Putting money away can seem like an impossible task to many.
If you feel uncomfortable at the thought of saving, you’re not alone. Struggling to save can be as simple as mis-budgeting or can run as deep as your limiting beliefs.
In personal finance, we hear all the time to save and work on an emergency fund. But if you legitimately feel that you cannot save money, being told to save, save, save is not too helpful.
Even the word “save” alone can trigger anxiety in many people.
I myself felt that I couldn’t put any money away, and I felt the terrible anxiety that came along with it. I came to the realization that I was not able to save because I kept telling myself that I couldn’t, and I believed it. That belief kept me from progressing until I was finally able to trick my mind and change my belief. I want to share with you a few tricks that enabled me to save and save consistently.
I always had some pretty big Goals.
Having big goals is a good thing, but I came to the realization that they also can be intimidating. And intimidation leads to procrastination.
Not only were my goals big, but they were long term. So, waiting a day or skipping a day of action with my goals was justifiable because I “had plenty of time”.
Basically, a double-edged sword of procrastination. I kept my big, long term goals but I broke them down into micro goals to help keep me motivated to take daily action and build momentum.
Out of the micro goals, I took the near-term ones and made them into a list. And I kept that list in my wallet. I kept the list in my wallet so whenever I dug into my wallet for cash or a credit card, I would have those goals right in my face, basically becoming the angel on my shoulder, and helping me to make a goal conscious decision.
An even more effective approach can be to take a picture of your goals and set them as the background and screen saver on your phone.
We look at our phones VERY often so we can’t help but see them multiple times a day. When you have an urge to buy something that’s not a necessity, look at your list, wherever you decided to have it. Let your goals drive your decision making.
Take whatever money that was going to be spent frivolously and spend it on your dreams instead. Transfer that amount from your checking to savings right there at that moment and experience the confidence it brings. By doing this it will help you to become very mindful of your money and where it’s going.
Goals written in a peak emotional state will work better than goals written in autopilot mode.
That’s right, put money away every day.
You may be thinking “but Jake I’m having trouble saving out of every paycheck, and you want me to save every day?!”
I get it but stay with me! Challenge yourself, put away a dollar every day. Every morning log into your mobile banking app and transfer $1 from checking to savings. $1 is just a figure I like to start with because a dollar is not intimidating, we walk past loose change every day that probably adds up to a dollar or more and we just leave it there. So, if you can afford to walk past loose change, you can afford to save loose change.
A dollar a day might not seem like much, but it’s $365 at the end of a year that you weren’t able to save before. But in all honesty, I use a dollar as just an example, you can choose whatever amount you’d like. The amount you put away is not important. The purpose of this exercise is to get in the habit of putting money away, the habit of paying yourself every single day.
After consistently saving every single day, momentum builds, and your efforts compound in your savings account. Slowly but surely saving won’t be a foreign concept, but instead a daily ritual.
Whatever amount you choose to stash away every day, make sure it’s an amount you can commit to, and stick with that amount for 60 days.
After 60 days, challenge yourself further, increase the amount you were saving every day by 10%.
So, if you went with the example figure of $1, after 60 days you would then be putting aside $1.10 a day.
Again, be sure that whatever amount you decide to increase by, make sure it’s an amount that you can commit to for 60 days.
The purpose of this exercise is to create a habit, and consistency is needed for a habit to form.
Now you may be thinking to yourself “but what if I reach a point where I can’t increase the daily savings number anymore?”. Well that point, is the point of growth. Assuming you maintained discipline and made a habit out of putting money away every day, your brain will fight to stay consistent with the new habit. You will have to dig deep and think outside of the box to increase your income to in return increase savings.
Before I jump into my 3rd tip, I should start off by first explaining one small piece of behavioral finance.
A psychological behavior that we experience with money is called mental accounting.
Mental accounting summed up can be explained as people having the tendency to treat separate sources of money differently. Basically, we are less prone to spend a $100 bill we worked hard for and very prone to spend a $100 bill that was given to us as a gift.
If this doesn’t click, for example, think of tax return season.
How many of your friends or relatives have you heard talking about a decent size purchase they’re going to make or made with their tax return, maybe a slight home renovation, a vacation, wardrobe, etc.
Now think about that same friend or relative, would they easily make that same purchase by spending the money they saved?
I use this example because I see it year after year with some of my own family and friends, and I’ve been guilty of myself in the past.
So now that you’re familiar with mental accounting, it’s something to stay familiarized with as it will help you make rational financial decisions.
The 3rd trick is to put aside every dollar given to you that was received as a gift. Birthday, Christmas, Congratulation cards with a $20 bill, put it into savings. Receive a tip at work (being that your livelihood doesn’t depend on tips), put it into savings.
I remember the first time I tried this, any tip I received at work, I put it into a cigar box that I kept in my drawer. After 4 months I actually decided to count what was in the box, and I was shocked when I counted over $1,100!!
Before, I was using any tips I got just to buy lunch here and there, but after using this trick and actually experiencing its power, I never went back. I actually used that $1,100 to open my first brokerage account.
The secret to actually following through with this new discipline is by linking those dollars to your goals. By doing this, you can make your deposit with a sense of purpose and pride.
Implement this trick with speed as well. Time and security go hand and hand, the sooner we make the deposit, the more secure the cash will be, the longer we wait, the likelihood of it being spent increases dramatically.
The purpose of saving is not just to accumulate a mountain of cash. A mountain of cash does sound nice, but money is not what we’re after, we’re after what money provides us, and ultimately that is security and certainty.
When we feel secure, we experience more joy and pleasure, and ultimately live a much better quality of life.
To stay on track with your savings goals, I recommend having a reward system for yourself. Similar to implementing a cheat meal into a diet. But treat your reward like you would a cheat day, responsibly. You’ve made so much progress so don’t consume something that will set you back on the progress you’ve made.
Below I’ve listed some examples of ways to reward yourself for your progress. Feel free to implement or edit to fit your needs.
Jake Lewis is a certified personal financial consultant and a licensed life insurance agent. His passion is to help others better understand their finances and to put plans in place to help others achieve their goals.