Finances 101: How to Save
I grew up in a household where financial stability was never strongly present and the normal way of living was paycheck-to-paycheck with little to no money left over. I was fortunate to learn from this by seeing it as a negative example (how not to do things) instead of making the all-too-common opposite mistake of believing that it is a vicious inescapable cycle. Just because it was the norm does not mean it always has to be the norm.
I now work as a financial services officer and frequently see this same cycle happening to families and individuals. Speaking from experience and observation, I can say that this is a sad and difficult situation to be a part of. I know that for a lot of people, this is a crushing burden that leads to hopelessness, despair, negativity, and anxiety. I am fully aware that there actually are some people who really don't make enough money to save after obligations are met, but I also know that this is a sad exception and not the actual case for the overwhelming majority of people.
Many who find themselves unable to save might think there's nothing they can do to change that reality. I firmly believe that this is nearly always untrue. So, in light of this, based on my own personal experience as someone who came from such a household and on my career as a financial services officer, I wish to offer my basic advice on how you really can create an ability to save that can hopefully turn into a habit.
1) Patience is key! No mindsets or habits are stopped or created overnight. You have to make the conscious decision to change your financial habits. You can't just feel sorry for yourself, hope for a change, or quit after a brief effort. You have to create self-discipline, practice discretion in spending, and learn the benefits of self-denial and delayed gratification. You have to change your habits before you can begin establishing any real savings. Think long-term: months and years, not days and weeks. If you don't start saving now, rest assured that there will come a day when you will not have money.
2) Think about every expense. Social media makes this seem impossible, but you have to know who you really are instead of who you want to project yourselves to others as. A key is to think not what seems fair compared to what everyone else is doing, but what is prudent and makes more sense for where you are and what resources you have. Not everyone is going to live the lifestyle of the rich and famous. The first tangible step to begin saving when you're used to living paycheck to paycheck is to really monitor where you are spending money. I guarantee you that you will find areas where you can spend less, but you first have to stop denying that you spend money unnecessarily.
One of the biggest areas where people are unwise with money, especially when they're on a tighter budget, is food. Don't eat out every day! Those small expenses add up. Cook meals with the intention of having leftovers for subsequent meals. Get water instead of blowing $2-3 on a drink when you eat out. Buy foods that are not name brands. Sometimes this sucks (Oreos!), but often there's not a huge difference. Drink less alcohol; alcohol is expensive! Smoke less cigarettes! Look at a few consecutive bank statements and you will be surprised at how many opportunities you are wasting on small items that have a great cumulative effect. Some of these cuts really feel painful, but will be a necessary sacrifice if you struggle to save but want to begin doing so. A tough reality in life is that not everyone is dealt the same cards, so some people will have to make sacrifices that others don't.
3) Start small! My target here is people who are not rich, but want to save. This means that you will have to start small. You probably won't be able to save $50-100 every week or month, but I am confident that you can save something if you try. I would advise to not necessarily set a goal amount to reach in a savings account at first. Instead you have to create a habit of saving on a regular basis. For some people this means putting $10-20 in your savings every time you get paid. Though that's a small amount, its aggregate effect can surprise you-especially if you truly make it a habit to put money back for saving.
The easiest way to do this is to treat saving as if it's another bill. When you pay your bills each month, make putting a small amount into your savings account part of that process. Put it into an account that can't be accessed with a debit card. What's left after that can be your discretionary money to spend on entertainment, shopping, eating out, etc. The most important thing here is to do it, and do it regularly regardless of the amount.
4) Really know the difference between a want and need. We can all use a reality check here. It is not a necessity to wear name-brand clothes, carry an iPhone, or get a new car every 5 years. Once again, we have to look at our own situation, and not try to compete with others. How is it that you can't save, but you can have ten nice pairs of shoes, the latest smart phone with unlimited data, eat out every week, and get a new car loan as soon as you paid off your last one? It doesn't really make sense to complain that you can't save in these cases. You can save! You are just choosing to put your money somewhere besides a savings account. You're willing to sacrifice saving so you can have these things, but you aren't willing to forgo some of these things so you can save some money. You've got to change your mindset and habits!
5) Don't depend on credit cards! Too often, people spend unnecessarily on credit card debt. Stop using those cards and focus on paying them off. You may have to make this a goal before you can make beginning to save a goal. That may mean that your goal of beginning to save could be years away. Unfortunately, sometimes that is going to be a reality. It's ok to use credit cards, but DO NOT DEPEND ON THEM TO MEET YOUR OBLIGATIONS. That will trap you in a cycle where you accrue interest, can only meet minimum payment, and your balances may go up faster than down without evening making new purchases! If you can't save money, you should not be using credit cards.
6) Learn to say NO! Sometimes you have to deny yourself things you want. Sometimes you have to deny friends and family members' requests for money. This is also a tough reality. Sometimes you are in a position to help others, but sometimes you just aren't. You can't have everything you want (even if you can afford it!), and you can't give to others everything they want or think they need. Caring for others is very important, but if you aren't in a position to save to care for yourself, you're also likely not in a position to do that for others.
