Saving money is one of those habits that we know is good for us, but might not have developed particularly well. For an individual who doesn’t currently save, perhaps it’s because they’ve faced some financial hardships in the past, that they’re too busy “enjoying life” or that they simply never saw the value of devoting any of their energy to saving.
But at the end of the day, none of those reasons is particularly important. Rather than spend time figuring out why we don’t yet have that good habit in place, it’s better to simply start building one.
Here is some banking advice and pointers for developing and improving your own money-saving habits.
- Take a Financial Inventory. Sometimes the biggest incentive to getting into a money-saving habit is merely understanding that your current financial situation might not be as strong as you thought. By taking a financial inventory you’ll be able to quantify exactly how much you currently have saved, as well as your current assets and liabilities. This is usually known as calculating your Net Worth. Understanding clearly that you might not have as much saved as you thought can give you a strong push to start doing so.
- Make a Budget. Even though you know you should be saving, you might not have a good idea of what is a reasonable savings amount to target each month. Having a personal budget that clearly identifies your income and all of your expenses can help make this happen. There are many budgeting tools that you can use. When you have a detailed budget you can identify potential areas to cut back on in order to boost your savings rate.
- Be Creative. In order to maximize your potential savings, don’t assume that any category of your expenses is fixed. Nearly all things can be changed and scaled back on, provided that you have enough will to do so.
- Involve Your Family and Friends. Even though we’re talking about your personal finances, your daily life probably involves many other people. It can be difficult to save as much as you’d like if you have friends and family members who may be competing for your financial resources. For example, your budget may demonstrate that you spend a bit too much going out for with your friends, so consider proposing less costly alternatives sometimes. Similarly, if your family spends too much money going out to eat, come up with a less costly way to still get the quality time together. By involving those in your life who are closest to you the savings process becomes easier.
- Prepare Yourself for a Change. Even once you’ve identified the areas that you want to cut back on in order to boost your savings rate, it’s quite another thing to actually go ahead and change your behaviors. If you assume that changing your other habits will be easy, you may be frustrated to find that it requires a little more work, and frustration can lead to failure. If you are targeting multiple areas, change one at a time and to give each change some time to become a new habit before trying to change the next one.
The best way to improve your savings rate over time is to do so in a deliberate and sustainable manner.
Tags: Banking Advice, Budgeting, money saving, saving money