7 Tips on Saving Money

Surprise: Budgets aren’t the only – or the best – way to save! Budgets, like diets, may work for a few months, but in the longer term may leave you unhappy and less wealthy.

Want to save some money? You can learn from people who have successfully lost weight and kept it off. The same principles apply to savings. You’ll establish habits that help you in the long term without feeling deprived.

1. Keep a spending diary

Keeping a diary of everything you eat helps you lose weight. Keeping a diary of everything you spend works, too.

If you have to write it down, you may decide not to spend it. Do you need that extra latte every afternoon? A simple cup of coffee might be less embarrassing to note.

Be consistent and brutally honest. It can take only a day or two to change your spending habits.

2. Read over your diary to spot trends

Afternoon grocery trips pricier than the weekend restocking? Maybe you’re shopping when you’re hungry, and more likely to buy impulse items. Spending eight dollars a day on lunch at work? You may feel moved to pack a healthy lunch one day out of five, saving both money and calories!

Write down the day and time for each expenditure. Some folks note their mood as well. If you shop for solace or to relieve boredom, you’ll detect it.

3. Work up to your savings goals gradually

Would you start weight training by curling 50 reps of 50 pounds? Savvy exercisers set small goals at first – perhaps twelve reps of five pounds. Once those are established, they make a small increase.

The same principle gets you in the savings habit. We all know the old adage, “pay yourself first.” But if you start with your final goal (say, saving $200/month), you’ll feel frustrated and pinched.

Start with something small and achievable. Save $5/week (a couple of afternoon lattes traded for plain coffee), or even $50/month. Once the habit is established (try six weeks if you’re paid weekly, or three months if you’re paid bimonthly), increase the amount a little.

Within a year, you may be saving at a higher rate than you originally imagined – pain-free.

4. Reward success with interest!

Instead of buying something, open a certificate of deposit when you have your first chunk of savings. You can open a CD with as little as $200. Putting your new nest egg in a CD protects it from impulse spending and nets you a higher rate of return.

5. Don’t go to a party hungry

Don’t go shopping right after you get paid or earn an incentive award. You’ll be too tempted to overspend – and you’ll feel lousy later!

6. Get a buddy

Spend leisure time with another friend who’s trying to save. You’ll find creative and less costly ways to have fun together.

7. Be consistent and persistent

Use dollar-cost averaging for your savings. This technique is often used to buy stocks or mutual fund shares. Spend the same amount of money on your mutual fund account, and you’ll automatically buy more shares when the market is low, less than the market is high.

Do something similar with CDs: Chuck your savings in a new CD every three or four months. You can’t predict interest rates, but over time, you’ll have taken advantage of the high times, while still making money in the low times.

Follow these steps and you’ll have more than you thought you could – without the pain of a budget. Now that’s savings!