This is the last article I will do in this “savings” series for a while since even I am ready to move onto something else…
Hopefully you took some action to increase or start your automated savings. If you are now struggling with saving as much as you want to, I recommend that you try something (maybe a few things) with your spending and see what happens. You need to find actions that work for you, so keep trying different things until you find what works. Just as everyone has a different workout that they like, all that matters is that you are doing it and getting some positive results.
1) Only Use Cash
There are some people who overspend and it doesn’t matter how much money they have or what the bank statement says. This is one of the issues with credit cards. You are allowed to charge something and you do not have to have the money to pay for it. This can get you into trouble.
If you have this issue, I recommend that you get rid of your credit cards or stop carrying them around with you and go to a cash system. Studies show that a different part of our brain is activated when we have to give cash in exchange for buying things. It makes you think twice.
Take out the money you want to spend each week and / or put money in envelopes for each spending category (food, fun, gas, etc.) to help control your spending. You have to make that money last for the week. You can try viewing it as a game. It will make you more aware of each dollar you have and where it is going.
Impulse spending is harder when you don’t have a credit card with you.
2) Track your spending
I expect that you have heard this before. Yes, it can be an effort but if you are truly struggling with your finances and not saving as much as you want, this does make a difference. Just like keeping a food diary does for those who want to lose weight.
Most of us are “unconscious” about how we spend our money. We honestly don’t know where it goes. It is easy to track the big ticket and consistent items (rent / mortgage, insurance) but the little things can add up.
I cannot tell you how many times a client has presented their budget to me and it shows they should be saving a large sum of money. I ask what they are saving or I figure out what they are saving and the answer is nothing or drastically less than what their budget says they should be. So money is going towards things that are NOT listed on that budget. The way to get answers is to track your spending and go back and see what you actually spent money on over the past year.
There are various ways to track your spending –
- paper and pencil with a cash notebook or spreadsheet. The effort of this really makes you notice.
- online tools like www.mint.com, www.budgettracker.com, or www.budgetpulse.com or You Need a Budget (YNAB) at www.youneedabudget.com
- software like Quicken, www.mvelopes.com or pearbudget.com or www.moneydance.com
- Many new apps to track your spending too
The important thing is just to do it.
The only way to find money to save is to take the time and effort to become conscious of your spending and see where your money is going.
With spending information comes power. With this information you can make wiser, more conscious spending decisions. Look at where your money is going and see what is not “worth” it to you. Can you come up with some creative ways to accomplish the same thing but more cheaply? Is a pizza night out with your husband instead of at a fancy restaurant still giving you what you want (quality time with him) but saving $50-100 that can be put towards your future savings?
When you see that you are spending $3 a day for coffee it doesn’t seem like a big deal. Yet when you see the cumulative numbers it becomes much more real for you. $21 per week on coffee is $1,092 per year. Can you think of a more worthwhile way you would like to spend that money? You may love your coffee and don’t want to make a change, but it helps to have the information so you can make better decisions.
Saving the $1,092 per year for 30 years growing at 7.2% will become almost $107,000. This is just from saving your $3 per day coffee.
The other side of this is that a happy life is continual small treats. Is that coffee worth it to you? It very well may be, but only you can decide that. Probably there are other things you spend on that you won’t miss if you cut back on.
3) Save your change with a change jar or with a special bank account.
At the end of the day, especially if you are using cash, put your change into a change jar and then every so often put that money into your savings account. It is fun to see this gradually increase in value and it doesn’t feel that painful to you.
There are banks that will help you do this for you too. See if this is an option where you bank. Every time you use your debit card and you buy something it will round to the next dollar and put that money into your savings account. For example, if you buy a pizza for $12.78, the bank will automatically move 22 cents into your designated savings account. (Can you tell I love pizza?)
4) Whenever you want to make a large purchase, wait a day or two.
By giving yourself time to think, you can see how much you really want it and avoid the impulse buys that you later don’t fully love.
I don’t want to come across as a “scrooge”. I truly believe our life is to be enjoyed. I believe all of us can spend money on things we enjoy AND save at the same time. My point is to use your money wisely for things you DO enjoy. What is enough for you? Is your spending aligned with your values? Can you appreciate some things more when you are not in excess of it? I do know that enjoying your future and having future options is VERY worthwhile.
I do not mean to present this as something that is easy to do. It is not. We all have our own deeply established habits and beliefs around money so be patient with yourself.
I cannot say it enough– Savings and paying yourself first is the key to financial success. So start right now. Take some actions now to get your cash flow and savings moving in the right direction.
I would love to hear what savings strategies or apps that work for you. OR where you are struggling and maybe we can brainstorm some things together to help make a positive change.
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