I’m saving an extra $3,000 this year thanks to one simple change

After a series of poor financial decisions in 2020 and the following years, I was left with a five-figure retirement account. Rebuilding it has been a task and a half. Sweeping the leftover dollars from my checking account into my IRA hasn’t made much of a difference, honestly.

Thanks to the advice of some people smarter than me, I managed to change that. I’m saving an extra $3,000 this year thanks to a simple change: making automatic contributions to my retirement account. Here’s why it really works.

I only think about money once a month

Automatic contributions work because I only remember to do them once a month. No one confronts me when I cut hundreds out of my monthly income and funnel it into a 401(k). I am not receiving emails or phone calls. I barely remember that I have a 401(k), and that’s fine with me.

Once a month is the ideal time to think about my retirement savings. It’s frequent enough that I can appreciate the growth; I feel confident about my future. But it’s not often that I start to wonder, what else could you spend that money on? The temptation just isn’t there.

Turning on automatic contributions helped me save $2,964.73 this year tax-free, without significantly changing my lifestyle. Without it, I would have added $0 to my 401(k).

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The psychology behind self-contributions

Automatic contributions are so effective because they tap into universal mental tendencies. Two of these tendencies are present bias and habit formation.

Morgan Housel, author of The psychology of moneysays, “Being successful with money isn’t about what you know, it’s not about where you went to school or how smart you are, it’s about how you behave.” Enabling automatic contributions helps you behave rationally by overcoming current bias, the tendency to prioritize immediate gratification over long-term benefits.

In his book Atomic habitsJames Clear says enrolling in an automatic savings plan is one of four ways to build good long-term financial habits with just one action. Doing so takes advantage of the idea that Good habits are easy to achieve when you can’t see or hear them working.

I feel safer

I feel more confident about my future knowing that I am saving for retirement. Despite not meeting all of my financial goals (RIP, emergency fund), I’m making progress. Movement feels productive, and productive is what I want to be, especially for retirement.

Some of my friends tell me that life is worth living now, which makes saving for the future less important. But I don’t agree. Mixing some money together for retirement is based on the long term, yes, but it gives me peace of mind today. The month I started contributing to a retirement account, I felt a lightness in my chest.

Two ways to set up automatic contributions

Set up automatic contributions by directly depositing a percentage of your paycheck or turning on automatic deposits. I do both. I send a percentage of my earnings to my 401(k) — it goes directly from my employer to my retirement account. It’s my favorite way to save.

But I didn’t set up direct deposits into my Roth IRA. That’s why I’ve set up automatic contributions. Every day, my broker withdraws money from my checking account and deposits it into my IRA. It’s a little more painful because I see the money coming out of my checking account, but it works.

Robinhood matches my Roth IRA deposits like an employer. The cash bonus helps me save for retirement faster, and that’s the most I can ask for from a stockbroker. Does that sound good to you? Open an account with Robinhood today and start contributing to your own IRA match.

Automatic contributions have been a game changer for me. Whether you’re rebuilding like me or just starting out, give it a try. Set it, forget it, and watch your savings grow. It’s not glamorous, but it works, and that peace of mind? Totally worth it.