You want to save. You swear you’re going to save. But you said that last year, too, and your bank account doesn’t look much healthier. Saying “I need to save” means you’ve recognized a basic financial fact: You need to take responsibility for your financial life. You really intend to do it one of these days.
Or maybe you’re just financially overwhelmed, especially if you haven’t had a raise lately or if you’ve undergone a spell of unemployment. It’s easy to convince yourself that you’ll save “later.”
The best time to start saving money? Ten years ago. The second-best time? Today. Do you want 2014 to be the year you turn things around? Four simple tactics can make all the difference.
Step 1: You need a goal
The first thing to do is set a specific goal. “In 2014 I’m going to start an emergency fund” or “I resolve to have a healthy bank account this time next year” are both fatally vague. How much of an EF? What’s a “healthy” account?
Try this instead: Pick a specific sum. It could represent, for example, your emergency fund, the cost of a long-deferred vacation or a down payment on a house. Your choice.
You could divide that amount by 12 and put that result into savings each month. Or you could divide that goal by 52. Why 52? Because a small, weekly savings plan is less traumatic than a once-a-month withdrawal. You learn to live on what’s left week by week, vs. losing a (relatively) big chunk all at once.
Let’s start with an easy example: take a £500 savings target. Divide $500 by 52 and you get £9.61, which rounded up makes £10. Can you save £10 a week?
Step 2: Pay yourself first
Pay yourself first. Otherwise that “extra” £10 will get spent on something non-essential, like a pizza, or even for something essential, like rent. Paying yourself first forces you to get smarter about the way you let money slip away each month.
Step 3: Automate
Automate a weekly withdrawal of £10 (or whatever your selected amount is) from your current to savings accounts. Why automate it? Because that way it’s sure to happen every week or month. Treat your savings like any other bill — utility, credit card — that you pay online.
Step 4: Track your expenses
Track your expenses with a free app on your smart phone, which shows you where your money is going. Now you can look for ways to save on everyday expenses.
Earn more or spend less?
A recent survey from CareerBuilder indicates that 36 percent of U.S. residents either always or usually live paycheck to paycheck. If you’re in this situation you might wonder how to find that $10 per week.
Let’s turn that idea on its head: If you had an emergency, how would you find the however-many-pounds it would take to fix things? Better to sacrifice £10 a week than to have to come up with £300 all at once.
Even if you’re not in that situation, you’ll need to find ways to set extra money aside to meet your goal.
Here are a few ideas to get you started:
Pick up extra work. If extra hours on the job aren’t available, you can find other ways to earn more money. Dog walking, house cleaning, lawn mowing, delivering newspapers and the like are all tried-and-true methods. Try thinking outside the box, though. I once interviewed a woman who walked several neighborhood kids to school; since she had to walk her own daughter, she was earning money for doing something she did every day. Smart.
Cut back on eating out. Way back. Cooking at home is much, much cheaper. Can’t cook? Go online or to the library for easy recipes. Do this gradually if you’re a total restaurant junkie. For instance, cook twice a week at first (and make the meals big ones so you’ll have leftovers to carry to work).
Cut other everyday expenses. Trim TV costs by ditching cable (or at least negotiating for a better deal). Use discounted gift cards to pay for goods and services. Look for cheap or free ways to entertain yourself.
Look for savings elsewhere. For instance, find ways to save on car and homeowners insurance.
Use coupons. Sites online can do the work for you by matching coupons (often downloadable) to sales at supermarkets. I never pay full price for toiletries. Incidentally, there really are coupons for healthy foods, including organic products.
Sell stuff as soon as you don’t need it. On eBay, on Craigslist, on the supermarket bulletin board. Sell books through online used-book sites.
Tell yourself “no” more often. Tell yourself “not now” or “not today” when you’re itching to buy any unnecessary item. Don’t stop treating yourself entirely – just pick your times.
Try one new tactic at a time until you’re confident you can pry that £10, or whatever amount you’ve picked, from your budget. Watch that savings account creep up. If through luck or diligence you find a little extra money in the budget some weeks, shoot it over to savings.
Pat yourself on the back (just a little), but don’t consider the matter closed. Instead, keep looking for ways to increase your savings. Even if it’s only £11 a week instead of £10, that’s an extra £52 per year. Slow growth is better than no growth.
Yes, it can be tough. But it gets easier, or at least becomes second nature to pay yourself first. If times are tight, don’t let that undermine a better future – and that future starts now.
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