We’ve all heard how important it is to build up personal savings, but so few people actually have any type of substantial savings. If saving money is as easy as most financial experts purport it be, why aren’t more people successful at doing so? Quite simply, it’s because saving money requires personal discipline. Practicing personal discipline in the 21st century is incredibly difficult due to our commercialized culture.
Everywhere you look there is an invitation to spend money. Turn on the television and what do you see? Commercials galore. Go to a movie and before the previews start there are commercials. Some restaurants have even started selling advertising space in their menus. Our current multimedia and digital age gives the average advertiser far more exposure to the consumer than in decades past. As consumers we are flooded with marketing, selling us the idea that we need extra things to make us happy – even if we cannot truly afford such things.
The following are five tips that can help anyone break the cycle of spending and begin the habit of saving.
1. Pay yourself first
If you’ve heard this tip before but ignored it, it’s time to start paying attention. We’ve all seen what happens on payday. When payday rolls around the first thing most people do is immediately spend.
Bills need to be paid, grocery shopping needs to be done, and recreation needs to be had. When the paycheck is almost all used up, whatever pathetic amount is left over is sometimes allocated towards savings but there are no guarantees. More often than not some other unforeseen expense creeps up and drains the leftovers.
It’s time to face an important reality: If you don’t pay yourself first, chances are you won’t do it later.
It’s recommended that you put away ten percent of every paycheck. That might sound like a lot at first but the sooner you start doing it the less impact your budget will feel. Look for places in your monthly budget/expenses where you can trim some fat to make up the difference of what you’ll lose by allocating ten percent to savings.
If ten percent sounds like a wildly unreasonable amount, start with five percent and work your way up to ten. If you want to walk on the wild side, try 15 or 20 percent!
2. Put your savings out of sight
Ever heard the saying “Out of sight, out of mind?” Well that rings especially true with money. A $20 bill sitting on the kitchen table isn’t going to last very long in any house. Twenty dollars sitting in an interest bearing savings account could likely survive a whole year if you forgot about it.
One of the tricks to saving money is to stash your savings in a place that makes it difficult to make a withdrawal. Here are a few ideas for making your savings more elusive:
- Don’t use your regular bank for a savings account. If at all possible, use another bank – one out of the way, or even out of state.
- Set up reoccurring automatic withdrawals from your regular checking account into your savings account. For example, ask your bank to withdrawal $25 every Friday and deposit it into your savings account.
- Check with your employer to see if they will allow you to split your direct deposit. Many employers can take a percentage of your paycheck and deposit it into a different account than your normal checking account.
- Don’t use a checking account. You want to make it difficult for yourself to make withdrawals from your savings so it’s important not to have a debit card or paper checks connected to the account.
3. Use less plastic and more paper
Debit and credit cards are ultra convenient. They make transactions so much easier. However, sometimes they can cause us to lose track of how much we’ve been spending. In this era it’s pretty difficult to not use any type of debit or credit card, but there are some expenses where it’s not necessary.
As an experiment, try putting yourself on a cash budget for certain line items in your budget where you’d like to cut back. One example is food. It’s very easy to spend a lot of money eating out or grocery shopping. Set your monthly food budget and at the beginning of the month withdrawal the full amount in cash.
Put the cash in an envelope and put it in a safe place in your house. For the entire month, only use money from the envelope for food-related purchases. When the money runs out, that’s it. No pulling money from elsewhere. You’ll be amazed at how clever you can be when you absolutely must stick to a budget.
4. Keep the change
Have you ever gone on a change hunt in your home? Change is lurking in all sorts of interesting places. That change may seem insignificant, but it quickly adds up. Make it a practice to regularly spend an hour or so gathering the spare change around the house. Check under sofa cushions, in the laundry room, in pants pockets and all around.
There are many services that will cash in your change for dollar bills. Coinstar.com is one of them. Coinstar has kiosks in many grocery stores where you can simply dump all your change while the machine counts it and spits out a receipt you then redeem at the checkout stand for cash. Doesn’t get much easier than that. Take that cash and immediately deposit it into your savings account!
Another tip for saving change is to establish a change/money jar somewhere in your home. Every time you find spare change or dollar bills, drop them in the jar. Empty your pockets at the end of every day. Whatever you do, don’t take money out of the jar and spend it!
5. Ignore unexpected income
We’ve all been blessed with some unexpected income. It might be some birthday money. It might be a bonus from work. It might be a lonely $100 bill you found on your morning jog. The reality is our first inclination when we come across extra money is to spend it.
Start a new habit and put any new and unexpected income directly into savings. If you really think about it, it’s money you didn’t expect in the first place so you’ll never miss it when it’s gone!
These are just a few easy (and not so easy) tips to get you started down the path of true financial freedom. Stop living paycheck to paycheck and embrace the lifestyle of saving. The peace of mind you get by stacking up savings is worth the temporary sacrifice.
What ways do you use to save money?
photo credit: paul (dex)