Saving money – we know what to do, but by and large, we stink at doing it.
According to a 2015 Bankrate survey, just 37% of Americans have enough savings to pay for a $1,000 emergency.
23% would have to cut back spending in other areas, 15% would have to use a credit card and 15% would have to borrow money from friends and family to cover such an unexpected cost.
In short, the vast majority of American savings are in crisis mode.
While managing money may be one of my strengths personally, I can empathize with the savings struggle. I suffer from knowing exactly what to do and failing to do it on many other fronts.
Take time management. I know that browsing through my Instagram feed for the tenth time this hour isn’t going to get this post written any sooner – but I do it anyway. Not because I want to push my post-work glass of wine any further away, but because I’m human, my willpower is limited and my habits are out to destroy me (or so it sometimes seems).
By becoming intimately familiar the flaws that stand in the way of my productive prowess however, I’m able to set up systems for sabotaging my own self-sabotage – blocking myself from sites like Facebook when I’m up against a deadline, waking up at the crack of dawn to work without the distraction of constant calls and pop up notifications, and committing to launch dates publicly to keep myself accountable.
Anyway, back to saving money. Much like I’ve learned to sabotage my own self-sabotaging time management habits, you too can set up systems for sabotaging your self-sabotaging savings habits.
Here are six strategies to help you get started….
6 Ways to Make Saving Money a Habit
1. Take Inventory of Savings Opportunities
Consider the opportunity cost of each of your expenses and potential purchases.
In other words, how much are you giving up in potential savings with every purchase? And how quickly could those potential savings compound to meet your major money goals?
For example, knowing that giving up your gym membership from May through October could afford you the all-inclusive getaway you’ve been dreaming about since last January might make six months of outdoor running and free YouTube workouts a no brainer.
Those kinds of trade offs may not be worthwhile for every expense, but it can be pretty eye opening to see what savings opportunities exist when you stop to take inventory.
2. Revisit Savings Often
When you look back at pictures of yourself from ten years ago, you probably make fun of something – your hairstyle, your clothes, maybe even your significant other. That’s because you’ve changed and evolved, I mean, it’s been ten years, right?
Remember that the next time you think about your finances.
Just as you’ve evolved, your financial needs probably have too.
Don’t waste money holding onto expenses that no longer serve you – the premium cable channels you stopped watching after Netflix came out with House of Cards, for example.Your financial needs evolve as you do. Don’t waste money holding onto expenses that no longer serve youClick To Tweet
Take your savings to the next level by automating a direct transfer equal to the sum of whatever expenses you eliminate into your savings or investment accounts each month.
After all, your diligent cost cutting won’t do you much good if those dollars just get spent elsewhere.
Pocket your savings where they belong – in savings.
3. Save the Difference
It’s not just the sum of the expenses you eliminate that can be rerouted into savings, it’s also the difference between any costs that you’re able to reduce, renegotiate or replace with more cost-effective alternatives.
If you’re able to negotiate a better deal (or conversely, a raise), don’t celebrate by blowing it all on crap you don’t need. Celebrate with added savings (and maybe a few bucks toward a special treat).
4. Eliminate Potential for Human Error
All of these strategies are great in theory, but they still leave us with the possibility of failed follow through.
Eliminate the potential for weakness and self-sabotage by automating your savings.
Instead of paying the bills each month and saving whatever’s left over, automate a transfer directly from your checking into your savings immediately after your paycheck lands in your account each week or month.
When you don’t see that money sitting in checking, you’re less likely to think of it as part of your spending allowance – circumventing yourself in service of your savings.
5. Take Advantage of Technology
If you succumb to the “I can’t afford to set aside savings” mentality, download Digit. It’s an app that connects to your checking account and analyzes your income and spending, finding small amounts of money it can safely set aside for you in savings.
By making small transfers, as little as $5 at a time, it will change your notion of your savings abilities.
And don’t stress about overdrafting, Digit has a no overdraft guarantee.
6. Up the Ante
I like to think I’m a pretty positive person, but positivity isn’t always the best policy when you’re trying to do something as difficult as replacing an old pattern of behavior with a new, healthy habit.
Human beings are loss averse – meaning, our fear of losing something is more powerful and thus, more likely to instigate a change in behavior, than our anticipation of gaining something.
So in addition to thinking about what saving money will afford you, think about what a failure to save will cost you.
Ask yourself if you’re really willing to give up that dream vacation or that dream home or whatever a future on your own terms looks like.
The prospect of settling might be just the motivation you need to kick your savings efforts into high gear.