Auto-pilot Your Savings - Stay vigilant against your own self-destructive habits

The practice of setting my saving and investing on auto-pilot, which I have been doing for the last 12-ish years, has proven to be one of the most effective pain-free ways of building financial security and wealth.

The HOW

The moment I get paid each month from my salary, I set up direct debit which automatically transfer out a certain amount of my pay. I also do the same whenever I receive a lump sum of money, like either some cash winnings, refund or cash gift from relatives.

The WHY

By doing so, I achieve a few things:

1. I make some money inaccessible to my spending side, it protects me from spending it;

2. I ensure that every month, I get to save or invest right from the day after I get paid. I know I have already achieved my savings goal for that month (pat on my back), well done;

3. For rest of the month, I immediately know how much money I can afford to spend for leisure and indulgences. It's guilt-free spending;

4. I 'gamify' my savings rate. I try to reduce my spending. Whatever leftover at the end of the month before the next payday, I move the rest into my savings/investments again. It becomes a challenge/game I play with myself;

5. I sleep much better than before. I know that I always have money aside ready for any unexpected events/payments/bills. I also know i am maximising my investment potential. The money works and grows for me when I sleep. The 'future' me, thanks me.

Working example

Monthly income take home pay = £2850

• then take out/direct debit living costs (mortgage, car, car insurance, bills) = £1950

  • then Pay-yourself-first saving = £300

    • then residual spending = £600

Savings rate achieved = £300/£2850 = 10.5%

See how you pay yourself first BEFORE your residual spending!

Gamify your saving practice - gradually up the investments

In my own practice, the more I manage to pay myself first each month, the happier I get. It ends up being even like a little game for myself. 'How high can I push my saving boundary each month', 'can I cut down my spending to get a higher saving/investment rate next month'.

Continuing from the example above...

Imagine after a few months of contributing £300 to your investment account and witnessing the money working for you through investment growth. You are starting to get a taste of the power of investing, or comfort in realising your financial wealth.

Next month, you want to increase that monthly contribution even more. You sacrifice not eating out one meal each month, or you cancel a doubled TV subscription which you don't really need. You increase the monthly saving from £300 to £350, pushing your savings rate to now £12.2%!

How to do it though - the magic of direct debits

And the best part? You don’t even have to think about it! Automate your savings, and it happens before you get a chance to talk yourself out of it. Set up direct debits that auto-transfers out of your debit account where your salary goes to.

The money either get direct debited to a Cash ISA account as your emergency fund pot with higher interest rates; Or it goes to a Stock & Shares ISA account investing monthly into a low cost index fund of your choice; Or it goes to pay off debt (part of debt clearing strategies which I'll write seperately about).

Before long, you’ll have a healthy stash growing without even feeling the pinch.

How much should you set aside

Honestly, when you are starting out, it really does not matter how much you start off with. Even start with as little as £25 per month. The important thing is not how much you put away, the key is starting NOW! You just have to start somewhere. Within no time, you would taste the rewards and see your wealth grow.

I will be writing about seperate post on savings rates you should aim for depending on your circumstances or life choices.

Over time, these little habits compound—just like your investments. Future-You will be high-fiving Present-You for making smart choices while sipping a fancy coffee, knowing your savings are working hard in the background.

So, next payday, before you tap that "Add to Cart" button again, remember: pay yourself first. Your future self (and your bank account) will thank you!