leave a buffer in your checking account.
Generally, it’s always better to store extra cash in a savings account, where it can accumulate interest. But, you’ll want to leave a little extra money in your checking, at least for the first few months, to make sure you don’t accidentally overdraft and have to pay fees. I suggest around $500.
4. Watch your savings increase!
The beauty of automatic savings is that you don’t have to do anything at all. You get to sit back and watch your money pile up.
But remember, you can make changes to the automatic transfers at any time. Already hit 6 months of emergency savings? Change that transfer to your travel account. You’re never locked in to your automatic transfers, you can always change them.
5. Track your progress.
Tracking your progress is important. It shows you how far you’ve come. When you set up your automatic transfer, write down how much you have in your savings account. Check it again in a few months and see how much it’s increased. Then celebrate your great work!
Once you set your automatic transfers, now comes the fun part! Sit back and watch your money grow.
Money Psychology Sidebar
In case you’re still skeptical whether automatic savings are for you, the answer is yes.
Here’s why:
Everyone falls into one of two categories: see money = spend money, or see money = save money.
My husband is see money = spend money. People in this category will see money in their checking account and immediately be looking to spend it. Got an extra $50? My husband’s shopping for a new jacket.
Automatic savings benefit him because it removes temptation. The money is out of his checking account, reducing the amount he can spend, and ensuring that he’s saving an adequate amount of money.
I, on the other hand, am see money = save money. If there’s money in my checking account, I’m putting it aside for an emergency because you never know when you might have to be rushed to the hospital for an emergency appendectomy, right??
Automatic savings give me permission to spend. I know I’m already saving money, so anything left in my checking account should be spent. I feel much less guilty spending $100 on dinner with a friend, when I know my automatic transfer to my emergency savings account already went through.
Action Items:
Are you a see money = spend money, or a see money = save money? How do you think automatic savings could help you?
Run your numbers. Make sure you know your monthly expenses and keep that amount in your checking account before setting up automatic transfers.
Set up your transfer! It’s easy to do with most online banking systems.
Not sure where to start automatically saving? Start with a retirement account!
Your life may not be perfect, but it is imperfectly yours. The only way to live it is your way.
