The key is to put your money on autopilot.

Why does something so simple matter so much?

THE BEHAVIOR GAP

Because we’re human, and we do stupid things. In his blog and new book by the same name, doodling financial planner Carl Richards coins this “The Behavior Gap“.

Looking at the long-term returns of investments like the S&P 500 compared to the returns of individual investors, Richards found that the investors consistently did worse than the investments. He explains the difference, The Behavior Gap, as humans’ tendency to let emotions influence decisions (for example, to sell off stocks during scary economic times or buy a particular stock based on a tip in the financial media).

Emotions can lead us to make a lot of terrible financial decisions like:

• Making a big purchase you can’t yet afford—perhaps an engagement ring or a wedding dress—on a 19% APR credit card.
• Taking on too big a mortgage because it’s “your dream house”.
• Cashing out your 401(k) because you’ll “feel more secure” with cash in hand.

Putting your money on autopilot can’t stop us from all of the stupid things we do, but it goes a long way in protecting ourselves from two of the most common:

• Ceding to temptation.
• Being lazy.

TEMPTATION

Emotional decision-making is part of the problem; pure temptation is another. If you have ever tried to resist a temptation—to turn down an extra drink, to surf YouTube instead of working, to buy something you shouldn’t—and failed, you know what I mean.

Psychologists have shows that although it is possible to stretch and strengthen our willpower like a muscle, our ability to self-regulate is a consumable resource that depletes. What this means is:

• The more we exercise self-control, the better we become at it in the long-run.
• BUT, the more we use self-control in the short-run, the harder it becomes in the short-run (Muraven and Baumeister, 2000).

So if you focus on not procrastinating every day for a month, you may find it easier to diet next month. But if you’ve had a particularly exhausting, stressful day at the office and you’ve been fighting off distractions to get stuff done, resisting the candy bars in the checkout aisle (or going out to dinner even though you don’t have the money) may be all but impossible.

Although we can work to improve our self-control in the long run, as humans we’ll always be susceptible to moments of weakness when our self-control is depleted. To prepare for this inevitability, we can alter our environments to remove or reduce temptations.

An obvious example is that cliché advice that debtors should cut up their credit cards or put them in a block of ice. The next time your willpower is depleted and you want to charge the Forever Lazy you saw on a late-night infomercial, you may have second thoughts by the time your Visa defrosts.

LAZINESS

Sometime we do stupid stuff because we are emotional or tempted. And sometimes we’re just lazy.

If you currently pay for a monthly subscription that you don’t use—a gym, a magazine, $12 a month for DVR service on cable—and don’t do anything about it, whose fault is it? The recurring-subscription business model that gyms, cable companies, and Netflix use is one of the most stable and profitable in existence. And guess what? It is built on the simple fact that people are lazy. When we stop using something, most people will pay $20 or more each month for many months before making a 10 minute phone call to cancel.

Laziness hurts our wallets in all sorts of ways.

Overspending on credit cards or paying for unused subscriptions are just a couple of ways our behavior sabotages our finances. Other examples include:

• Forgetting to pay bills, incurring late fees and credit penalties
• Depleting savings by comingling them with everyday spending money
• Failing to invest enough for retirement
• Failing to invest in regular intervals

There may be different reasons for making these mistakes, but don’t discount laziness. If you’ve ever thought of cancelling something you don’t use or opening a Roth IRA or increasing your 401(k) contributions and said “I should look into that” but haven’t done it yet, your laziness has already cost you money.

WHY AUTOMATION IS THE ANSWER

Think about your daily habits.

Most likely, you brush your teeth every day and don’t even think about. It doesn’t take willpower to brush your teeth. It’s automatic.

Now think about something you’d like to do but are struggling with; perhaps it is to quit smoking, lose weight, or spend less.

These things are difficult to do. They take conscious effort—active self-regulation—to achieve. Meanwhile, the corresponding bad habits (smoking, overeating, spending money) have become automatic.

