Many Americans are struggling to put money into their saving account.  According to a recent report from Bankrate who analyze data from the Federal Reserve, the typical American household has $8,863 tucked away in savings at a bank or credit union.

Typical saving according to Household Type and Age. Source: 2016 Survey of Customer Finance

I think this is both sad and alarming. Sad because the American Dream is going away and Alarming because everyone shows the lack of basic understanding of personal finance. So how can a 32 y.o pharmacist in Southern California like myself was able to put away $31,000 towards saving last year? I did it by implementing one simple but effective method: AUTOMATIC SAVING. If you are interested, keep reading because I will show you step by step on how to use AUTOMATIC SAVING effectively. 

What is AUTOMATIC SAVING?

To boil it down, AUTOMATIC SAVING means putting money away automatically according to whatever timelines you desire. You can do that manually or telling the bank to do it for you. I did it by setting up my bank checking account so that 600 dollars go from Checking to Saving every Monday. Like I mentioned before, it is not rocket science. However, the critical question is how to decide the right amount of money to put away without affecting your monthly bills and quality of life. BUDGETING is the answer. 

Step 1: Create A Budget

The word BUDGET is often frightening to many people. Here are a few excuses of why people shy away from creating a budget:

  • Difficult: it requires spreadsheets and hardcore computer systems.
  • Time-consuming
  • I only make minimum wage, and all the money go towards bills. So why do I even need a budget for?

Creating a budget is not complicated but rather simple by using just common sense. Here are the most basic budget equation

SAVING = INCOME – EXPENSES

Once you figure out how much money you make a month and how much you have to spend towards bills, it will get easier from there. Previously, I wrote a full blog explaining what I did to create a budget. I encourage you to go back and have a read to better understand about BUDGETING before moving forward. 

Related: HOW TO START SAVING?

HOW AUTOMATIC SAVING HAS HELPED ME SAVE $31,000 LAST YEAR.

Step 2: Methods of Automatic Saving

The easiest way is to set up your bank account, so they can do it for you. For example, WellsFargo bank allows you to transfer fund among accounts or to outside accounts without any fee.Here is the the instruction on “How do I edit or delete a recurring transfer?” straight from the bank website: 

  • Sign on to Wells Fargo Online to access transfers.
  • Click on View/Edit or View/Delete for each transfer listed under the Transfer and payment Activity. Or if on Wells Fargo Mobile®, tap on each transfer listed under Scheduled Transfers & Payments, and click on Edit Transfer or Delete Transfer. This will allow you to edit or delete any future and recurring transfer.

For someone who receives wages in cash such as waiter/waitress or nail technician, you can go to the bank once a week or every two weeks to put money towards your saving. 

Step 3: Be discipline and patient

This is probably the hardest part of this whole process. Let’s assume I have accumulated $2,100 in my saving so far. There are always the temptations for me to spend it on something: buying a PS4 gaming system, getting a new couch that is bigger and more comfortable, getting a new laptop,… My parents have taught me to live within my means and be very respectful of money. I expect the same from you if you want to make this process works. One tip is to forget about this saving account and make a habit of not looking at it every week. It will be difficult at the beginning because you are excited to see how much money is growing in your saving, but you will forget about it eventually.  

Your Turn

I hope you like this little blog. Let me know in the comment below if you already implemented this method and how much have you save so far. I would love to hear your thoughts. 

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31 COMMENTS

  1. Good ideas and very informative post. In India we have multiple options to save money, many schemes and plans. I plan to save for future.

    • Roth is a great saving strategies as well. But Roth’s max is only $6,000 this year, where 401k and other saving can get you a higher limit.

  14. Thank you so much. I started working recently and I don’t know much about savings etc. This helped me to determine how to set aside funds. So grateful.

  15. Wow! You are very lucky to be able to put aside $600 every Monday. For many of us, that is their entire weekly paycheck. I would love to be able to participate in automatic savings, however, most of the time, we don’t have much extra cash to spare. But whenever we do get an extra paycheck, I toss a little money in the savings account. If I ever strike it rich someday, I will do this.

    • The goal for not just me for all of us is to save, whether it is $50 a month or $10 a month, it is still saving. So I am glad that you are still able to save, have the mindset of saving and continue to work on it. Don’t give up. I am with you 100%

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