I read a really interesting article recently on Kiplinger.com about 10 easy ways, or “tricks”, to make yourself save a portion of your hard-earned money. While saving is a fundamentally important pillar for any worthwhile personal finance plan — and this week is America Saves Week — I think it’s important to go back over some of the easy ways those who have trouble with discipline can ensure they are stashing away part of their money for savings.
The Kiplinger.com article gives 10 really great “tricks” to save. My favorites of the 10 include:
- Don’t trust yourself to pay yourself first (automated savings deposits from paychecks, i.e. for direct deposit take 10 percent and transfer it to a savings account, with the other 90 percent going to checking);
- Limit yourself to one ATM withdrawal per week;
- Record all credit-card purchases immediately; and
- Pay yourself after paying off a debt.
Personally, I have fairly good self-discipline when it comes to saving — so I don’t feel the need to automatically have money transferred to my savings account with each paycheck. Also, sometimes I save more than my standard 10 percent for various reasons, and I like to have the control of putting in my desired savings amount myself. But, for those who will spend money as soon as they receive it, automatic deductions are viable options.
What I think this article didn’t go into — and to be fair, it wasn’t the main point — was determining the reasons why you should save. Yes, saving money is good — but to what end? If you are blindly saving money because someone tells you it’s a good idea, or you feel this pressure to do so, there is a very good possibility one of two things may happen:
- You’ll harbor bitterness and resentment, ultimately binging on spending unnecessairly and stop saving entirely.
- You’ll tailspin and feel terrible whenever you spend money, because it is detracting from this out-there goal of pooling X amount of money for ??
The “??” is important here. I wrote a post awhile back about having tangible savings goals, and I think it is more important than ever to have some realistic end-goals for saving your money. Not just long-term ones, but short and medium term markers along the way that will help you track your progress and keep you motivated to continue saving.
Definitely check out the aforementioned link for a more detailed explanation, but essentially, this is what I mean:
- Long-term goal = Cruise to Carribbean — $4,000 (I made up this number, it could cost more or less)
- Medium goal = $500 per month to go toward cruise
- Short-term goal = $250 per bi-monthly paycheck set aside for said cruise
See what we’ve done here? We’ve established a tangible goal for ourselves (awesome, fun-in-the-sun cruise), set mid-term markers ($500 per month) to ensure we are making progress toward the end-goal, and setting really short markers (per paycheck) to make sure we are disciplined enough to set aside money.
The same can be done for retirement, emergency funds, cars, etc. The idea is that your savings will eventually need to be used for something. You’re not just stashing away money for the sake of stashing it away. That’s pointless, as money’s supposed to be used (properly). Figure out what you’re saving for, and then figure out the best ways to successfully reach those savings goals. The discipline will be easier to come by when you have a purpose for saving.