You'd like to save more for the thing you care about: the course, the sabbatical, the fund for your side project. But when you look at this month's budget, there's nothing obvious to cut. Saving more right now feels like taking something away.
What if you didn't have to take anything away today?
The idea behind Save More Tomorrow
Economists Richard Thaler and Shlomo Benartzi designed a program called Save More Tomorrow and described it in a 2004 paper in the Journal of Political Economy. The idea was simple: instead of asking employees to save more now, they asked them to commit in advance to saving a larger share of their future pay raises.
At the company where it was first studied, employees who joined raised their retirement saving rate from an average of 3.5 percent of income to 13.6 percent by their fourth raise, according to a U.S. Department of Labor review of the study.
The same review adds an important caveat: people chose whether to join, so those who signed up may have differed from those who didn't. That makes it hard to say how much of the increase came from the program itself. Still, the design draws on a well-known idea in behavioral economics: committing ahead of time to something your future self can afford often feels easier than giving something up today.
It's easier to say yes to a future you can afford than to a sacrifice you can feel today.
Use it for your own goals
You don't need an employer program to borrow the idea. This isn't financial advice, and the right amounts depend on your situation, but here's one way to try it:
- Decide now what happens to your next raise. For example, "Half of any raise goes to my project fund."
- Write it down, with the account it will go to.
- Set it up to happen on its own when the raise arrives, if your bank or payroll allows it.
- Apply it to other windfalls too: a bonus, a tax refund, a freelance payment.
- Keep it modest. A commitment you'll actually keep beats an ambitious one you'll reverse.
If you're paying off high-interest debt or don't have an emergency cushion yet, a qualified financial professional can help you decide where future increases should go first.
Where an accountability partner helps
Commitments made in advance are easier to keep when someone else knows about them. An accountability partner is someone in your corner who can hear your plan, help you think it through, and celebrate with you when your next raise lands in the fund you named. They care that you reach the goal the money is for.
This week
Write one sentence about what will happen to your next raise or windfall, and which goal it will fund. Put it somewhere you'll see it. Enjoy the feeling of knowing your future self is already taken care of.