Relationships are intricate, but perhaps none is as intricate as our connection with money. Cultivating a healthy rapport with money requires self-reflection and practice, and a fundamental aspect of this financial journey is savings.
In its essence, savings encompass the money that remains unspent after covering all monthly financial obligations, such as rent, utilities, debt payments, and credit card bills, which is set aside for future use or investment. While saving money might not exude glamour or excitement, the benefits are plentiful. The act of saving money may not seem enticing when you could splurge on the latest trends, travel, or outings with friends. Nevertheless, the end result—financial security, a safety net for unforeseen financial emergencies, and assurance for the future—is truly praiseworthy.
A Bankrate report from January 2022 reveals an alarming statistic: less than half of U.S. households, roughly 4 out of 10, claimed they could handle an unexpected expense of $1,000. Considering that many financial experts advise saving three to six months’ worth of expenses, the disparity between this recommendation and people’s ability to cover a mere $1,000 expense raises questions. The foundation of this disconnect lies in our behaviors. Although our attitudes toward money are crucial, actions speak louder than words. Therefore, let’s delve into the behaviors that can aid in enhancing savings and bolstering financial security.
Behaviors to Boost Savings
If the prospect of boosting your savings appears daunting, rest assured it’s a manageable feat. Even if you find yourself wondering how to save when living paycheck to paycheck, these four behaviors can set you on the right path.
Schedule a Recurring Money Check-in:
To commence your savings journey, you must gain a clear understanding of your financial standing. Mark a regular date on your calendar for financial check-ins, whether monthly or aligned with your pay schedule. During these sessions, scrutinize your bank accounts, expenses, upcoming bills, and the funds available for saving or investment. Although it may feel uncomfortable initially, confronting your financial situation honestly is paramount. Consider adding an element of enjoyment, such as cooking a special meal, ordering takeout, pampering yourself with a face mask, or savoring a glass of wine before diving in.
Pay Yourself First:
A mindset shift that can greatly benefit your saving endeavor is treating savings as an obligatory expense. In the same way you prioritize paying your electricity bill or mortgage, allocate funds to your savings. Ensure you set aside a portion for your “savings bill” each month, even before addressing other needs and desires. By paying yourself first, you’ll be less inclined to spend when you don’t see that money readily available. Begin with an amount that feels comfortable, and gradually increase it over time.
Automate Savings:
Simplify the saving process, making it more likely that you’ll follow through. Just as you can automate bill payments, consider automating your savings. If you already contribute to a retirement account, such as a 401(k) or 403(b), you’re already following this principle. The objective is to streamline savings, allowing your money to grow without the hassle of determining contribution amounts and timing. In addition to retirement contributions, you can set up direct deposits from your paycheck into a savings account or schedule transfers from your bank to a savings or investment account. Eventually, saving will become a second nature, and you’ll witness your money flourish.
Exercise Caution While Spending:
Saving inherently implies refraining from excessive spending. However, it’s unrealistic to stop spending altogether because some expenses are essential for daily life. Therefore, it’s imperative to practice mindful spending. The next time you contemplate adding an item to your cart or queuing up at the checkout counter, pause to evaluate if your spending aligns with your values and objectives. If it does, excellent! But if you hesitate, consider whether that money might be better allocated to your emergency fund, saving for an upcoming trip, or contributing to your retirement account. Cultivating a habit of mindful spending will ensure that your money is directed toward things that genuinely matter to you and away from frivolous expenses.
Tips for Growing Your Savings
After you’ve adjusted your money-related habits and behaviors, you’ll begin to feel more secure and confident in your financial position. To further augment your savings, consider the following tips:
Keep Tabs on Your Finances:
To watch your savings grow, it’s imperative to have a clear understanding of where your money is going and how much is available for saving. The most effective method is to create a budget, and various apps like Mint and YNAB can assist in this process. Alternatively, if you prefer a spreadsheet, manual tracking of your spending and saving can be equally effective. Irrespective of your choice, incorporate budgeting as part of your regular financial check-in to progress toward your financial objectives.
Differentiate Needs from Wants:
It’s time to be candid with yourself. Do you genuinely require those new shoes, or are they merely a desire because they’re stylish? To save money effectively, you must distinguish between necessities, such as food and transportation, and desires, such as travel and new clothing. If you tend to indulge yourself, remember to hit the pause button before making a purchase. This can prevent unnecessary charges on your credit card and enhance your savings.
Downgrade Services:
A 2022 survey indicates that 42% of people are paying for unused subscriptions. If you find yourself in this category, it’s time for financial housekeeping. Carefully review your budget and assess which subscriptions or memberships can be downgraded or terminated. Are you paying for monthly streaming services, clothing deliveries, gym memberships, or discretionary subscriptions that you no longer use? If the answer is yes, consider canceling them. Alternatively, if you’re not prepared to part with these services, investigate whether there’s an option to downgrade your membership or plan. If you downgrade and still don’t use the service within a few months, it may be time to cancel.
Reduce Unnecessary Expenses:
If saving is your current priority, you must reevaluate your spending patterns to ascertain their alignment with your financial goals. By scrutinizing your finances, you might realize the necessity to adjust your spending and saving patterns to better suit your needs. This often entails cutting down on superfluous expenses. For instance, is it wiser to spend $75 on delivered takeout or accrue interest in your high-yield savings account? Be intentional in deciding where your money goes. Saying yes to one expense, such as a new subscription or a pair of sunglasses, means saying no to something else, potentially contributing to your retirement fund while lounging on a beach with a tropical drink in hand.
