Have you ever told yourself that you don’t make enough money to save? Or promised yourself you’d start saving when you got that raise or found a new job? We feel better when we make excuses for our bad money habits. But the truth is, it’s one of the most dangerous mistakes a person can make. 66 million Americans have no savings. The bad news is that Generation X-ers (ages 35 to 51) are in the worst shape—over 33% are living without a rainy day fund.
Our inner dialogue and what we tell ourselves guides our behavior—whether we want to admit it or not. It takes courage to open up and examine our limited thinking. And here’s something that’s hard to admit: it’s all about discipline. Before spending even one more dollar, honestly examine your current spending habits.
Pay Yourself First
Think of it as treating yourself better than your creditors. This is one of the most popular morsels of investing advice and can’t be stressed enough. If you do nothing else to change your habits, making yourself a priority is the best way to increase your personal wealth. Before you pay any bills, set aside a portion of each paycheck for your future. It is the single most powerful way to take control of your own money and it will make you feel wonderful.
Many years ago, I learned this from a coworker who actually wrote herself a check on payday. She would declare with a huge smile on her face, “I can’t spend it if I don’t see it.” Think about it this way: you’re hiding disposable income from yourself before it slips through your fingers.
Don’t know how to get started? Take a few minutes and follow these steps to get an idea of how much you can put away before paying your bills. Generally speaking, we tend to adjust our spending to what we bring home. It might seem difficult at first, but before long you’ll look forward to being the first one on your list of creditors.
The Tiered Approach
Start small. Begin today. Can you commit to saving a minimum of $10 a week? $10 grows into $520 in twelve months (and don’t forget the magical power of compounding). Once you get used to stashing a ten dollar bill each week, add $5, then another $5, then another. Over time, small steps add up to huge leaps forward. Take it as a challenge to find the perfect balance.
With the new Acorns app, you can immediately start investing your spare change. It’s heralded as the first mobile investment application where you can manage your investments from your smartphone. You simply connect your bank accounts and invest the change you receive from everyday purchases.
Put Your Savings on Auto-Pilot
Next payday, take a look at your paycheck. Taxes and other withdrawals are deducted before it ever reaches your hands. Enroll in your company’s 401k and set up an automatic deposit into an account every pay period. Believe it or not, you won’t miss it.
Stash Your Tax Refund
Stop thinking of your annual tax refund as “free” money. Let’s face it, it’s YOUR money. Consider this: you’ve been saving this money throughout the year and Uncle Sam has been your bank—and you didn’t earn a penny of interest for allowing the government to hold onto it. What if you diverted these funds to a savings account throughout the year? Talk about an immediate pay-off! Reduce the amount that is deducted on payday from your check and instead of pocketing the difference, deposit that cash into your 401k or IRA. You won’t get that warm and fuzzy feeling around tax time, but watching the balance of your retirement account increase month after month should make up for it.
How many wild ideas can you come up with to start saving money right away? A quick Google search will reveal lot of amazing and creative ways. Ideas abound, so see how many crazy ideas you can come up with yourself. You’ll find money you didn’t know you had.
It has been said that there are three types of people: those who save, those who wish they could save, and those who never think about it (until they have an emergency). Regardless of which group you fall into, it’s easy to get started. Make a decision to make one small change today and don’t look back. Before you know it, you won’t have to make any more excuses.