Green Couch

Automatic Savings Plan

You may have heard of a technique called 'automatic savings plan', where you instruct your bank to put aside x% of your income to a savings account. While this is a good initiative when you are just starting out, it's difficult to recommend on a longer term. I look at it as "admitting your defeat on your control over money", and just letting the system do the work for you. If you are an avid user of this technique, you may have experienced a time where you had to pull back those funds to cover for additional expenses. This happens over and over again because you are not allowing yourself to be transparent with your money. It's a lazy approach to managing your money, and an excuse to skip budgeting in most cases.

To properly execute this plan, you will need to stay on top of your expenses - know your budget and what you need to put aside for optimal spending. Even then, you won't be able to fully maximize your potential savings rate when this is fixed. Every month is different - some months you can have higher income due to bonuses, other months you can have lower expenses in general. The goal is to bring out the 'best' in you in all circumstances. Automatic savings plan will only hinder your process in having complete control over your money.