My Ultimate Savings Hack

As a fresh-out-of-college-grad, I quickly found myself spending far too much of my paycheck far too soon. At the time, I didn’t have any credit cards and I was constantly checking my bank account balance. I still recall seeing a $20 balance on a Tuesday and reminding myself the money needed to last until Friday.

That feeling crept up and I wanted to eliminate it. A “quick fix” solution is what I describe here as my ultimate savings hack.

Here it is…

With each pay raise, decide at least weeks in advance what % you will automatically elect to contribute towards your 401k, IRA, or a broad based index fund such as Vanguard’s VTI.

The trick here is our mind is extremely optimistic when it comes to planning out future behavior and we can benefit from this if we ride the optimism wave.

In our lives, we’ve elected the vast majority (90%+) of our pay raises into our retirement accounts and our student loans.

The process has been smooth since we elected up front.

Effectively, we still see a pay raise, without seeing the new piece now flowing into investments.

For more on this check out our podcast episode:

I find it more difficult to do something great when deciding in the moment as opposed to planning ahead.

The easiest example is when children see one piece of candy in front of them but are told they will receive two pieces of candy if they do not touch the first one for fifteen minutes. Despite the prospect of a 100% return in 15 minutes, the kids still decide to eat the candy.

We just can’t help ourselves in the moment (sometimes), but we can help ourselves ahead of time (almost every time).

This is why I describe this as my ultimate savings hack. Literally, anyone can do it.  

Even when I was checking my account daily, I ended up appreciating my decision more and more as time went on. Not only did I see my bank account grow, I also watched as my investment accounts increased in value.

In the end it was a win-win.

“Your net worth to the world is usually determined by what remains after your bad habits are subtracted from your good ones.” Ben Franklin

If that’s the case then surely this savings hack is one of our easiest good habits.

What Is Your Ultimate Savings Hack?


10 comments… add one
  • The Grounded Engineer Apr 5, 2017, 7:24 am

    Agreed, Matt. I’m a fan of the set it and forget it mentality for saving money. To your point, if you can start right out of college it is easier to not get caught up with overspending.

  • Matt @ Optimize Your Life Apr 5, 2017, 8:12 am

    This is a great tip. When I first started working, I spent a year in a low-salary fellowship. When I got brought on full time, it came with a $25,000 raise. Since I had been getting along just fine on the lower salary, I used that one raise to max out my 401(k) and my IRA. Being able to take it out of money that I had never seen before made it really easy.

  • Mrs. Picky Pincher Apr 5, 2017, 11:03 am

    Hey, whatever works! I think my best savings hack is to do old-fashioned expense cutting and applying the excess to debt repayment. I often mull over purchases for a few days and think about the amount of money and time I’m giving up in exchange for an item.

  • Cody @ Dollar Habits Apr 5, 2017, 11:57 am

    This is an incredibly valuable tip, Matt. Thanks for sharing. It is definitely much easier to make sure the money gets to where it needs to go without first having the ability to spend it on the latest and greatest.

  • Chad Apr 5, 2017, 12:41 pm

    Great tip Matt. I’ve always been of the impression that if I don’t see it then I don’t think about it.I agree deciding ahead of time and just immediately redirecting those funds when it comes time, makes it all that much easier.
    When I was younger and in my first job, I wanted to begin building up an emergency fund, so I actually opened an account at a separate bank from my other accounts. That account had no ATM card, and I did not even enroll in online access. I had my employer send a percentage of each check to that savings account, and the rest to my main checking account(most companies will direct deposit to multiple accounts if you ask them to). This way I was a) paying myself first, b) keeping myself from touching the money, and c)by sending a percentage instead of dollar value to the account any increases in my pay would automatically increase my savings rate.

    I remember looking at the account after 6-8 months or so and couldn’t believe how much I was able to save up at the time.

  • Dividend Diplomats Apr 6, 2017, 7:51 pm

    Distilled –

    Out of site out of mind is always a great saving philosophy! Works, EVERY time.


  • Save Splurge Deny Debt - Cameron Apr 6, 2017, 11:35 pm

    Always paying yourself first, many people don’t quite get it but this is it. Great post.

    I love the auto raising of my contributions every year. My work makes it very easy to move money into savings accounts, which is something I am glad to have.

  • Chris @ Keep Thrifty Apr 7, 2017, 8:38 pm

    Great idea! This is similar to the method we’ve used the last few years – every raise gets redirected to additional prepayments on our mortgage. It’s a great way to combat lifestyle inflation!

  • Jackie - Undo My Debt Apr 8, 2017, 11:14 am

    “I find it more difficult to do something great when deciding in the moment as opposed to planning ahead.”

    I think this pretty much sums up the take away. I 100% agree with you on this. Without a plan, my money disappears as soon as I earn it.

  • Sean Murray Apr 10, 2017, 9:08 pm

    Great read and interesting concept.
    I’m not earning anything yet as a college student but will definitely have to consider implementing a system like this after graduation.

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