Saving more money is not always an easy task. But, it can have a huge impact on your reaching your financial goals.
I’ve found the easiest way to save more money is by simply hacking your mind into believing you have less.
By believing you have less money than you actually do, you’ll end up spending less money.
Setting up auto withdrawals is an easy money hack for making yourself believe you have less money than you do.
What Are Auto Withdrawals?
Auto withdrawals are an automatic transfer of funds from your checking account to a savings or investment account.
Most banks or brokerage firms let you set them up.
You can set it up for a certain amount or frequency or time period and just forget about it. Talk about out of sight and out of mind!
Why Setup Auto Withdrawals to Save Money?
So why and how does setting up auto-withdrawals save more money?
Well, it all starts with understanding that people live within their means.
You make different financial decisions when you have $100 vs $1000 vs $10,000 in your checking account.
If you have more money, you’ll spend more money.
Sure, some people are perfect with their budgets regardless of much money they have, but it’s definitely not the norm.
For the rest of us, we need to set the constraints within which we need to live our lives.
Setting up auto withdrawals artificially lowers those constraints by taking out money before you even know you have it.
This way, you’ll see less disposable income available and your day to day spending habits will soon reflect that.
How Much Do Auto Withdrawals Help Save Money?
So how much should you be setting up for auto withdrawal?
We’ll, it depends on how you want to set it up and at what frequency?
Here are a few examples of how to structure it:
- Daily $X
- Weekly $X
- Monthly $X
- % of paycheck
My personal favorite? Percentage of my paycheck
Save first, spend later.
It’s easier for me to automatically transfer 15% of my paycheck to my investment account and not have to think about.
Once it’s gone, then I know the true value of what I’m working with for the upcoming month.
At the end of the day, auto withdrawal is just one tool. To maximize savings you need to be attacking it from all angles. Using cash, setting up tax advantaged accounts, everything!
It’s not easy, but over the long run, it’ll definitely help you reach your financial goals easier and faster.