Saving can be a hard habit to adopt but the rewards of building a healthy financial portfolio are too great to quantify. Of course, your personal outlook has a direct impact on your attitude towards saving. If saving was viewed less as a form of self-deprivation and more as a means of deferred satisfaction it might be easier to put some money aside.
The money you save in most instances is for yourself. This reveals a startling fact, today’s society has become so obsessed with instant gratification that it is difficult to put money aside even for personal use. The fear factor also seems to have lost its impact. Descriptions of what life could be like at retirement without proper planning and saving have failed to frighten people into action. Instead, the pull of advertising and what money can buy now forces people to live in the moment.
However, with the economy experiencing the worst downturn since the last depression people are finally getting the wake up call they needed. Suddenly, everyone is interested in saving and budgeting, but mostly because it affects the here and now and the reward is not some distant probability.
Whatever the stimulus, the following tips will help you incorporate saving into your lifestyle without sending you into a state of shock so strong that you end up going on a spending binge just to feel like yourself again.
Start a Spending Diary
Similar to some diet programs that encourage you to document everything you put into your mouth, think of this as a financial diet. Get a notebook or daily planner and write down every time you spend, including on your morning latte. Also include your method of payment, as this will help you to identify spending leaks which make them easier to clog down the line.
Perform a Month End Budget Review
Quickly skim through your entries for the month and draw up a table with categories that recur frequently. For instance, if you find that you spend on transportation everyday, you will have a transportation column. Add up the totals for category to determine how much you spent for the month. This will highlight how much you spend on particular items over the period.
Analyse Spending Patterns and Find Ways to Cut Back
Would it be cheaper to take public transportation instead of buying gas for the car? Can you take meals to work instead of buying food everyday? Next, look at your method of spending. Do you make several trips to the ATM or do you swipe your credit card? If you have huge balance on your credit card at the end of the month try withdrawing your allowance for the week from the ATM and switch to cash instead. Handing over ‘real money’ will also trigger that you have actually spent instead of having the safety net of the ‘I can always just make the minimum payment’ voice ringing in your ear.
Make it Difficult to Access Cash
Open a new account that does not have an ATM card to use as your savings account. It does not matter for now if this account pays a very low interest rate. The point is to get in the habit of putting some money aside.
Use the Envelope System
Start an envelope system in you dresser drawer, where you put aside money for different items. You might have a gas envelope, a groceries envelope and a saving envelope for instance.
Start a New Savings Account
If there was any money left over from your first month’s experiment this can be used to start the new savings account. After you have created your new budget and allocated money to different categories in your envelopes, allow yourself a small amount for entertainment, the rest goes to the savings envelope.
Reassess and Transfer
At the end of the month you are to take all the money you stashed week by week in the savings envelope as well as any money you have left over (you just might have a positive balance) and deposit it into your new savings account.
Continue using the financial diary and the envelope system for as long as you think it is necessary. As soon as you think you can manage to resist the impulse purchases and you have mastered averaging how much you need each week overall you can take off your training wheels and enjoy the ride.
All it takes is determination and self-control to incorporate saving into your lifestyle.