Like so many things in life, setting money aside as savings is a habit that needs to be developed. If you want to see your nest egg grow, you need to do what you can to encourage a savings habit. Setting money aside needs to become a way of life, instead of some sort of burden.
If you are having trouble getting into the habit of saving, you should try these five ways to keep you motivated:
1. Set Achievable Savings Goals
One of the biggest issues is that you may not have a goal. You just have an idea that you need to save money, but there is no true purpose for your money. It’s hard to stay motivated when you have no clear idea of what the money is for. So it is much easier just to spend it.
Instead of pointlessly saving, create achievable savings goals that give purpose to your money. Whether you want to save $5,000 in the next six months for a vacation, or whether you want to save up five months of expenses by the end of the year for your emergency fund, having a realistic goal gives you something to work toward — and progress you can see.
2. Reward Yourself for Reaching Small Milestones
You can reward yourself at certain milestones depending on the length of your goal. This helps you track your progress, and also helps keep you motivated to continue saving. These rewards should be fun things you might not normally do, but that are still small and within reason. It might be a day off (if you can take a personal day at work), a picnic in the park, dinner at a nicer restaurant than usual, or some other enjoyable activity. Just don’t blow all your savings while enjoying your small reward.
3. Automate Your Savings
One of the easiest ways to get into the habit of saving is to set up some automatic method of moving your money around. Whether you have money from your paycheck automatically deposited into a savings account (including a retirement account), or whether you do an automatic transfer each month, automatically having your savings moved around can help you adjust your lifestyle to what you end up as “take home” pay. Soon you won’t miss the money, but it will still grow and work for you.
4. Don’t Sweat the Small Stuff
Always denying yourself the small treats you enjoy, and focusing on penny pinching, can bring you to hate saving. While you can cut back on some of those small expenses that eventually add up, you might actually feel better about saving if you focus on cutting back on the big expenses. Forgoing the big TV is an one time thing that can save you $700 to $2,000. And you can still get good entertainment on your current TV, or use the Internet. You will probably find that you will get over the TV pretty quickly and move on. However, telling yourself everyday how you can’t get that delicious $2 bagel you love can start to create resentful feelings toward saving. It’s a daily litany of denial that can start to make saving a chore.
5. Look for High Yield Accounts
One of the most depressing things about savings is how slowly the money grows. You can increase your satisfaction with savings by looking for high yield accounts. While yields are still generally low, you can still do better than the less than 1% offered by a traditional savings account. You can also look for alternative products like money market accounts and funds, high-yield CDs and bonds. However, be aware that some of these options may not be FDIC-insured, and come with greater risk.
Bottom line: Setting aside money for the future is important, but you need to find ways to keep yourself motivated. Do any of these things work for you? What keeps you motivated to save?
{ read the comments below or add one }
One thing I’m doing now is setting money aside soon for PPC advertising and some other small funds for shopping @ the thrift stores soon so I can get my side hustle millionaire buying and selling game up to par value.
High Yield savings accounts are definitely the way to go considering regular banks are only paying 0.05%!
Some really good tips mentioned. Also, don’t forget to measure your progress! Sounds obvious, but I’m surprised at how few people actually track the progress of their money. We often do it when running a business, though seldom do people draw up their own personal balance sheet.
All it takes is a simple spreadsheet with your assets in one column and liabilities in another, and then subtract one from the other to give you an idea of your net worth. . Track this monthly or quarterly using the same layout to see whether you’re tracking in the right direction in relation to your goal.
Automated transfers are the best, as long as you don’t see it you don’t miss it. Navy Federal is good at helping me manage automatic transfers. As far as frugal living, nothing wrong with it at all…
I practice automated savings. Apart from that I’ve also created an emergency insurance fund that is solely to take care of any small claims, if they happen to crop up, so that I do not need to tap my insurance policy. Life insurance policies are another great way to plan for the future IMO.
These are great, realistic ideas. It’s hard for people to forgo that morning coffee or breakfast sandwich. Keeping yourself from buying the latest laptop every year is a huge blow to your savings. I don’t know many people who have bankrupted their savings by buying the occasional latte…
I use the milestone techinque to pay off my mortgage, and I have at least half of my payment for bills and contributions to retirement accounts automated.
Nice sound advice.
Hi
I think the point about automation is absolutely essential. If the money is not moved to an investment account it will find a way of spending itself 🙂 I also like the idea of saving on big items and keeping the small treats. Life is for living after all.
I like how you pointed out that you should have some kid of incentive towards saving. If you’re saving pointlessly then you’re going to get bored of it and start to spend all your money. But if you have something to look forward to, then you are going to be much more motivated to save.
And I no doubt agree with you with spending on smaller things that give you much joy. I love getting that fresh cup of tea (or coffee for others) the morning, it is what keeps me going during the day. Otherwise, what is the purpose of life if you can’t even enjoy a good cup of tea?
And definitely give yourself some breathing room when you are budgeting in savings. Otherwise it will most likely be unachievable and you will end up giving up saving your money.
Automating savings was one of those things I was always hesitant to do, but once I did it, it really had a profound effect on how much we were able to save. I also think it’s important to set those goals because if you’re not shooting for something – you’ll never hit anything.
I think setting a goal and automating are the two best tips. By setting a goal you know exactly what you’re trying to do and by automating the process, you won’t even realize the money is gone.
The most successful way to save in my opinion is to automate a certain amount, and then supplement that amount along the way.
Our local RBC bank is advising people to save $25 a week and touting “You can be on Bondi Beach [Austraila] IN FIVE YEARS.” Well, no, you can’t. By the time 5 years are up, the prices will have tripled, air travel will be even more difficult and unpleasant (and remember, it’s a 14 hour flight if you take it in one hop) and your life will be vastly different from what it is now. What I have done all my life is scrape and pinch for a year and blow it all on a wonderful, well planned vacation to a place I have read and studied about for that year. Once I came home from England with 12 cents in my pocket, but I will always have the memory of standing in North Yorkshire waiting for a local bus and suddenly over the hill directly in front of me rose The Red Arrow (Britain’s military aerobatics team, akin to our Thunderbirds.) My tip for saving: have 3 piggy banks you can’t see into (coffee cans will do). Save a different coin in each; ALL the coins of that type have to go in those cans. You can spend the other coins you get. Once a month empty the cans and roll the coins and put the money in the bank. Here in Canada we have $2 and $1 coins; one of my banks is an emergency fund of $50 in $2 coins that stops me from taking money out of my bank account. Works for me.
The power of setting realistic goals are not to be underestimated. When you are encouraged by the results (in other words, when you always hit your goals), the increased motivation will allow you to achieve pass your wildest dreams.
I can’t believe how much more I save now that I automate my savings. Because it’s automated, you just kinda forget about it so it’s really nice but then at the end you have this huge(well decent) amount of money in the bank. I would seriously recommend everyone to automate their finances.
I totally agree with your points. I am a strong believer of saving as much as you can, but living life too. I don’t want to suffer just so I can save a little more. Yes, retirement may come 6 months later than if we really scrimped and saved, but I would rather enjoy the journey.
This is something I’m starting to learn actually, though I admit that the reason why I’m “opening up” is because my income and nest egg have increased.
This might sound backwards, but when you are 40 years away from retirement and need to save $1 million, it’s harder than spend than when you are 5 years away and need to save another $100,000. (At least for me anyway)
People who read this and are wondering about my spending should note that I’m still saving quite a bit though.
So, don’t worry, I’m still very on track to a comfortable retirement now compared to a few years ago, if not “more” on track.