On and beyond the cusp of the new year, more than 40% of Americans become fraught with thought: which resolutions should I make? Are these goals actionable and attainable? Will I fail? According to the experts, most likely — only a mere 8% of people resolve to do what they set out to accomplish in the new year.
One of the most common of these failed resolutions is “make better financial decisions.” Besides being vague, this resolution likely leads to failure because it depends largely on sheer will, commitment, and discipline, which aren’t necessarily the building blocks of better habits.
Sometimes, the trick to saving money is not having to think much about it. This may sound counterintuitive, and we certainly don’t advocate for handling your finances mindlessly — on the contrary. The more you can automate pocketing money away, the more effortless, impactful, and habitual saving becomes. Here are 5 simple ways to automate your way to a successful savings habit in 2018.
1. Track (Rather Than Just Budget) Your Spending
This strategy comes from writer and entrepreneur David Cain who hypothesizes that simply ledgering your income and expenses “will save you tens of thousands of dollars, years of needless toil, and relieve you of an enormous amount of financial stress.”
Under this strategy, you’re free to buy whatever you want, so long as you track it. “Without any budgeting or self-imposed restrictions, you’ll automatically make far better use of your money, at least doubling or tripling the efficiency of your discretionary spending” claims Cain. “You’ll gain a sense of control over your financial life and experience far less money anxiety, all without any conscious effort to spend less or make more.” In a nutshell, this strategy automates your awareness of the numbers behind your behavior, which in turn changes your priorities and creates “a natural aversion to wastefulness.”
While Cain’s model uses a standard spreadsheet, make the process even more automatic with an innovative app like Oval, which links to your bank accounts and credit cards and tracks each time you spend and receive income. You can also create custom, searchable tags for each expense, which makes it easy to quickly see how much you spend on specific categories of items.
2. Flow Your Money
According to financial advisor Anna Sergunina, one of the best ways to automate your finances is to use a system called Money Flow. This system essentially breaks your finances up into three accounts: a checking account for fixed expenses and bills, another checking account designated for expenses that usually vary in amount (groceries, entertainment, etc.), and then a high-yield savings account you don’t touch unless it’s an absolute emergency.
After you’ve determined the required budgets for each account, set up automatic deposits of your payroll based on your expenses in each category. While you’re at it, go through and set up auto-pay for your fixed bills so you never incur late fees, and make sure each account is linked to your financial app.
3. Sign Up For Smart Subscriptions
Over the past few years, there’s been a noticeable shift in consumer preferences, and 80% of the public now wants the option to subscribe to services rather than pay-per-product. Zuora CEO Tien Tzuo has coined this era the “subscription economy,” and $420 billion was spent on subscriptions in the US in 2015.
We now live in a time when you can subscribe to nearly anything, and for good reason — subscription pricing models usually save you money. For example, ditching cable for Netflix can save you roughly $90 a month, and you can have access to all your favorite music for the price of one album a month with Spotify.
Besides entertainment, we recommend subscribing to both the kinds of things you buy regularly and to the places you most frequently shop, which will ensure you’re coming out on top. For hygiene basics like shower gel and razors (which you’re supposed to swap out after every 3-5 uses), Harry’s offers customizable subscription plans to their catalog of products so you only get what you need when you need it. If you’re loyal to Target, they have a subscription program meant to compete with Amazon’s where you can have your essentials shipped regularly for a discounted rate.
If you’re the kind of person who finds it difficult to plan ahead when it comes to meals and ended up spending $3,008 dining out in 2015, it may be worth looking into a food subscription box. Do some comparison shopping to find the best deal and include the monthly expense as half your grocery budget to help break your pricey restaurant habit.
4. Use The Right Kind of Credit Card
You’ll find a lot of financial advice that discourages the swipe, but in a time when convenience is king, avoiding credit cards is impractical, frustrating, and can actually cost you money. The trick, of course, is to use them strategically and sparingly (when possible), and make the majority of your credit purchases with cards that will automatically pay you back.
Like any credit card, remember to treat it like cash, buying only what you actually have money to spend on.
5. Don’t Make It So Easy To Spend
This last hack is actually a recommendation to un-automate. While incredibly convenient, storing your card or PayPal information on an e-commerce website will only set you up to spend mindlessly and impulsively. Resist the temptation to link your payment information to your favorite online retailers, no matter how often you shop there. Sometimes, all it takes is the tedious task of typing out your card number to make you realize you don’t actually want the thing that badly.