Fortunately, saving no longer has to be purely an exercise in willpower (good thing, since the world is never so full of temptations to spend as when you’re trying to salt more money away!). With a few simple clicks of the mouse, it’s possible to take yourself almost completely out of the process. Try these three steps:
Step one: Get real about your goals. Envision what you want, as specifically as possible. “When you know what you’re saving for, the process no longer just feels like eating your vegetables,” says Springfield, Ohio, financial planner Jill Gianola. You might even put a picture that represents your dream—say, a beautiful golf course if that will be a big part of your retirement—next to your computer to remind you of why you are depriving yourself of some current luxury for your future goal.
Step two: Attach numbers. Investigate how much money you need for your goal, determine a deadline, and come up with a plan for how much you need to save each month to get there.
Step three: Automate. If your employer offers a 401(k) plan, you can elect to have the money funneled directly out of your paycheck into the account. Since those contributions are pre-tax, you won’t miss the cash as much as you think. If you earn $60,000 a year for example, upping your 401k contribution from 2% to 5% will only decrease your weekly paycheck by $27 a week (And make sure you’re automating up to any employer’s “match,” since collecting that free money is one very easy way to save.)
Don’t stop at your 401(k) contributions. Most employers allow you to funnel your paycheck into several different accounts, so you can elect to put some of your paycheck directly into a 529 for college savings, an IRA for retirement, or bank or investment accounts for any other goals. Alternatively, you can set up regular transfers from your checking account into those other accounts.
Ideally, the transfers should go through at the time of the month when you’re most flush so you’ll be less likely to miss the cash. “The important thing is that you put it to work before you have a chance to spend it,” says Greg McBride, senior financial analyst at Bankrate.com.
Step Three: Escalate. The majority of 401(k) plans have an auto-escalation feature, where you instruct your plan provider to automatically increase your savings rate by an amount you choose (usually between 1% and 3%) on the same day every year. For outside accounts, create your own semi-automatic-escalation feature: Set a calendar alert reminding you to bump up contributions by a percentage point or two every year on your birthday or every time you get a raise.