Make Saving Easy and Spending Hard


Make Saving Easy and Spending Hard simple money man


This post is also featured on Gen Y Finance Guy.


A part of me has this weird conspiracy theory that we spend so much because we are subliminally trained to do so. This is evident with incentives like rebates, points, rewards, free “trials”, cash back and even free merchandise (which is not really free since we did spend in order to be eligible for it in the first place).


There are also so many ways or methods of spending which are so easy and right at our fingertips and thumbprints. We don’t even have to take out any real money or even credit cards. Merchants may have our payment information stored online or we may have payment information stored on our smartphone that we can just scan at so many places. By the way, the security around this is a whole other story, which I won’t get into here.


Therefore, if we can make saving easy and spending hard, it can help us achieve financial goals including a respectable retirement balance or an emergency savings cushion that allows us to sleep at night.



Make Saving Easy Using Automation


Automate Savings


Simple things can be done to automate your savings; all of these just follow a set it and forget it mentality:


  • Automate contributions to your retirement plan – whether you work for a company or are your own boss, you can contribute to your retirement plan at regular intervals. If your employer offers a matching contribution, be sure to contribute at least up to the amount of that match.


For example, let’s assume your employer matches 50% of your contribution up to 5% of your base pay. Let’s say your base pay is $50,000. This means that 5% of your base pay is $2,500 ($50,000 X 5%). So you should at least contribute an annual amount of $2,500 simply to obtain the employer match which is FREE money.


  • Automate Health Savings Account contributions – you can contribute to your health savings account every pay period. This is an account that allows you to contribute pre-tax dollars to a fund. Generally, participants receive a credit card that can be used to pay for copays, prescriptions and for other medical related expenses. You can set the amount you’d like to contribute and best of all; it lowers your taxable income!


  • Automate contributions to your brokerage account – you can set automatic deposits from your checking account into your brokerage account at intervals, such as monthly. Then you can invest in stocks and ETFs. It doesn’t have to be a big amount, but something to get the ball rolling – the snowball of investing. J


The key is consistency in your savings. Once consistency is established you’ll be in a better position to reevaluate and up your savings rate. Maintaining a high savings rate is crucial in establishing lasting wealth. Over time, saving becomes easy with the help and power of automation.


Using automation as a tool for saving has proven to work. From a study in Denmark, John Friedman of Harvard’s John F. Kennedy School of Government indicates that you actually save more when you do not pay attention. He goes on to say that the implementation of passive saving policies like automation is significantly better than activities such as tax incentives to save.



Automate Investing


The brokerage account I’ve had for years, Scottrade, has a Flexible Reinvestment Plan tool. I just go into my account every so often and to make sure it is operating as intended (i.e., the securities of funds I want to reinvest in are designated at the proper percentages, what my flexible reinvestment balance has accumulated up to, when the next trade date is, and the transaction history to make sure dividends are transferring into this account as they should be).


Apart from Scottrade I also use Robinhood. This platform doesn’t have an automatic reinvesting tool, so I manually reinvest about once a quarter. But the benefit is trading is free on Robinhood, which is one of the reasons I signed up for an account over a year ago.


One of the key benefits of automating your investing is dollar-cost averaging. This is the art of consistently investing in the stock market so that the prices you buy at average out over time. And we all can agree that over time the stock market does provide positive returns.


And even if you started with dollar-cost averaging 5 years ago into Vanguard’s S&P 500 Index Fund (VOO), your investment would generate a return of almost 16%:


Make Saving Easy And Spending Hard - VOO simple money man





Make Saving Easy Thru Reinvestment of Dividends


Dividends are one those great things that make saving super easy. Once you invest in stocks or funds that pay out dividends, you can just sit back and relax, a little bit that is.


As I mentioned earlier, some brokers have a feature which automatically reinvests dividends earned into securities you designate. If yours doesn’t, be like me and set a reminder on your calendar to check up, maybe quarterly, to reinvest your dividends.


