Professor Nudge says: Automate your savings!
In my last column, I warned about the hazards of lifestyle inflation. Today, I’ll give you a few tools to prevent spending more than you earn and start automatically saving for your future.
Lifestyle inflation can creep up on us, especially after we pay off debts and feel like there’s extra, “free” money in our budget. This tendency to increase spending can compromise our retirement, financial goals and dreams.
Saving money shouldn’t be an exercise in willpower with every paycheck. That’s asking too much.
With that in mind, I turned to Professor Nudge, Richard Thaler, for solutions. Thaler, author of Nudge: Improving Decisions about Health, Wealth and Happiness, offers this lesson in behavioral economics: “... people only save if it’s automatic. If people just put away what’s left at the end of the month, that’s a recipe for failure.”
Thanks to technology, automating your savings is easier than ever. Here are a few apps that can do the work of building your savings, and if the idea of combining technology and money unsettles you, I’ve got a DIY solution, too:
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