Aren’t these two words “Savings” & “Automatic” antonyms? Can savings happen automatically? My answer is with you – No. Savings do not happen automatic because of the very human nature of “pleasing yourself first”. One tries to dodge all hard functions first and tries to shift/delay the real painful measures. But we all know savings are must for present and future. So what if a mechanism is developed and implemented so that in the end a person is bound to save his chosen amount? This is called Automated Savings Plan, your very own ASP.
“Automated Savings Plan” is an automated system where the contributor can transfer his savings moment he has a positive cash flow. This is done using various technological platforms, implemented with the help of Banks/Financial Institutions like Mutual Funds and deposit companies.
A typical structure of can be like investing in the various combination of fixed deposit, recurring plans and mutual funds from the savings account in the first week of the month. So when a person receives his salary, a certain portion goes automatic to these savings instrument without writing cheques, filling forms and calling middleman every time.
Why do you need an Automated Savings Plan (ASP)
It is important to believe in the following equation:
Income – Savings = Expenses
If you are following the reverse one – Income – Expenses = Savings, then most likely the outcome will be “zero” or negative savings. So it is important to save for following reasons:
- To fund long-term goals like Retirement, Education, Vacations, Major Purchases like house or car or any other long term goal.
- To save for emergencies like career hiccups, medical problems and accidental events like robbery or disability.
- Get benefits/discounts offered when making full payments/cash payments.
- To show your kids/spouse that savings have advantages and help, they build this habit by showing that you are doing it too.
Benefits of ASP
- No struggling with savings for long-term
- No delay/default payments for the loans.
- You will never say that “I don’t have enough to save”.
- Builds habit of being disciplined in personal financial matters.
- Keeps accounts separate for investments and expenses.
- The majority of it is automated, so no more juggling between different banks or remembering dates etc. Saves time and efforts. Just sit and let your money grow.
How to set up an Automated Savings Plan
The best way to set an ASP is from the bank account where you get earnings. The idea is to hold the bull by its horn. The moment you get an inflow, it should be directed to your savings instruments.
I have just put a snapshot of my ASP template which I use when I do my planning for the month.
Do you have an ASP in place? If yes, share your learnings with us. If not, do you wish to plan it now? Share your views and concerns in the comments section.
Nice information