Not everyone has a natural inclination towards saving money – in fact, many of us perceive budgeting and saving to be a chore rather than a pleasurable past time. But, small behaviour modifications, if adhered to, can become habit-forming and over time can transform you into a ‘saver’ rather than a ‘spender’. Like starting a new eating plan or exercise regime, taking those first deliberate steps to become a better saver can be overwhelming. How do you start? Where do you save? How much do you need to put away? What happens if you fail? Below we have outlined some simple, practical steps that are aimed at empowering and encouraging those who wish to be better savers:
Don’t set yourself up for failure: If you don’t have a natural inclination towards saving, start out small and set mini-goals that are both realistic and achievable. Rather than thinking ten years ahead or trying to save for something big, set smaller, shorter-term goals that you know you can achieve. With each success, set larger goals to work towards – and reward yourself, preferably with experiences, when you achieve them.
Put yourself on auto pay: You don’t spend what you can’t see, so automate those savings account debit orders. This will make saving a priority in your life and force you to live off the balance. Don’t forget to attach annual inflationary increases to your savings premiums.
Adopt a savings mindset: To be a successful saver you need to start thinking like a saver, not a spender. Where a spender will ask ‘Can I afford it?’, a saver will ask, “Do I need it?’. Track your savings and learn to derive more pleasure from watching it grow than you do from spending it.
Become the CEO of You Inc: If you were a business entity, you would want to be financially viable and make a profit each month. So, make You Inc a successful business and start working towards making a profit. Regard everything you manage to save at the end of each month as ‘profit’ for You Inc and see how successful you can be.
Keep your eyes on the road: Write down the goals that you want to save towards and keep your eyes focused on these goals. If necessary, create visual reminders of your goals to keep them top-of-mind.
Name your accounts: Use your online banking platform to manage your bank and savings accounts. Set up separate accounts for each of your goals and then name them. Every time you logon you will be reminded of the goals you are working towards and can visually see your money grow.
Have a savings jar: A great visual reinforcement of your commitment to saving and how money can accumulate is to have a savings jar in which you can put your spare change and coins.
Set guidelines: Determine how you intend employing your after-tax income. A great guideline is to put 15% aside for retirement funding and to use 60% to cover your living expenses such as home, food, utilities and other necessities. The remaining 25% can be channelled towards discretionary saving (such as TFSAs and emergency funding) and discretionary spending.
Give yourself an allowance: Unless you’re on a hunger strike, all starvation diets eventually fail. Be realistic about how much you can spend on hobbies, sports and entertainment, and then set that money aside so that you can use it guilt-free.
Focus on being wealthy, not looking wealthy: Competing with the Joneses is a race you can never win. If you enter the race, others will expect you to compete and will measure you on the material wealth you flaunt. If you choose not to compete, you can channel your money towards building real wealth.
Make good financial decisions: Practice making good financial decisions, even the small ones. If your cellphone is due for an upgrade but is in perfect working condition, then don’t upgrade. Drive your car for longer, cancel your gym membership if you’re not using it and take care of your stuff so that it lasts longer.
Have a super evening.