How To Supercharge Your Savings Goals

January brings a special magic. The possibilities of a new year, the promise of a fresh start — we sprinkle all that sparkly hope atop a list of new goals and dreams and declare this year will be different.

Turns out that special magic isn’t just in our heads. Research shows we imbue New Year’s resolutions with a psychological phenomenon called “the fresh start effect.” But as January turns into February, and February fades into March, that fresh start effect loses its power; our gym attendance slips, the screen time creeps back up and our savings goals fall by the wayside.

Danielle Arlotta, a certified financial planner (CFP) and lead planner at Brooklyn Plans, says she often sees clients struggling to stay engaged after that initial goal-setting boost fades from memory.

“Usually what I hear is [they fall for] the New Year hype, and they go in with ambitious goals,” she says. “So then they kind of burn themselves out and overextend what they think they can save consistently over the course of the year.”

But sticking to your savings goal beyond January — maybe even supercharging it — doesn’t have to be as hard as it looks. Sometimes reviewing the goal, perhaps even tweaking it, can bring about some other magic: the goal can become a habit.

Reassessing that January goal

A lot of folks — and I count myself among them — fall for an all-too-common trap: they set their savings goal for the following year based on the way they felt about cash flow from the end of the year. That savings goal will feel super achievable in January, when many people are going out less — and subsequently spending less — after the holidays.

Then, in February, Arlotta says she sees people pick up their old habits and suddenly shrink back from the savings goal they so optimistically set for New Year’s Eve. That goal will feel even less doable in the summer, when a lot of people spend more money on travel and entertainment.

When clients describe having trouble sticking to their savings goal, Arlotta says she often recommends they revisit that original number and interrogate just how achievable it may have been.

“That’s not a bad thing if you’re setting your goals too high and you can’t meet them, but I’d like to be more realistic about it so that we are saving consistently rather than ad-hoc,” she says. “It’s a stressor if you set a goal and you can’t achieve it.”

Arlotta recommends, instead, reviewing your spending patterns from all 12 previous months and building your goal around when you spent the most. That number will feel much more achievable on a month-to-month basis, and you won’t be tempted to give up saving altogether.

“If we’re looking at your lower spending months — for most people that’s January and February — then it’s not realistic,” she says. “You could have a $500 surplus in January but then a $250 surplus in June, and that’s the surplus you didn’t spend on variable or fixed expenses. It’s helpful to use your higher spending months to set a more realistic savings goal.”

If you have a number in mind that feels a little too high, Arlotta suggests building up to that goal with “baby steps” that build on each other.

“If you have a goal to save $10,000 by the end of the year, then I tell people to take it in baby steps,” she says. “If you’re saving zero dollars a month, then start saving $100 a month. That way, it’s not all at once, ‘I have to save $1,000 a month!’ Slowly work up to whatever monthly savings you want to do. That is more sustainable.”

Choosing the savings vehicle

Something as simple as separating the amount you’ve earmarked for a discrete savings goal can work wonders, says Robin Patin, a financial planner and wealth adviser in San Francisco. She recommends clients create a special savings account for this one goal, or at the very least to separate it out from checking. Splitting this money up is a mind trick that works, she says — she’s seen it in her own life.

“Your mind is going to say ‘spend it,’” she says. “We live in a society that encourages consumerism, and even myself as a financial adviser, it’s very hard. If I know money is coming — it’s often spent. I have to figure out my own shortcuts so I can feng shui money.”

Where you “feng shui it” often depends on two things: the amount you intend to save and the reasons you have for saving it. Regardless of your number or your timeline, Patin and Arlotta advise clients against keeping this portion of your savings in cash or a checking account, where the money won’t grow at all.

High-yield savings accounts are popular with many people because you’re easily able to access the money and most don’t require your deposit a specific amount to get started. A lot of top-yielding high-yield savings accounts are now offering annual percentage yields (APYs) of between 4 percent and as high as 4.75 percent, as of the week of February 24.

Certificates of deposit (CDs) lock up your money for months, even years, at a time, so you definitely won’t be tempted to spend this money. High-yielding CDs can levy a sizable withdrawal penalty for taking the money out early. But make sure this isn’t money you think you’d need in case of an emergency; should catastrophe strike and you access this savings earlier than expected, you’ll have to eat the early withdrawal penalty.

Plus, you can usually find much higher interest rates using other products, Patin says, so if you’re not planning on using this money any time soon, you may feel more motivated seeing it work harder in another savings vehicle. As of the week of February 25, the interest rates on CDs also aren’t much higher than those offered on high-yield savings accounts; at Ally, for example, the interest rate on a high-yield savings account is currently 3.7 percent, compared to 4.0 percent offered for a six-month high-yield CD.

Those with a higher appetite for risk, and have no need to touch the money at any near point, can do something a little more unconventional: invest the savings goal. Patin likes this method because it helps people get more accustomed to investing with smaller amounts of money, and the returns are much higher in the market than they are in CDs or high-yield savings accounts. Just remember, she says: “You’re not putting your emergency fund in the stock market.”

Road testing these strategies

When it comes to supercharging a savings goal, I have my own proven strategy: automation.

When I first set up a recurring transfer to my savings account, I wanted to pick an amount small enough so that it wouldn’t hurt my wallet, but large enough so that it could actually make a difference toward my goal, knowing it will pile up over time. For the last several months, I’ve been diverting $50 a month to my brokerage account, and the recurring transfer allows me to build my monthly cash flow around this money coming out, rather than feeling the pinch every time I see the money moved.

Patin also likes relying on technology to help build a habit. The recurring transfer can help that same habit stick, even through the little financial ups and downs that rock our daily lives.

“The reason a lot of people fail to save money: life happens,” Patin says. “The car breaks down, the fridge needs a repair — and then they stop and never start again. Automating helps. If you stay committed to saving $50 a month for the long term, you have longer-term growth.”