But talk to somebody who has successfully changed a habit—for example, a daily exerciser—and you’ll hear that  it’s the good habit that is now automatic. Getting out of bed to jog becomes as routine as brushing your teeth.

Your brain has an autopilot!

When your can teach your brain to include a habit on autopilot, maintaining it takes much less effort, if any at all. Better yet, seemingly tiny habits can have big ripple effects.

In the book Willpower: Rediscovering the Greatest Human Strength, the authors explain how even small automatic behaviors can trigger better decisions. For example, have you have ever felt like when you’re well dressed, you work harder? There’s something to that.

Studies show that little habits like shaving, dressing neatly, and keeping an organized home correlate to more self-control in other areas of life. People who exhibit these behaviors are more likely to exercise, eat less, moderate alcohol, even use condoms more often.

So the more good habits you can put on autopilot, the more success you may have regulating other areas of your life.

And when it comes to putting your money on autopilot, your brain has an ally in technology. Twenty years ago, automated personal finances were impossible. Having your paycheck directly deposited was still cutting edge, and paying bills meant cutting a check every single month. Today, it’s not only possible to have an entirely electronic checking account, it’s becoming the norm to do away with paper checks altogether. And these new financial technologies make it possible to put your money entirely on autopilot.

A SIMPLE APPROACH TO PUTTING YOUR MONEY ON AUTOPILOT

As you get older, your finances will get more complicated whether you want them to or not. So the simpler you can keep your financial system, the better. Two primary accounts—one checking and one savings—should suffice unless you own a business or are married with separate finances.

The Three Steps to Automatic Finances

1. Put your savings on autopilot
2. Put your bills on autopilot
3. Put your investments on autopilot

Here’s what somebody’s basic financial autopilot looks like.

Today we’ll cover setting up your savings and bills, next time we’ll talk about investments.

Put your savings on autopilot.

The first step in putting your money on autopilot is to pay yourself first. This means directing a portion of the money you earn into a savings account as soon as you earn it.

• If you’re still working on your emergency fund, put this money towards that.
• If you’re in high-interest consumer debt, put this money in an account that automatically makes extra payments on your debt each month.
• If you’ve funded your emergency fund, then put this money towards your next life savings goal (e.g., a house, a car, a wedding, or a vacation).
• If you’re set on cash, skip this step and focus on investments instead.

There are two ways to pay yourself first:

1. Split your direct deposit between your checking account and savings account (ask your HR manager for the form).
2. Set up an automatic transfer between your checking account and savings account on the day after you are paid. Any online savings account will make this easy.

Put your bills on autopilot.

In part one of this series, I talked about your “nut”, the fixed monthly expenses like rent, insurance, and student loan payments, that you pay every month in the same amount. Once you have a comfortable bank account buffer in place, the next step in putting your money on autopilot is to setup automatic bill payments to each of these bills. There are different ways to do this, and I rank them in order of my preference.

1. Pay with a rewards credit card.
2. Pay with your banks online billpay.
3. Pay through an automatic bank draft (ACH).

Let’s talk about the options:

Credit Cards. Some billers like insurance, cable, and cell phones let you pay with a credit card. As long as they don’t charge a convenience fee to do so, this is your best bet. For one, you can earn your one or two percent of the bill back in rewards and two, you have a third party in between you and the biller. (Remember one of the best things about paying with a credit card—not cash check or debit card—is your right to dispute the payment with the credit card company and not pay a dime until that dispute is resolved).

Online Billpay. The next best option is setting up a recurring payment through your bank’s online billpay service. I like this option because you have control over multiple bills in one place (your bank’s online login). You can stop or change payments to more than one bill instantly in one place.

