Remember that old infomercial for an at-home rotisserie grill? Ron Popeil, infomercial king, demonstrated how to prepare the chickens. Once he placed them in the grill, he asked the audience what to do next. “Set it and forget it,” they shouted.
Saving for your life goals -- retirement, a house, your children’s education -- is a bit more complicated than roasting chickens in an as-seen-on-TV appliance, but we all could learn a little something from that “set it and forget it” catchphrase.
In the personal finance world, setting it and forgetting it refers to diverting some of your hard-earned paycheck away from your checking account and into savings accounts. There are three big benefits to this form of savings.
Less temptation: Think about it. If your entire paycheck automatically goes to your checking account, how likely are you to save at least a little something. Or, do you typically spend it all. When money is funneled away from your checking account, you’re less tempted to spend more than you really should because that money isn’t easily available by merely swiping your debit card or heading to the ATM.
Build more savings: When you pay yourself first, you’re able to redirect your earnings to other accounts so you can boost your savings. That might include a retirement fund, your children’s college fund, a savings account, an emergency fund or a special account earning money toward a particular dream -- perhaps a big vacation or a house.
There’s no small amount: A tight budget can make it really hard to sock away money for the future. But, when you start saving steadily by channeling money into savings, it can add up in the long run -- even when you put just a little bit away.
For instance, if you pull $10 a week from your paycheck and deposit it into a savings account with a 5 percent interest rate, in five years, you’d have nearly $3,000 saved up. CNNMoney’s savings rate calculator lets you key in your savings plan to find out just how much you can save when you put any amount away.
You’ll need to complete a few steps before you start. First, decide exactly how much you want to save each month. Look for a few dollars here and there to shave off of your daily living expenses -- cutting those fast food meals out or skipping those Big Gulps at the gas station, for instance.
Then, figure out where your money should go. CESI’s Planning and Saving page offers lots of ideas and resources. Finally, work with your employer to divert your paycheck to one or more accounts.
Once it’s all set up, leave it alone. Check in, from time to time, to see how much you’re saving. But, until you’re ready to retire, send your kids off to college or make that down payment on your first house, consider that money off limits.
Instead, set it and forget it as they used to say in that old infomercial. Watch that pot of money grow and celebrate the hard work and determination it took to get you where you’re headed.
Consumer Education Services, Inc. (CESI) is a non-profit committed to empowering and inspiring consumers nationwide to make wise financial decisions and live debt free. Speak with a certified counselor for a free debt analysis today.
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