The biggest mistake I find people making is directly depositing their entire paycheck into their checking account and trusting them self to save or invest after the fact. I know, because I used to be guilty of the very same thing. I used to wonder why my savings account was not growing that fast or when I would be able to “afford” to invest. With all of my money in my checking account, I had easy access to spend it all whenever I felt, leaving nothing to save or invest.

When I opened up an account with ING Direct (now Capital One 360), and I learned what a sinking fund was, I decided to give this auto savings a try. I opened up a few savings accounts and started saving about $25-$50 a paycheck in each.

From there (a few years later) I decided it might be a good idea to actually use the two checking accounts I had in a more responsible manner. I realized that I should use one checking account for fixed expenses, the other for variable expenses. I changed my direct deposit so that a set amount would go directly into my account for fixed expenses and the balance to my other checking account for variable expenses.

The final piece to the puzzle was to incorporate investing into my automation scheme. I opened an investment account with Betterment and put my investments on auto pilot. To date my account has grown over 21%!

I can honestly say, my closet would have been way more stuffed with clothes I didn’t need if I paid myself last after I finished spending. Now I leave a small amount for discretionary once I have saved and invested. At this rate, according to my Personal Capital retirement planning projection, if all goes well, I’ll have $1.6 MIL by the time I hit 65 years old!! Amazing right? But if I continued with the status quo, and had not automated, my estimates would be about half that amount.

So give it a try! I can guarantee you will have more money in the bank!

Check out this pdf of my exact paycheck percentage split!