A simple 2-step plan for saving more money | Your Money and Your Mind

Transcriber:

Everyone's heard of the tired old adage

of paying yourself first.

But that saying lacks a lot of useful details.

How do you actually pay yourself first?

So today, I'll lead you through some changes you can make

to improve your saving strategy.

[Your Money and Your Mind with Wendy De La Rosa]

First and foremost, you should focus on only one goal at a time.

Typically, we think about having multiple savings goals

for multiple things.

We have an emergency savings fund,

a vacation fund, a wedding fund,

a car fund ...

But one great study compared people's savings progress

when they had one savings goal compared to five savings goals.

And it turns out that when participants had just one savings goal,

they saved more than when they had five.

The research showed that if you made progress

in just one of your savings accounts,

you'd think you've made progress across all of them.

Like multitasking at work,

splitting your attention across multiple savings goals

just isn't efficient.

Now, that's not to say

that this will be your only savings goal;

you'll have many more throughout your life.

But I want you to think about the one thing that you want to focus on

over the next six months to a year.

Start with your emergency savings fund,

even if it’s 500 dollars or 600 dollars, the average cost of a car repair,

and then go from there.

Now that you have a primary savings goal in mind,

let's focus on helping you increase the amount that you save.

Your main savings strategy should be

to switch from having to remember to save a small amount every month

to saving a percentage of your income automatically,

any time you receive income.

Now, some people advise saving 10, 15 or 20 percent of your income,

but that's not important.

You know your financial situation.

You know how much you can manage to save.

The real trick is to find a provider

that lets you set up an automatic savings plan

and not to have to think about it ever again.

The "set it and forget it" approach

is shown to help you save more.

Researchers believe that passive systems like this are successful,

because they work with our tendency towards inertia.

You don't have to manually initiate each subsequent transfer,

and you won't be tempted to hold back a bit

every time you make a savings transfer.

I want you to take the time right now to find a provider.

Go to your app store, download the app

and set up your automatic savings plan.

If you make these two small changes --

focus on just one savings goal at a time

and automate your savings --

you should find success,

even if you don't think you're saving that much money.

And it's easier than it may seem.

So there you have it.

We have demystified the old adage of paying yourself first.