Here's part 6 of a Money magazine series on 10 rules for building wealth that I'll be covering over the next few days. Today their suggestion is to make saving automatic. The details:
No one wants to think about saving - so don't. Already more companies are making 401(k) enrollment automatic (34 percent of big companies, vs. virtually none ten years ago). If you're already maxing out your 401(k), see whether your company can transfer money directly from your paycheck into your Roth IRA or a taxable account. Or ask if your bank can transfer a set amount (even $100 a month) from your checking account into a high-interest-bearing online savings account (check out HSBC's and ING's offerings).
Here's what I do:
1. My 401k is deducted automatically from my paycheck. I contribute the maximum each year.
2. The rest of my check is sent automatically to my checking account.
3. A portion of what goes into the checking account is sent automatically to Vanguard, who then automatically invests it in various funds I have selected.
So, yes, you can say I believe in and follow this advice. Once everything's set up, it makes investing very, very easy.
I have an Emigrant account set-up and it's so nice, I have it set-up to take out so much every month for savings and school expenses (I'm currently in the grace period since I'm a full-time student in the summer). So I saved the amount that I would normally spend for student loans and put it into an account, so come this summer--smaller or no new loan!! Anyway, I love the extra savings account and the automatic system. Also, becuase it is harder for me to get my money out (get online, set-up a transfer back into my checking, wait a day or two) I really have to think about why I am taking money out.
Next goal for year, set up a Roth IRA. It'll be small but it's a start!
Posted by: Jo | January 17, 2007 at 12:08 PM