As a runner in Minnesota, I got myself out of bed on dark winter mornings by convincing myself I would only run for 10 minutes. (Just 10 minutes! No more!) Then I laid all my gear out the night before so I wouldn’t have to think in my groggy haze.
You know where I’m going with this. Once I got out the door, peace and awe took over. I watched fluffy snow light up under the glow of streetlights and breathed in crisp morning air. Before I knew it, 10 minutes turned into 30 and I felt proud.
The hardest part isn’t knowing what to do.
It’s getting yourself to do it again and again.
When it came to saving money, I used the same approach. Convinced myself I’d only save $20 a paycheck (Just $20! No more!) Then I set up auto-transfers from checking to savings on paydays.
The less I had to think, the more my savings grew. To hell with willpower, I put inertia to work.
Your brain likes the default setting
Research shows putting savings on cruise control is surprisingly effective.
In the famous Save More Tomorrow study by Richard Thaler and Shlomo Benartzi, people committed in advance to increase their retirement savings when they got raises. Savings rates rose from 3.5% to 13.6% over 40 months.
The plan worked because people made the decision once, in advance. Their future raises quietly increased their retirement savings without requiring another decision. More important, there was no temptation to talk themselves out of it.1
Systems like this also work because human nature makes it feel less painful to make a decision about future money than it is to take a bite out of today’s paycheck.
Pay yourself before you can talk yourself out of it
Research by America Saves tested the idea of having money auto-deducted from paychecks before people got their hands on it.
In other words, instead of getting a full paycheck and then transferring money from checking to savings, people signed up for “split direct deposit.” Part of their paycheck went directly to checking and part went directly to savings.
Workers who used split deposits saved up to $90 more per month than workers who saved in other ways.2
How to set up a savings system that actually sticks
Two important points to keep in mind about successful automatic savings systems:
- Give your savings a name.
It works best when you have a clear, tangible savings goal. For example, saving for a winter vacation, or a new car, or to build a Peace Of Mind fund. Rename your generic bank savings account and make it feel real. - Start smaller than you think you should.
Choose an amount small enough that you’re not worried about an overdraft; you can always increase the amount later. (Set up a phone reminder in 6 months to check in.)
We make hundreds of decisions every day – what to wear, what to say, how to solve complex problems. It’s exhausting and it wears down willpower as the day goes on.
Cruise control still lets you steer
Setting up an automatic savings system works because it reduces decisions without taking away power. It’s the magic of cruise control: You choose the destination and speed, and once it’s set, you don’t have to keep pressing the gas.
The trick to saving money is not about becoming more disciplined. It’s about designing a system that doesn’t require so much discipline in the first place.
Your Nudge
This week, put one savings goal on cruise control.
- Choose an amount so small it feels almost impossible to fail: $5 a week, $10 a paycheck, $25 a month. For now, it’s not about how much you save, it’s about designing the system.
- Set up an auto transfer to a separate savings account on payday.
- Name the account something real — Peace of Mind, Winter Escape, New Car.
The win is creating a system that keeps going, even when you’re tired, busy, distracted, or tempted to spend the money on something else.
You know what you need to do. Now design a system you don’t have to think about.
Saving gets easier when you stop asking yourself to start over every month.