Autodraft/ACH. Traditionally, if you wanted to pay a recurring bill automatically, you have to sign up with the biller, give them your checking account and routing number, and let them automatically withdraw the bill amount from your checking account each month. This is fine, but there are some concerns:

• Redundant Maintenance. You must maintain your autopay with each biller individually. If you change banks, for example, you have to remember to change the accounts at each biller.
• Less Control. Let’s say you accidentally rack up $3,000 of data roaming charges on your phone while travelling abroad. Since you’re travelling, you forget to check your bill before the autodraft goes through. Your cell provider withdraws the $3k from your checking account and overdraws the account. Not only are you out that money and responsible for overdraft fees, you may lose your ability to negotiate the charges down (after all, the cell company already has your money).
• Returned Payments. If you have your checking account to reject overdrafts, your auto payment will be returned if you don’t have enough money in the bank at the time it’s processed. This may trigger a returned payment fee in addition to late fees from the biller. (Also, be sure to enter your checking account numbers correctly when you enroll at the biller’s Website. You payment will be returned if you make a typo, too.)

Put your investments on autopilot.

Once you have your savings and bills on autopilot, the last (but I would argue most important) step is to set up automatic investing. We will cover this in detail in part four of this series.

RECAP

We humans are emotional, easily tempted, and lazy. We do stupid stuff with money. Therefore, it’s my opinion that the single most important thing you can do for your finances is to put your money on autopilot. Start by transferring a percentage of your income to a savings account as soon as you get paid. Then, setup all of your bills to be paid automatically by their due date either by credit card, bank bill pay, or ACH autodraft. Next time, we’ll talk about the final piece of the puzzle: establishing an automatic investment plan.

ACTION ITEMS

1. Pay yourself first. If you haven’t already, open a separate high-yield savings account and set up an automatic transfer or split direct deposit to correspond with every payday. Do this even if you can only afford to save $20 a paycheck. You can increase the amount later. Having the system in place is what matters.
2. Ensure you have a bank account buffer. Do not proceed to action item three until you have this in place.
3. Put your bills on autopilot. With a bank account buffer in place, put all of your monthly bills on autopay. Set aside an hour to set this up tonight and you’ll easily save an hour a month for the rest of your life.

Join The Discussion: How do you put your money on autopilot? What’s your system? Let us know in a comment.

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Here’s Amber:

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If you lost your job tomorrow, do you know how you’ll pay the rent next month?

If your car’s transmission broke and required a $2,000 repair to be back on the road, could you pay the bill without going into debt?

For more than half of Americans, the answer is no. And chances are, among us younger (and poorer) Americans, the percentage is higher.

The answer to both of these potential problems is to have a good chunk of money set aside in savings…a rainy day fund if you will, or as we financial nerds call it: an emergency fund.

Emergency funds are like insurance: confusing and boring, but downright necessary. You shouldn’t drive without car insurance and, quite frankly, you shouldn’t try to live life without emergency savings.

If you, like many Americans, haven’t been able to save an emergency fund or have put it off because you don’t think you’ll need one, consider what you would do if suddenly you found yourself with a $1,500 repair bill or, worse, without an income.

Emergency funds could be the most vital part of your financial plan, so you really owe it to yourself to make a plan to build yours today. We’ve put together a step-by-step guide to creating your very own emergency savings—from the initial buffer to the fully-funded emergency fund.

WHAT IS AN EMERGENCY FUND?

Before we break down exactly what an emergency fund is, let’s define what it is not:

• It is not used for planned purchases like a house, a new car, a college education, and so on.
• It does not have to a large, unattainable amount; it can start small.
• It is not a set amount for everyone—it varies based on your lifestyle.

Now that you know what it’s not, let’s talk about what it is.

WHY YOU NEED ONE

An emergency fund serves two major purposes:

1. It creates a financial safety net during emergencies like a job loss, illness, or major unexpected expense.
2. It allows you to avoid the use of credit cards or loans during said emergency.

Unfortunately, there are plenty of times you may need an emergency fund. Some may be scary and severe—like a job loss or chronic medical condition—but others are simple expenses that you just weren’t expecting—like a car or home repair.

