Forced Savings Plan

Last year we were really motivated to save up for house purchase. It was exciting to see a set percentage go to our savings account, so that one day we could buy our very first house. The down payment savings account increased every month little by little. The goal motivated us to watch our spending.

Now that we have bought a house we need new goals to motivated us again. Especially me. I like goals. Without goals I tend to just drift away aimlessly.

For us, it’s much easier to save an allocated amount every month. We are not very good at watching our spend and hope we come under in order to meet our budget.

So our plan this year is to set automated saving withdrawals every month.

How does this work?

For example, one of our goals this year is to maximize our retirement contributions. I already have a set percentage being withdrawn from my paycheck that goes straight to my 401K. Last week I also set up a monthly ROTH IRA contribution with Vanguard. This will ensure by the end of 2013, I will have my ROTH IRA maximized. My husband does not have a retirement plan available through his work. I’m going to set up a Traditional IRA with Vanguard. Every month a set amount will be withdrawn from our savings account to the Traditional IRA. This will ensure have retirement covered.

I’m considering starting a brokerage account with Vanguard (After-Tax) and having a monthly contribution go to a set of mutual funds. This probably won’t be a huge amount but at least I know it’ll be set aside for our future.

My husband and I have been talking more and more about financial independence. We don’t want to be stuck in the grind forever working for the man. One day we hope to have the freedom to say F*** You!

A forced savings plan is one way to get there. It’s also psychological. Just like every month I make sure all our bills are paid, I will make sure there’s enough in the account for our contributions to be withdrawn from on a periodic basis.

I have found myself buying things for our house and I realize when start making updates that the house needs (remember, it’s a fixer upper), our costs will be higher than when we were renting an apartment.

Have you started automatic savings? Has it been helpful so far?