If I’ve learned anything in my work as a financial planner over the past eight years, it’s that if something is too hard to implement in our financial lives, chances are we just won’t do it. Most of us know the importance of saving for financial goals, but go about saving all wrong—and therefore make it much more painful than it needs to be. So to make things easier for you, I’ve outlined five ways to help you save more this year.
1. Have clear goals
Know what you’re saving for. How can you reach a target if you don’t know what the target is? Having clearly defined goals will help you stay motivated with your savings plan. Want to save for a home down payment? Great, then figure out how much you need, by when, and how much you need to save every month in order to reach that goal. When your goals are S.M.A.R.T.–that is, Specific, Measurable, Attainable, Relevant and Timely–you will be able to stay motivated for the long haul and not fall victim to all the other things you can use your money for on a daily basis.
2. Automate your savings
So many people don’t save, or find saving difficult, because they are going about it all wrong. They follow the old method of trying to save, which is spend first and save whatever is left over. But let’s be honest: There is never money left over, so why make it so difficult? Instead, follow the “pay yourself first” strategy and set up automatic savings just like any other bill, then spend whatever is left over after you save. This takes the emotion out of it, and before you know it, you will see your savings account balance actually going up month after month.
3. Prep your meals for the week
Dining out and entertainment are two of the biggest money pitfalls for people. But with a little bit of planning, you can hit the grocery store before the week starts and have your meals mapped out for the rest of the week. Plus, when you eat at home, not only are you most likely saving money (no tax and tip to worry about), you’re probably saving calories, too. And who doesn’t want to be rich and skinny?
4. Calculate the cost of your time
One of the best things I ever did was calculate the cost of my hourly rate. That way, when I am out shopping and I see a pair of shoes I want, or a nice pair of yoga pants, I ask myself how many hours will I need to work to pay for them. For example, if your hourly rate is $15, and you see a pair of shoes for $120, that pair of shoes will cost you eight hours of work. If that’s worth it to you, you can buy them. If not, you can move on, knowing you made a mindful financial decision.
5. Practice delayed gratification
Even when you set up your financial system to save money first, you still need to manage the “whatever is left over” amount effectively. We are constantly bombarded with messages from the media to buy, buy, buy, now, now, now, so having a rule that you will wait a day or even 48 hours to buy something can really help you get clear about what is a want versus a need. I find that when I delay gratification with my money, I end up not buying half the things I originally wanted, because I find other places I would rather spend my money or save my money for.
What are some of your favorite money-saving tips?