Now that you know exactly what an emergency fund is and why you need one, it’s time to look at building it!. Here at Money Under 30, we think that savings “buffer” of $500 to $800 is the best way to start.

Step 1: Build a Buffer

Last year, we wrote about 6.5 half steps to financial stability. The first and arguably most important step is to build a savings buffer of $500 to $800.

If you’re in debt, it’s tempting to throw every extra penny towards your debt. However, it’s better the build at least a small buffer of $500 to $800 dollars in savings before attacking your debt.

Those amounts may seem small, but when you’re in debt, they’re really not. When I was in debt and living paycheck to paycheck, I couldn’t seem to save even $100. Whenever you feel like you’re making progress, something comes up and you fall behind again.

So if you can’t even get ahead in your debt payments, how will you ever save extra money on top of that?

There are three primary ways to scrape together extra funds to build your primary buffer before you start tackling your debt payoff and, later, building a stronger emergency fund.

1. Reduce discretionary spending
2. Cut recurring expenses
3. Earn more

You can choose to focus on one of these items or all three to scrape together any extra cash you can.

Cutting back is easy for some people, but it just doesn’t work for everyone; that’s why building an extra income stream is vital if you can’t seem to find any extra dollars to build your buffer. Whether it’s picking up a couple extra hours at work, creating a freelance business, applying for a part-time job or creating an online store, figure out what fits best with your available time and skills.

Here are some great articles that break down tips on how to earn more money:

• Deciding to Earn More [Money Under 30]
• Infographic: The 3 Easiest Ways to Earn More [I Will Teach You to Be Rich]
• Make More Money: How To Super Charge Your Income [Get Rich Slowly]

And by the way, in case it’s not obvious, you don’t need to get a second job or start freelancing to earn enough cash to start that emergency fund…it could be simple as finding a few things you don’t use anymore and selling them on Craigslist or eBay.

WHERE TO PUT THAT MONEY

If you ever do have the need to use your emergency fund, you’ll need access to the fund quickly if not immediately.

This is why you shouldn’t maintain your mutual fund in stocks, CDs or bonds—you’ll need to keep your emergency fund liquid. The best and easiest way to do this is by using a basic savings account, either online or at your local bank. We recommend keeping the account at a different bank than your primary checking account to reduce the temptation to tap it for non-emergencies.

Remember, an emergency fund is for security, not earning a return. While you should absolutely get the best interest rate you can find while keeping your money accessible, don’t be tempted to chase yields and lock up money you might need tomorrow in an investment that may be more difficult to liquidate.

HOW MUCH DO YOU NEED?

Everybody—financial experts and amateur advisors alike—has a different opinion on how much money you should keep in your emergency fund. 

In general, however, your ultimate goal should be to have enough money in an emergency fund to pay your essential expenses for several months. Some experts say six months, others nine, or twelve.

We recommend figuring out what makes you comfortable.

At the very least, you should have enough money set aside to cover a big unexpected expense without turning to credit cards. Then, ideally, you would have enough money to get you by in case you lost your job and had to find a new one.

(Hint: The more difficult you think it will be to find a new job in your field, the more you may want to save!)

Step 2: Build Your Emergency Fund

Once you’ve created your buffer—and completed steps two and three in the 6.5 Steps to Financial Stability list—it’s time to start building a sustainable emergency fund.

Building the emergency fund will be very similar to creating your initial buffer.  If you’ve already reduced spending and/or created extra income, a percentage of that cash should go to your emergency fund.

Here are some helpful tips (in addition to reducing spending and/or earning more) for building that emergency fund:

• Direct Deposit. If you’re tempted to spend extra cash, set up a direct deposit into your separate emergency fund account. (Pay yourself first.)
• Bill Yourself. If you don’t have access to direct deposit, treat your monthly emergency fund allotment as a bill—like rent or your electricity payment. Remember to deposit that amount into your savings on whatever day of the month works for your situation. (Same idea as above—pay yourself like any other bill).
• Add Bonus Money. Use things like tax refunds, mail-in rebate checks, or unexpected windfalls to add a boost to your e-fund.

