My Smartest Investment
My smartest investment move was setting up my paychecks to be direct deposited into my savings account. I’ve saved $10,000 this year by having that money routed away from my checking account, where it’s so easily spent.
— M. K., online
The Fool Responds: You’re onto something very smart there. It can be hard to find the willpower to avoid spending more than you should — but making your dollars a little less available can be quite effective.
There are many other ways to use automation to benefit your financial health. For example, you may be able to have a chunk of your paycheck automatically routed into a 401(k) account, where that money can be automatically plunked into investments you’ve chosen. (Here’s a tip: For long-term money, consider a low-fee, broad-market index fund, such as one that tracks the S&P 500.) If you can set your 401(k) account to automatically increase the portion of your paycheck that it gets by, say, 1% each year, that’s a great move, too.
You also might be able to have a portion of your paycheck automatically deposited into a retirement savings account. You could set routine bills — such as your mortgage, insurance and utilities — to autopay, too, to reduce the chance of their being paid late or forgotten.
The more of your financial life that you automate, the more financial goals you may be able to meet. ¦
