How to Save More Effectively
Hey Taylor: For some reason, even as my earnings go up, my savings stay flat. I haven’t made any big purchases or changes, so I feel like I need some advice on how to save more effectively. - Calvin
Hey Calvin: This is a pretty common phenomenon, actually. If your tendency is already to spend—meaning you have the money personality of a Spender—you'll never save by default. You have to make the conscious decision to save; otherwise, the money that hits your bank account will leave as fast as it arrives. It won’t be easy, but here are some ways to save better.
1. Think twice… then a third time. Whether it’s ordering the filet mignon, splurging on a weekend getaway, or having the choice to pay for parking instead of driving a little longer to find a street spot, you need to sit through your first instinct. Your initial reaction will almost always lead you astray because paying an extra $10 or $20 doesn’t feel like a big deal, especially as your earnings go up. Unfortunately, as you’re aware, all that spending adds up and suddenly you’ve got nothing left over to put into your IRA. As often as possible, you'll need to talk yourself out of the easy, more expensive option.
2. Schedule retirement contributions. Part of the reason people overspend is that they feel like money is just sitting around. The solution? Get that money out of your bank account and into a retirement account. At first, you might feel anxious about it, like you need that money to spend and you’re depriving yourself of it. After a while, you’ll start to enjoy investing, and watching your retirement account grow over time is almost as much fun as spending. If you need more motivation, putting money into an IRA is spending! You’re buying stocks and bonds and giving your money a chance to grow. A little change of mindset will help you see the benefit of saving without becoming bored.
3. Check your monthly fees. From utilities to insurance to every other type of subscription, there’s a good chance you’re paying for something that you don’t really use. Or, and this is just as common, you overpay for a service. When was the last time you looked at your car insurance policy? Or looked over your credit card statement to see what recurring charges are just slipping through your fingers? If you don’t mind spending, you might turn a blind eye to bad spending. Fix that and you’ll quickly save a decent amount of money.
You might not be able to eliminate that urge to spend, but you can be better about it. If you want to learn more about your money personality and find some more useful tools, check out TheMoneyCouple.com. Thanks for writing in!