Here are some more ideas:

• Three Little Ways To Boost Your Emergency Fund [Money Under 30]
• 50 Tips to Help You Establish Your Emergency Fund [Consumerism Commentary]
• 22 Way To Build An Emergency Fund [BankRate]

Establishing an emergency fund may not be the most fun or exciting part of creating financial stability, but the safety net it creates is worth more than the actual dollar amount it contains. It’s the first step towards financial freedom that can keep you on the right financial path even if life’s events try to knock you off.

Ask Your Question About Emergency Funds

What do you want to know about emergency funds? I’m sure there are plenty of questions we haven’t covered, so ask yours in a comment and we’ll select the best ones to answer. Other readers may have some good ideas to share in response, too. Leave your question in a comment now.

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One such question is:

“How much do I need to save in an emergency fund?”

Long ago, I answered that question with a way-too-complicated formula. It was an interesting way to tackle it, but ultimately I think you want—and I want to provide you with—a much simpler answer.

The good news is that if you save just $1,000, you’ll be better off than more than a third of working Americans. According to a MetLife study on emergency savings last year I found in a New York Times blog post on the subject, 36% of full-time employees in the U.S. have less than $1,000 saved and 46% have less than $5,000.

Assuming you want to do better for yourself, just how much is enough?

Unfortunately, even financial pundits don’t always agree on a magic number for your rainy day savings. Dave Ramsey says to save between three and size months expenses and Suze Orman says eight months.

But as you can see in reader responses to a similar question on the blog Get Rich Slowly, everybody has a different opinion on how much should be in an emergency fund. Ultimately, I more or less agree with J.D. who, in turn, is agreeing with Dave Ramsey.

• Start with $1,000 in savings.
• Pay off credit card debt.
• Save at least three months expenses, six months if you can.

Where my philosophy differs from Ramsey is that he’ll tell you to pay off student loans and other low-interest debts before saving cash for an emergency. Personally, I would pay off high-rate credit cards, then pad my emergency funds before paying off loans with interest rates lower than six or seven percent.

When it comes down to the final amount, well, personal finance is personal, and it’s ultimately up to you. If you’re young and single and just starting out in your career, three months should suffice. As you add responsibilities like a mortgage and a family, however, you’ll probably want to save more. My wife and I recently exceeded six months’ expenses, which we’re satisfied with for now.

What do you think? How much—in terms of months’ living expenses—seems right to you?

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Thanks to UpsideofMoney for including this post in this week’s Carnival of Personal Finance.

In case you’ve had your head in the sand for the past few days, here’s the quick version: Slater was a Jet Blue flight attendant who had a really crappy Monday at work. After an altercation with a defiant passenger, Steven Slater let fly an expletive-filled rant over the airline’s PA, grabbed a beer from the galley, popped an emergency exit slide, and departed from his career.

About an hour later, police arrested Slater at his home near JFK airport.

Having worked service jobs before, I snicker at Slater’s story. I don’t doubt the seriousness of his legal troubles or the recklessness of his actions. But, I know every past and present service worker has dreamed of quitting in a “take this job and shove it” blaze of glory. Most, of course, never act. And those who do usually don’t go out in first-class fashion like Slater.

But what does this have to do with personal finance in your twenties?

It’s about the utility of the F-You Fund.

I know nothing about Steven Slater’s financial situation. I don’t know that flight attendants earn all that much, but he’d been at it for close to twenty years and, if he were smart, could have had a decent emergency fund and other savings. But did Slater have an F-You fund?

An emergency fund is money to pay the bills for six to nine months in case you lose your job. An F*-You fund is money to pay the bills in case you just can’t take it anymore.

Similar, but different.

