Another year is quickly barreling towards its expiration date, and that means it’s time for me to assess what I’ve learned about money and my own behaviour towards it. And this year, the big thing that I’ve learned is that automatic savings plans perform better than promises.
For the most part, I have the same financial goals every year:
- Max out my TFSA & RRSP contributions.
- Have a sinking fund for my annual property taxes and insurance premiums.
- Take a trip, whether domestic or overseas.
- Renew my Broadway Across Canada subscription.
- Contribute money towards the education funds of younger family members.
- Pay off my credit cards in full every month.
- Invest a big chunk of every paycheque for my retirement years.
- Buy birthday and holiday presents for family and friends.
These are my priorities each year. Some are long-term goals for my money, while others are very definitely short-term goals. I generally have sinking funds for each of them. These little pots of money make it super-easy for me to pay for big expenditures every year without worry.
That said… yet there is one goal that I set for myself that is just as un-finished as it was at the start of 2023. That goal relates to my emergency fund. You see, I had promised myself that I would add atleast $2,000 to my emergency fund this year. It didn’t happen.
And why didn’t it happen?
Dear Reader, the answer to that question is very simple. Promises about money don’t work as well as automatic savings transfers. Had I spend 2 minutes in January setting up a transfer of $100 every payday from my chequing account to my emergency fund, I would’ve easily hit my goal. Instead, I promised myself that I would send any “leftover” money to cover my future emergencies.
Do you want to take a guess of how many times I actually transferred that leftover money?
Zero. That’s right. Over the past 346 days, I haven’t made a single deposit to my emergency fund.
Ask me what I’ll be doing on the morning of January 1, 2024. You guessed it! I’ll be setting up an automatic savings transfer of $100. Knowing myself as I do, I cannot count on myself to abide by financial promises. Instead, my most effective route to achieve my goal is to use the power of automation and allow inertia to do the work for me. Once I’ve put an automatic savings transfer in place, I’m loathe to interfere with it. Increasing the transfer amount is permissible, but cancelling the transfer is unfathomable to me. This is how I know that creating another transfer to increase my emergency fund will be extremely effective in getting me to my goal.
The part that really chaps my cheeks is that I use automatic savings plans for nearly all of my other financial goals. My cherished sinking funds aren’t funded by well-wishes and good thoughts. Nope! I have automatic savings transfers in place. My chequing account is fat and juicy for roughly 25 minutes on payday before steadily being eroded by my various transfers.
Relying on automation has been one of the most effective methods I’ve used to build my investment portfolio. I don’t have to choose to invest when I get paid because the computers are doing the heavy lifting for me.
So why am I so backwards with my emergency fund? That’s a very good question, but I don’t have any good answers. Here’s the key though… I don’t need to have a good answer before I rectify the problem. I can ponder that problem for as long as my heart desires after I’ve set up the automatic savings transfer to my emergency fund. The questions about why I didn’t do what I should have done can linger for as long as my brain wishes to dwell on them. I don’t really care about the answers. What I have to do is set up a system to save myself from my own bad choices and habits.
In this case, it’s another automatic savings transfer for the win!