The stats don’t lie - Americans have trouble saving. The federal reserve’s 2017 Economic Well-Being of American Households report shed some eyeopening light on our current state. Approximately 40 percent of Americans would not be able to cover an unexpected $400 expense without either selling something or borrowing money.1 While that number is actually an improvement from 50 percent of adults in 2013, it still shows that saving where we can won’t hurt anything. But the problem is, spending is easier. The best way to save more? Trick yourself using one of these hacks:
Trick #1: Automate Your Savings
One of the best ways to save your money is to forget it’s even there. Take willpower out of the picture by setting up an automatic transfer from your checking account to wherever - savings, a retirement account, etc. Every month after your paycheck is deposited, your bank can automatically pull over a lump sum of your choosing without any interaction needed. After a while, you may completely forget that you’re even saving money, meaning there’s much less temptation to spend it instead.
Trick #2: Name Your Savings Accounts
Don’t underestimate the power of giving your money a name or meaning. Setting up subaccounts for specific savings goals can be effective, especially if you rename each account to the goal you’re saving for. Think about it, which would be harder to take money out of? Savings or 10 Year Anniversary Trip? Directly connecting your goal with your savings can help deter you and your spouse from wanting to tap into that account.
Trick #3: Find a Personal Budget Software App
You likely don’t have the time to sit down and track your spending manually. But with today’s software apps, there are plenty of personal budgeting apps that can sync your accounts, track your spending in real-time and automatically develop a budget to help you save. Giving a visual overview of your spending and saving habits can be a real eyeopener, making it easier to understand how much you’re really spending and where you have opportunities to save.
Trick #4: Divert Payments
An important part of building up your savings may include canceling unused memberships or subscriptions, cutting the cable cord or paying off loans like car payments, student debt, etc. But the truth is, if you’re not diverting that now “unclaimed” portion of your paycheck into savings, you’re just as likely to spend it elsewhere. Find out just how much you were previously spending on these payments or subscriptions, and instead set up automatic payments to a savings or retirement account to build-up your cash emergency fund.
Trick #5: Don’t Spend Your Pay Raise
This one can definitely feel hard to do, but it can be another great “out of sight out of mind” trick to use if you’re able to afford it. Say you’re living on what you’re already making, but receive a bump in your salary of 10 percent. Instead of increasing your monthly spending because you can, consider diverting a portion of it into a savings or retirement account. For example, you could incorporate a certain amount, say five percent of the 10 percent raise, into building up your monthly budget, but automatically roll over the other five percent into a separate savings account. This allows you to enjoy a modest boost in both your monthly spending and your savings.
Saving money can feel like such an impossible task, especially when the temptation to spend has gotten so high. But by using these tips and tricks, you and your family can work toward automating your savings, developing healthy money habits and seeing your money grow. If you would like to speak with a financial professional about saving money, reach out to Peter O'Brien today by sending him a message or by scheduling a meeting with him.