01 Nov Thinkpiece
In this update:
- Automatic Savings: The Only Way to Guarantee Your Financial Future
It’s a simple, undeniable truth in financial planning – saving needs to be automatic, or it simply won’t happen.
This isn’t a motivational catchphrase; it’s a foundational principle rooted in human psychology and the reality of modern life. We live in a world of constant demands on our time, energy, and money. Relying on willpower alone to transfer money from your day-to-day current account to your savings account each month is a recipe for inconsistency, disappointment, and a chronically underfunded future.
The Flaw of Manual Savings
Why does saving manually fail? Because it requires friction and a conscious decision.
Every time you rely on manual savings, you introduce friction into the process. You have to log into your bank, decide on an amount, and execute the transfer. This may seem trivial, but it opens a window for procrastination. A busy Monday, a high-priority bill, or an unexpected expense are all it takes to convince yourself, ‘I’ll do it tomorrow.’ And as we all know, tomorrow often turns into never.
More critically, manual savings pits your future self against your present self. Your future self wants a comfortable retirement, a house deposit, and a solid emergency fund. Your present self wants to enjoy a nice dinner out, spending time and money with friends, upgrading a gadget, or simply spend the money that’s sitting right there in the bank account. When the money is visible and accessible, the present self almost always wins.
Do not save what is left after spending, but spend what is left after saving.
Warren Buffett
The Power of Automation
The solution is to remove the decision and the temptation entirely. Automation works because it establishes a financial habit that is consistent, invisible, and mandatory.
- Consistency is Key
The biggest enemy of wealth building is inconsistency. Saving £100 every month for 10 years is vastly better than saving £1,000 one month and nothing for the next five. Automatic transfers ensure a consistent contribution, turning your savings journey from a sporadic effort into a steady, reliable drip feed that builds capital through the power of pound-cost averaging and compounding.
- Savings Out of Sight, Out of Mind
When money is automatically moved to a dedicated savings or investment account the day you get paid, for example, it is then ‘gone’ before you even have a chance to earmark it for something else. You learn to live on what’s left, effectively treating your savings contribution as a non-negotiable expense—just like a loan, mortgage, rent or a utility bill. You can’t spend what you don’t see.
- Erasing Willpower Fatigue
Financial discipline is a finite resource. If you spend your daily willpower resisting the urge to spend money you know you should be saving, you’ll eventually exhaust it. Automation eliminates this daily battle. It’s an act of discipline you perform once (when you set up the transfer), freeing up your mental energy for other goals.
The habit of saving is itself an education. It fosters every virtue, teaches self-denial, cultivates the sense of order, trains to forethought, and so broadens the mind.
Thornton T Munger
How to Automate Your Financial Life
Making savings automatic isn’t just about one transfer; it’s about building an automated financial strategy that addresses every major goal.
- Pay Yourself First (The Golden Rule)
Set up an automatic transfer from your current account to your savings, pension or investment account for the day immediately following your payday. If you get paid on a Friday, the transfer should happen on a Saturday morning.
Start with any amount—even £50—and commit to increasing it by 1% of your income every six months.
- Pensions
Pensions are the ultimate ‘out of sight, out of mind’ strategy. As a minimum, contribute enough to capture the full employer matched contribution level, which is essentially free money.
- Target Specific Goals
Use separate, high-yield savings accounts for different, mid-term goals:
- Your Emergency Fund – Automate transfers until you reach at least three to six months of expenditure.
- House Deposit – Set up a dedicated monthly transfer.
- Holiday or Major Purchase – Automatically save a smaller, consistent amount to fund the goal without accruing debt.
The evidence is clear: the most financially successful people are not those with the highest willpower, but those who have engineered their lives to require the least of it.
By putting your savings on autopilot, you stop relying on your intentions and start guaranteeing your results.
Your opportunity
If you’ve not yet put in place a sound financial plan and you’d like to know more, please feel free to contact us on 01626 305318 or via email here.
The value of investments can go down as well as up. You may end up with less back than you have paid in. Past performance is no guarantee of future returns.
The views expressed are not to be taken as financial advice. Professional advice should be sought before proceeding.
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