If I wanted to create an F-You fund, I’d save more than just minimum expenses for a few months; I’d save a year’s worth of after-tax salary…enough to live on for a year.

Think about it: If you had a year’s salary stashed in a high yield savings account somewhere, you’d know that if you really got fed up at work, you could just quit.

Let’s be honest, popping the chute is never going to be a wise career move. But you never know when you might face a day, like Steven Slater, when enough is enough.

Have you ever quit a job suddenly? Were you financially prepared? How do you think having an F-You Fund would change your attitude towards work? (Feel free to comment on Slater, too, but let’s not get carried away…)

We all want to save that extra cash each month, and unless you want to move back in with mom and dad, you’re going to have to find ways to cut corners in your finances to put a little away every month…or even every week (it really adds up).

Now, the Web is brimming with frugal tips to help you save money on everything from toilet paper to laundry detergent, but some of us don’t want to go to the extremes. (Some people find separating 2-ply TP worthwhile, others never will).That said, there are some steps everybody should take to find savings in their weekly budgets. These three little things don’t require superhuman sacrifice and can add up to significant savings.

Plan Your Meals

Shop smart. It is easy to overspend when you’re at the grocery store. There’s a lot of food in there, and we all like food! Make a list before you go. Plan each meal for the week (or at least for lunch and dinner) on one side of the paper, and list the ingredients that you will need on the other side. Take a look through your cupboards before you shop, and make sure you’re not buying in duplicate. At the store, be sure to look at the unit price of the item rather than the total price. The unit price indicates which product is actually less expensive per unit (per gallon, per ounce, etc.) and will help to reduce your overall grocery bill.

On the other hand, if there is something you know you use a lot of on sale in bulk (like maybe toilet paper or your favorite shampoo) buy it! Buying in bulk can save money in the long run. Again, be sure to look at the unit pricing and don’t be fooled by the sale sign. Retailers sometimes put up the unit price on an item when there is a “sale,” counting on the careless shopper to believe the sign without looking into the details. You were not born yesterday!

Brown Bag It

If you don’t have to eat with a client or boss every day, you should be bringing lunch to work with you. You don’t have to eat in the office or at your desk. Go to the park, or eat in the canteen.

Most grocery bills are reflective of $8-10 dollars per day per person for all three meals. Depending on where you live and where you eat, you could spend anywhere from $10 to $25 dollars on lunch per day when eating out. It really adds up overtime. Buying lunch is convenient, but it will certainly put a damper on your ability to save.

Make a Simple Weekly Budget

If an emergency fund is the foundation of financial security, a budget is the cement. Still, a lot of people have a tough time getting into the habit of regular budgeting. You probably have a rough idea of your monthly budget—your rent, student loan bills, utilities, and how much money you have left over.

But such a “big picture” often gets lost in the day-to-day. A weekly budget can help.

Take the money you have left over after paying your monthly expenses and divide it over the weeks in the month.

Remember when mom and dad used to give you an allowance? It’s like that. Simply give yourself a weekly allowance, and stick to it! Take out weekly spending money in cash, and don’t go over budget.

You’ll know exactly what you’ve spent and won’t be unpleasantly surprised when you look at your bank account balance!

What About You?

Have you been successful saving more by making a simple but significant change to your everyday expenses? What works for you?

Here’s a quick review of the Sallie Mae Direct online savings account.

On the face of it, Sallie Mae online savings account checks out just like all of our other recommended high yield savings accounts:

• No minimum opening deposit or balance
• No monthly fees
• FDIC-insured
• Easy electronic transfers to and from other bank accounts

The Sallie Mae online savings account opening process is straightforward and should only take about 10 minutes. You’ll just need your Social Security number, a driver’s license, passport, or military ID, and a checking account number to make an electronic opening deposit. (Believe it or not, some online savings accounts still don’t take electronic deposits…you have to mail them a check. What’s online about that?)

