Practical Steps to Reaching Your Savings Goals
When it comes to money, there's one factor that splits everybody into one of only two categories. You either wish you were better at saving money, or you're already rich. There's nothing and nobody in between! If you're already rich, you have no concerns about saving money for the future. If you're not, you've probably started and stopped saving money more times than you can count, and you wish you were better at making those savings grow.
In the current global financial climate, people - and especially young people - are finding it harder than ever to put money away for the future. That's sad to see, because when we don't have savings, we're making things more difficult for ourselves both in the present when an emergency happens, and also in the future when we want to be able to rely on our savings for either big purchases, or our retirements. Having savings is of vital importance, and so regardless of how much or how little you feel you're able to save each month, it's essential that you do so and start sooner rather than later.
This article isn't about what type of account to put your savings into, or where to invest your money. We're not qualified financial advisers, and we don't pretend to be. Instead, this is just simple honest advice about how to adapt a saving mindset if you don't already have one, and how to give yourself a better chance of holding onto those savings instead of dipping into them when you're a little short of cash.
Write Down Your Saving Goals
We don’t believe in magic, but we do believe in psychology. Psychology tells us that writing down your goals makes it more likely that you’ll achieve them. If your goals are written down in a place you’ll see them every day, you’ll consciously or subconsciously always be striving for them. That’s why you need to have specific savings goals, and they need to be written down in a place you’ll look at them regularly. It’s hard to commit to saving money when you don’t have a specific purpose for it - you’ll always be thinking of something you could spend the cash on right now, and so you’ll use it for that purpose. Decide what you want to do with your savings money, and when. Do you want to buy something when you’ve saved $1000, or £10,000? Is it a bigger goal, like providing for your family’s future? Write it down, make it visible, and remind yourself of it.
Commit and Repeat
Your savings habits should become like clockwork. You should become so used to doing it that you don't even think about it - it's just part of your daily, weekly, or monthly routine. You can reach that point by repeating the same action at the same time, on the same day, whenever it is you move your savings money into your savings account (more on that in a moment). Saving is the exact opposite of gambling unless you're a very lucky gambler, but we're going to borrow a metaphor from online slots anyway: you have to keep spinning until you're winning. If you bet ten dollars on online slots, you may not win very much. Keep on betting ten dollars, and if you have an unlimited amount of cash to put in, you'll eventually win more than ten dollars back. Because of interest, your savings account will eventually pay out more than you pay into it. It's like playing online slots, but without the losses when your winning line doesn't come up. You just have to keep on 'spinning,' and that means repeating the same process over and again.
Make Your Savings Hard to Access
If you try to save money in your checking account, you're doomed to failure. Your savings will be mixed up with your 'everyday' cash, and you'll inevitably end up spending it. If you open up a savings account, not only will you start making interest on your balance, but you'll also create a clear separation between the money you have available for the here and now, and the money you're putting away. Don't stop there. If you're saving money for a variety of different purposes, open an account for each purpose. Have separate accounts for your college fund, your wedding fund, your vacation fund, and so on. If you can see where your money is (and it's clearly labeled), you're less likely to take it out on a whim. You could even ask your bank to make it impossible to withdraw money from your savings account unless you visit them in person, which further reduces the chances of whimsical spending.
Use Up Old Expenditures
Most people have an expense that will eventually reduce or come to an end. A typical example might be a loan or a credit card bill, but this could also be a utility bill that you've been able to reduce through negotiation. Don't spend that extra money on yourself. You've already proven to yourself that you can survive spending whatever it is you used to spend on these repayments, and so now you can move whatever it is you've saved into your savings account. If your loan was $400pcm but has now come to an end, you should be saving $400pcm. If you've just saved $30pcm on your electricity bill, that's great! That's $30pcm more to go toward your savings! Every reduction in essential expenditure should be answered with an increase in savings. That's the fastest way to save more even when your income hasn't increased.
All of the above steps require determination and discipline, but nobody ever said saving money was easy! We do, however, believe that anybody can do it - and the four steps described above are the best way to go about it. Toward the start of the article, we said the best time to start is right now, and we meant it. If you put it off until next week or next month, you'll find the same excuses then as you have done this time around, you'll never get started. Be tough with yourself, make that first sacrifice, and it will be easier to do so next time. As the old proverb says, a journey of a thousand miles begins with the first step. In your case, a journey to ten thousand dollars starts with the first dime - so open a savings account, and throw one in there!