As time goes by, dividends earned and reinvest will begin to accumulate and it may be a good idea to consider tax efficiency on dividend income.



Make Spending Hard By Using Only Cash


It may be hard going to the ATM on a regular basis and withdrawing cash. But I know people that do that and as a result, they are disciplined with their spending. Try it out and see if it works for you.


It may be good to start out with a small amount as it may make you cognizant of your routine spending. Ofcourse, the amount is different for everyone whether it’s $20 or $40 or $100 a week. Once you get in the habit of using only cash, you’ll actually become better at researching purchases to find the best deals and ignore bogus sales tactics.



Making Spending Hard By Preplanning Your Weekend or Leisure Time


Often times the weekend will come around and we have no idea what we want or need to do. We have no plans or preparation in place and that can be dangerous. As a result, you may not have meals prepared and will eat out more.  You may not have free activities scheduled so instead may drive to your local mall or shopping center and become a consumer looking to buy something just to fill in the time.


By preplanning your weekend, you’ll be able to deliberately put thought into activities and run the costs/benefits and advantages/disadvantages of those activities. This doesn’t mean you should deprive yourself. You’ve worked all week and may have to work on the weekend too. You deserve to indulge in something you or your family will enjoy. There are plenty of low cost or free activities to enjoy such as a picnic at a part, visit the museum. If you live near a metropolitan area, there are museums that cover so many topics (e.g., history, outer-space, and nature).


And if you need to buy groceries or run errands, try using a list. We’ve implemented this and it really helps on staying focused in the store(s), saving money and time. There have been many times in the past where we’ve either bought something simply because we were indulged at the grocery store and at the same time forgot to buy something we actually needed. This was the result of not using a list.



Have you implemented any of these saving or spending strategies? Which ones are the most and least effective for you?



I use Personal Capital because (1) it’s free, (2) it tracks all of my accounts and overall net worth, (3) my account balances automatically update, (4) it shows how my investments are diversified and allocated in various sectors, and (5) can use built-in tools like “Investment Checkup” to get….wait for it…free personalized advice!


Simple Money Man (SMM)


  1. Hey SMM,
    Your theory is not weird, you are absolutely right, more and more society is conditioning us to spend.
    So, I totally understand what you are saying about using cash for purchases.
    But, if we do that aren’t we missing out on credit card air miles and such?
    For me, getting air miles is one of the reasons I use a credit card.

    • That’s a very good point about the points. 🙂

      I actually use my card for big-ticket items. For example, when I bought a TV, it made more sense for me to pay with a credit card and take advantage of the points. For me it’s about justifying the purchase itself first and the method of payment second.

  2. We automate all of our work saving options (401ks, 457s, and FSAs), so I don’t even know how much I would spend if I took home all of my pay! It’s a great way for us to push our savings limits. I still don’t automate our IRA funding, but it would probably be a good thing. Whenever our emergency fund seems to be a little too full I’ll fund some of our IRAs. Though we are planning some MAJOR home renovations, so I’ve only spared an extra $150 for 2018…I could probably improve on that.
    Tracking our spending definitely makes me think twice before buying something. I’ll have to look at it later, so it better be something I’ll be okay seeing!

    • Sounds awesome! The more you automate, the harder your money works for you. I’m the same way as I’ve not automated my IRA for now. Home improvements definitely take a bite out of the budget but since a home is an appreciating asset overall it makes sense. 🙂

  3. SMM, I think we are conditioned as impressionable children by advertisers to be consumers. Those habits and way of thinking are then hard to break as an adult.
    Dividend reinvestment is an important wealth building tool. I used to auto reinvest, I now let the cash accumulate and selectively determine the reinvest on a lump sum basis. Tom
    Tom at Dividends Diversify recently posted…The “Fine Art” of Saving MoneyMy Profile

    • I like your approach. As we continue to build our account, the dividend payments can become significant. As a result, we want to make sure our reinvestment falls in line with our evolving portfolio.

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