Finally, there’s one unique perk about the Sallie Mae savings account: Savers who use Upromise can earn a 10% annual bonus on their Upromise earnings for having a SallieMae savings account. Upromise is a shopping rewards program that allows you to earn points for everyday shopping that you can use to repay student loans or save for your children’s college. To qualify, you’ll need to set up an automatic monthly deposit of at least $25 or save at least $5,000.

In a nutshell: As banks struggle to differentiate themselves and win over depositors, there’s really online one feature that matters in an online savings account: a fat interest rate! And this month, Sallie Mae has definitely taken the lead.

Open a Sallie Mae Savings Account Now

Learn More

Check out our most recommended high yield savings accounts compared or check out even more of the best online savings account rates.

† We have a financial relationship with this company. To learn more, read our disclosures.

What should you do with a windfall of money?

You may be inclined to spend it; to buy a new ride or take the trip you’ve been longing for. The urge to splurge is normal; people are more likely to spend unanticipated money (i.e., a windfall) than anticipated money, like wages (Arkes, Joyner, et. al., 1994). Unfortunately, spending your windfall—or at least all of it—probably isn’t the best move.

Here’s a prioritized list of arguably the best ways to use a windfall. Your individual situation may dictate deviating from this list slightly, but this is solid foundation for planning how to use unexpected money. (Note: You may decide to split your windfall among a few of these goals; that’s fine.)

1. Account for Taxes

Most likely, your windfall is taxable. Before you spend a dime, figure out what taxes (if any) have been withheld, and if it was enough. If the windfall is especially large (say, equal to or more than your regular annual income), it would be wise to hire a tax professional to help you minimize your tax liability.

2. Pay Down High Interest Debt

Once you are confident that Uncle Sam is paid-in-full, put high-interest credit card debt in your crosshairs. If you have debt and your windfall can repay it in one chunk, do it. Be sure to have plan for handling your credit cards after the debts are paid. Can you resist using them to dig a hole again? If not, get rid of them.

3. Check On Your Rainy Day Fund

If you don’t have debt or have windfall money left over after paying debts, it’s a good time to give your emergency fund a check-up. As a bare minimum, do you have at least $1,000 in a savings account set aside for emergencies? What about between three and six month’s living expenses? If not, use your windfall to pad this ever-important account. Don’t worry too much about the interest rate you are getting. This money is not an investment, it’s your safety net.

4. Max Out a Roth IRA

Next, consider funding a Roth IRA up to the annual maximum allowed contributions. A Roth IRA grows tax-free for retirement; it’s the absolute best way to make today’s windfall turn into tomorrow’s nest egg. You can contribute up to $5,000 to a Roth if your income falls below defined limits. You have until April 15 each year to contribute to a prior tax year’s Roth IRA. For more, read Why You Need a Roth IRA.

If you have money left over and have a 401(k) or 403(b) plan at work, you may also want to increase your contributions to that account, which are tax-deferred. The money going to your 401(k) comes out of your paycheck, but you can use your windfall to supplement your earnings.

5a. Invest

The next step is to invest remaining funds as you see fit. You may choose to open an account with an online broker and pick up some ETFs or no-load mutual funds, lend money to others using a social lending network, or use the money to see a new business venture. Whatever you do, your goal should be to make the money work for you today so it can provide for you tomorrow.

5b. Pay Down Other Debts

Some people would rather be completely debt-free before using extra money for anything else. Personally, I would rather invest money in the stock market before repaying student loans and mortgages with interest rates under six percent, but I understand why some people would want to get rid of these debts first, no questions asked. If your goal is to be 100 percent debt-free as soon as possible, then by all means, pay down student loan or mortgage debt now.

6. Buy Yourself Something

Have some fund, spend a little. Life is short, and it’s stupid to be young, broke and miserable just to grow old and rich! (Just don’t blow all of your windfall redneck-lotto-winner-style.)

