A post that I wrote last month on Babble about how my fiancé and I are saving $75,000 got a lot of attention. It seems that everyone was focusing on that number, and I understand. That's a lot of money. And it's true that it wouldn't be possible to save that much on my own (since that represents all of my income if I hit side-hustle goals).
But that doesn't mean you can't save more than you do. Here's the thing: everyone can benefit from saving money instead of spending it. Naturally, there are fixed costs, but if you can consistently make car payments and you're never behind on your mortgage, you can save $5,000. Here's a step-by-step process on how to save. It's not too late -- get started today!
Note: I picked $5,000 somewhat arbitrarily, but this method can be scaled to saving $10,000 or more. Follow this method, and see where it will take you!
Step 1: Automate
Treat savings like a bill you need to pay every month. $5,000 in 2014 equals $454 a month if you start in February.
So, get that money out of your general checking account! If you can't see it, you can't spend it. Open a new account in a different financial institution, and set up your paychecks to deposit $454 every month (or $228 every other week) into this account. There's a psychological effect to seeing a lot of money in your checking account -- you'll be more tempted to spend it if it's easily available. And automation is a great way to bypass some of the willpower required to start saving more. You won't be faced with a decision every time you get paid, so you'll be much more likely to succeed. Studies show that willpower depletion leads to acting in the now rather than acting for the future.
Step 2: Visualize
What are you saving for? A new car? A vacation? Visualize it, and make a poster board if you think that will help. You'll be motivated by the palm tree picture you see every time you put more money into the account. Create a visual to color in.
Step 3: Use Your Savings
Go on that vacation. Pay for it with your savings. When you get close to your savings goal, start planning. Then, when vacation time comes along, you'll be happy you saved for it, and you'll be able to relax because you know how you're going to pay for it.
Note: If your vacation ends up costing less than you've saved, congratulations! Pat yourself on the back for a job well done. Don't be tempted to upgrade everything while you're on vacation simply because you've saved.
Keep the savings habit alive, and reap the benefits not only this year, but every year beyond that. You'll be surprised at how simple it is to sock money away when you don't have to think about it. Who knows? Next year you might even save more!
Photo Source: Kathleen O'Malley
- By Kathleen O'Malley
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