Trick Yourself Into Saving
My advice for people that struggle to save money is to trick yourself into doing it. That’s necessary because we are not wired for good financial behavior.
Consumer spending releases a rush of endorphins, but we don’t get any such positive boost from saving. Americans are particularly bad at saving. In 2012, we saved just 3.7% of our disposable income. People in other rich countries such as Sweden, Switzerland and Germany, all save more than 10%.
Once we accept that it is human to overspend, we can find ways to trick ourselves into saving for important goals, rather than spending our money on things we think make us happy, but ultimately don’t.
Here are some ways to encourage yourself to save for the future.
Make it automatic. Don’t give yourself the option to save money, because if you have to physically move cash from your checking account to a savings account or individual retirement account, you are less likely to actually do it. Talk to your employer about making automatic deductions directly from your paycheck that flow to a savings account or Roth IRA automatically. This way, you don’t have to do anything.
Write down your future goals. The hardest thing about saving money is forgetting what we are saving for. Retirement seems so far away, and the shopping mall is so close. It’s hard to forego pleasure for something that you can’t visualize. It helps to write down your future goals. Cut out pictures from magazines that represent what you want in retirement, and hang them where you see them regularly. It can be a constant reminder of why you put money away instead of spending it today.
Look at your accounts weekly. It’s easy to fall into the habit of ignoring your financial status. Not paying attention doesn’t make your problems disappear. You have to make reviewing your finances a priority. Set aside time each week to look at your spending, savings and income. Sign up for an online service like Mint or Manilla that lets you see all of your accounts and bills in one place with just one password. It’s surprising how much easier it is to save money when you are more conscious of it.
Don’t beat yourself up. We all fail from time to time when it comes to saving. You might end up spending more than you intended on a date night, or your car might break down unexpectedly. It’s okay. That’s just a part of life. It’s only a problem if you don’t get back on track. Don’t let the guilt of failing to save money stop you from meeting your goals.
Get started today. There is no better time to save than right now. Don’t wait until tomorrow, next month or until the kids are out of college. The longer you wait, the more you miss out on increasing your savings through compounding interest and long-term stock market gains. Talk to the human resources department at your job today to raise your 401(k) contributions, or set up automatic contributions to a Roth IRA.
Saving money is hard, but it is something you need to do for your future self. Use these tips to help you get started.
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Alan Moore, MS, CFP, is the founder of Serenity Financial Consulting in Milwaukee, Wis.
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