When it comes to money, one of the biggest challenges people have is understanding how to save money consistently. People have good intentions when it comes to saving. They’ll put a budget together and have a goal in mind. But, more often than not, the money gets spent before a large amount accumulates.
Today, I’m going to provide you with some of my tips and tricks on how to practically save money. I don’t want you to undo all the good intentions you have when it comes to saving.
Start with a number that’s going to seem small and painless.
When you are starting to build a savings habit for the first time, you want to start with a small and painless goal. Very often, I see clients try to start with their ideal savings goal. If you’ve never been able to keep more than $1,000 in a savings account, a goal of $25,000 can seem unattainable.
You want to start with a small painless number. The consistency of saving money is important for success. Starting small is easy to build on. You won’t be as tempted to pull from your savings because you’ll also be leaving money for yourself.
For example, if I have $800 left each paycheck, putting $300 into a savings account is less painful than $600. Likewise, if I have $300 left per paycheck, putting $50 into a savings account is less painful than $150.
Use automatic transfers to save money.
When contributing to a savings account, setup an automatic transfer each pay period. Building good financial habits is difficult. It’s even more difficult when you don’t have the opportunity to practice every day. If payday only occurs bi-weekly, at most you have 27 times to build a savings habit annually.
Use technology to your advantage when building your savings habit. What you’’ll find is you have a far better chance of consistently saving money if it happens immediately. And if you’re starting with a small number, it will not impact you in a noticeable way.
Set reminders to check-in with your savings monthly and quarterly.
Monthly you want to check-in on the amount you have growing. Pat yourself on the back as the number increases. Celebrate having money in the bank. Be excited you are gaining interest, no matter the amount.
Quarterly you want to reassess your contribution. The goal is to increase the amount you are contributing each pay period. Even if you can only add a couple of dollars, you want to make the adjustments as necessary. If you have other investments, this is a great time to assess those, too.
Stretch your Comfort Zone.
Oftentimes, we’re not used to having money. When you start to have money in savings you have to pay attention to your thoughts. Does it freak you out to have money sitting in an account? Do you start to think about all the things you could do with that money? Besides, it’s “just sitting there.” It’s “waiting to be spent.” You could pay off a credit card or two. Or go on a vacation. Or renovate part of your home.
The underlying reason for all these thoughts is unfamiliarity. Having money is different. It’s scary. Your brain loves what’s familiar. If you’re used to operating financially with no money in savings, your brain feels better that way. Even if you feel the opposite, it doesn’t matter. You might think, “If I had money in savings, it would be better.” But very often it isn’t any better because the thoughts transition to spending the money. [Read more about financial Comfort Zones.]
One of the things I want you to do for your mindset is log into your bank accounts and look at the money. As you view your account balances, tell yourself, “It’s safe to have money.” And don’t just look at it, celebrate it. Celebrate the progress you are making with each deposit. You want to celebrate the growth, even if it’s growing slowly. This will anchor in that feeling of progress.
What if I still can’t save money?
If you’re still struggling to put money in savings and leave it there, you may need a different kind of savings habit. In this case, the best thing you can do is contribute consistently to a retirement plan. Very often contributions come out of your pre-tax money and go into an employer’s plan. The money is out-of-sight, out-of-mind each pay period.
This doesn’t mean you should fill out the paperwork and forget about it. Monthly, you should still check in on the money and watch it grow. Quarterly, you should increase your contribution. The nice part about a retirement plan? You’ll have very little opportunity to spend the money on anything except retirement.
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