The bank’s free ATM feature is what led me to become a customer in the first place. Bangor Savings Bank refunds any ATM fee, anywhere in the world, immediately. Take that, Stank of America!

“The bread and butter of community banking is having a person’s primary checking account,” Yellow Light Breen, a senior vice president for Bangor Savings told MaineToday.com. “It’s hard to get people to change banks. But when people are frustrated, maybe they’ll think of your bank to turn to.”

In addition to free ATMs wherever I roam, I like banking with a local bank because I know my money is staying local and that I can walk into any branch in the state and be treated like a person, not a number. I admit, I keep the bulk of my savings in high-yield savings accounts offered by bigger banks to take advantage of their high rates, but I’ll always keep my checking account local.

I just don’t see what advantages big national banks offer checking customers, other than a large ATM network—which Bangor Savings Bank’s ATM feature altogether negates.

Do you use a local bank that you love? Who are they, and why do you love them?

Here’s a preview of FNBO’s savings finding calculator and links to some of the other best free savings calculators on the Web.

Savings Finding Calculator

FNBO Direct’s Pay Yourself First Challenge Savings Finding Calculator asks you for some simple information about:

• How much you currently save
• What you routinely spend each month on things like coffee, groceries, entertainment, etc.

The calculator then shows you how much you could be saving by cutting down your spending by a certain percentage, and how much that savings could grow over several decades. You can tweak how much you want to cut back your spending, how long you want to save, and the interest rate you hope to earn. Try the calculator now »

Simple Savings Calculator

If you just need to know how much your savings will grow at a certain interest rate, BankRate’s simple savings calculator is for you.

When Will You be a Millionaire?

Want to know how fast your taxable and/or tax-deferred retirement savings will amount to $1,000,000? CNN Money’s Millionaire Calculator can show you.

Emergency Savings Calculator

A emergency savings calculator from BankingMyWay.com lets you estimate how much you need in an emergency fund and calculator how long it will take you to get there.

Who is Ally Bank?

Ally Bank is a subsidiary of the General Motors Acceptance Corporation, which began as the financial arm of General Motors and provided financing to auto dealers and consumers. (In 2006, GM sold a majority share of GMAC, so the two companies are now independent of each other). Last year, GMAC became a bank holding company in order to gain access to federal TARP funds. This year, GMAC Bank changed its name to Ally Bank.

As we all know, GM is having its fair share of trouble these days. Even though GMAC Bank and GM are now different entities, the bank decided to change its name to Ally Bank to, well, distance itself from its now distressed cousin. With a new name and FDIC insurance on all deposit accounts to $250,000, Ally Bank is now making waves in the online savings world by offering some no-fee, high-rate savings accounts.

Ally Bank Online Savings Account

The Ally Bank high yield savings account currently offers a and has no minimum opening deposit and no minimum balance and no annual fee. At the time of this review, that’s the highest no-minimum savings rate offered by any national bank. Ally Bank’s online savings account has no hidden fees. Finally, Ally Bank clearly advertises that there is a six withdrawal limit per statement cycle (approximately each month). This may seem like a downside to the account, except for the fact that federal law requires this limit on all savings account. (Chances are your existing savings account just put this fact in fine print).

Ally Bank No Penalty Certificate of Deposit (CD)

The high rate on Ally Bank’s online savings account is one thing, but Ally Bank also offers a no penalty certificate of deposit. Typically, banks charge a penalty for withdrawing funds from a CD early. (This is typically three months’ interest on CDs of up to 12 months and six months’ interest on CDs longer than 12 months). Ally Bank’s no penalty CD, by contrast, lets you withdraw funds from your CD anytime without a penalty. (Granted, you can earn a higher rate if you choose a regular CD over the no-penalty option).

Open an Ally Bank Deposit Account

Opening an Ally Bank can be accomplished online in about ten minutes.

Open an Ally Bank Account Online Now

Have you had a chance to save with Ally Bank? How was your experience?