Saving money ‘ we all know what to do, but by and large, we stink at doing it.
According to a 2017 Bankrate survey, just 41% of Americans have enough savings to pay for a $1,000 emergency.
If something unexpected did happen, 45% of Millennials would tap savings to pay, while those 71 year and older are more likely to turn to credit — 28% would put it on a card.
In short, the vast majority of American savings are in crisis mode.
The savings struggle
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 Snapchat feed (@stefanieoconnel) 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.
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 and might make six months of outdoor running and free YouTube workouts a no brainer.
Or you could put that money away toward one of your savings goals — like a car or a house.
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.
RELATED: 7 ways to save money on a low income
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 vestigial expenses that no longer serve you ‘ the premium cable channels you stopped watching after Netflix came out with House of Cards, for example
Take your savings to the next level by automating a 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.
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 a free 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.)
REALTED: Digit helps automate saving money
6. Up the ante
I like to think I’m a pretty positive person, but positivity isn’t necessarily 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.
How to start building your emergency savings | Common Cents
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