Saving Strategies Part 1 - Automatic Savings Plan Save without having to think By Mo2

The Automatic Savings Plan
The automatic savings plan is where you have a set amount of dollars that are taken out of your paycheque automatically. This means that you won't have to "think" about saving and it'll be done for you automatically. You can have this money taken out pretty much at anytime that you please; it could be everyday, (although that could be meaningless and could just rack up bank fees) bi-weekly or monthly.

This strategy is for the undisciplined ones although it does help even those that are disciplined but don't think they have enough money. Whenever I recommend this to anyone, the response I usually get is, "I don't have that extra cash to put away right now." Ok, fine argument.

The Pain
But really, how much would $50 a month really hurt anyone? Let's face it, Starbucks isn't the only coffee company that makes a Latte, unless you want a Decaf Quadruple Tall Nonfat 215 degrees No whip but extra mocha sauce Mocha, then you can simply buy a regular cup of coffee. For those that order such high-calorie drinks, have you looked in the mirror and said that to yourself before? It might sound cool but it actually you probably won't notice the difference even if it was caffeinated and was whole milk. Anyhow, before I start talking about the food chain, back to the point.

$50 a month isn't anything if you don't see it. Most people don't budget, fine. But that also means that you just spend pretty much every you see and save whatever is left, like the $4.27 for laundry and Snickers bar that you put in the wrong coat. So now you're looking at me blankly thinking, what good is $50 every month? That's a measly $1.67 a day.

Compounding
Ah, the power of time. Time isn't always against us, and compounding is probably the most powerful argument to support that. $50 a month will translate to $600 a year. Now, for five years and with the fast paced world that we live, that really isn't a lot of time. That amounts to $3,282.86 at a measly 3.5% interest rate. That's not too bad is it?

Now lets make this $100 a month at 6% for 5 years.
After Year 1: $1,239.72
After Year 2: $2,555.91
After Year 3: $3,953.28
After Year 4: $5,436.83
After Year 5: $7,011.89

You get the idea. 6% a year by the way in my mind is still pretty conservative. If you polish your financial knowledge and skills you should easily be able to make 10-15% a year. And I don't see why you couldn't make more.

The Plan
Mo2 thinks that putting away $50-100 is easy. Think that's too little but don't have any idea as to how much you can put away? How about setting a certain percentage of your paycheque. For example, putting away 10% of your paycheque away per month. This way, if you have a pay raise, (hurray!) then you can add more to your monthly contribution. It's all about having a plan.

Conclusion
So now you have absolutely no excuse not to setup an automatic savings plan. It doesn't even have to be $50 it could be $10, it's the process that counts. Start small and you'll see the difference not only in terms of dollar figures but your mindset. Change is hard to come bye, but if you don't start somewhere you'll never finish. Happy investing!

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Determine Your Cash Flow - Part 1
Another Pain of Smoking
The Art of Compounding

Please note that everything I write here is of my personal opinion and does not reflect the opinion of any association or organization (non-profit or for-profit) that I am a part of.

If you would like to comment on this article or anything on this website, please feel free to e-mail Mo2. He can be reached at Mo2@Mo2Thinks.com. Thank you for visiting!