7) Control your budget; don't let it control you! Don't overwhelm yourself with sticking to a rigid, controlling budget. Having a budget is a great thing, but it needs to be a tool to help you, not a tool that creates more stress. Deviation is ok. Sometimes things come up. You have to make yourself be the boss, not the budget. This means that sometimes you chose to honor the budget, but on some occasions you treat yourself. Make a budget that is realistic and leaves margin. This is the best way to not simply feel constrained and pressured by your budget. A budget that is overwhelming is a budget that will not be followed very long. This will lead to a failed attempt to save and will further a defeatist attitude.
So these are my quick tips for how to begin transitioning from living paycheck to paycheck to actually saving money. You have to change both your mindset and your habits. You have to learn to deny yourself. And you have to learn to make tough choices. I promise you that it can be done. You just have to make the effort. Desire is not enough.
I now work as a financial services officer and frequently see this same cycle happening to families and individuals. Speaking from experience and observation, I can say that this is a sad and difficult situation to be a part of. I know that for a lot of people, this is a crushing burden that leads to hopelessness, despair, negativity, and anxiety. I am fully aware that there actually are some people who really don't make enough money to save after obligations are met, but I also know that this is a sad exception and not the actual case for the overwhelming majority of people.
Many who find themselves unable to save might think there's nothing they can do to change that reality. I firmly believe that this is nearly always untrue. So, in light of this, based on my own personal experience as someone who came from such a household and on my career as a financial services officer, I wish to offer my basic advice on how you really can create an ability to save that can hopefully turn into a habit.1) Patience is key! No mindsets or habits are stopped or created overnight. You have to make the conscious decision to change your financial habits. You can't just feel sorry for yourself, hope for a change, or quit after a brief effort. You have to create self-discipline, practice discretion in spending, and learn the benefits of self-denial and delayed gratification. You have to change your habits before you can begin establishing any real savings. Think long-term: months and years, not days and weeks. If you don't start saving now, rest assured that there will come a day when you will not have money.
2) Think about every expense. Social media makes this seem impossible, but you have to know who you really are instead of who you want to project yourselves to others as. A key is to think not what seems fair compared to what everyone else is doing, but what is prudent and makes more sense for where you are and what resources you have. Not everyone is going to live the lifestyle of the rich and famous. The first tangible step to begin saving when you're used to living paycheck to paycheck is to really monitor where you are spending money. I guarantee you that you will find areas where you can spend less, but you first have to stop denying that you spend money unnecessarily.
One of the biggest areas where people are unwise with money, especially when they're on a tighter budget, is food. Don't eat out every day! Those small expenses add up. Cook meals with the intention of having leftovers for subsequent meals. Get water instead of blowing $2-3 on a drink when you eat out. Buy foods that are not name brands. Sometimes this sucks (Oreos!), but often there's not a huge difference. Drink less alcohol; alcohol is expensive! Smoke less cigarettes! Look at a few consecutive bank statements and you will be surprised at how many opportunities you are wasting on small items that have a great cumulative effect. Some of these cuts really feel painful, but will be a necessary sacrifice if you struggle to save but want to begin doing so. A tough reality in life is that not everyone is dealt the same cards, so some people will have to make sacrifices that others don't.
3) Start small! My target here is people who are not rich, but want to save. This means that you will have to start small. You probably won't be able to save $50-100 every week or month, but I am confident that you can save something if you try. I would advise to not necessarily set a goal amount to reach in a savings account at first. Instead you have to create a habit of saving on a regular basis. For some people this means putting $10-20 in your savings every time you get paid. Though that's a small amount, its aggregate effect can surprise you-especially if you truly make it a habit to put money back for saving.
The easiest way to do this is to treat saving as if it's another bill. When you pay your bills each month, make putting a small amount into your savings account part of that process. Put it into an account that can't be accessed with a debit card. What's left after that can be your discretionary money to spend on entertainment, shopping, eating out, etc. The most important thing here is to do it, and do it regularly regardless of the amount.
4) Really know the difference between a want and need. We can all use a reality check here. It is not a necessity to wear name-brand clothes, carry an iPhone, or get a new car every 5 years. Once again, we have to look at our own situation, and not try to compete with others. How is it that you can't save, but you can have ten nice pairs of shoes, the latest smart phone with unlimited data, eat out every week, and get a new car loan as soon as you paid off your last one? It doesn't really make sense to complain that you can't save in these cases. You can save! You are just choosing to put your money somewhere besides a savings account. You're willing to sacrifice saving so you can have these things, but you aren't willing to forgo some of these things so you can save some money. You've got to change your mindset and habits!
5) Don't depend on credit cards! Too often, people spend unnecessarily on credit card debt. Stop using those cards and focus on paying them off. You may have to make this a goal before you can make beginning to save a goal. That may mean that your goal of beginning to save could be years away. Unfortunately, sometimes that is going to be a reality. It's ok to use credit cards, but DO NOT DEPEND ON THEM TO MEET YOUR OBLIGATIONS. That will trap you in a cycle where you accrue interest, can only meet minimum payment, and your balances may go up faster than down without evening making new purchases! If you can't save money, you should not be using credit cards.
6) Learn to say NO! Sometimes you have to deny yourself things you want. Sometimes you have to deny friends and family members' requests for money. This is also a tough reality. Sometimes you are in a position to help others, but sometimes you just aren't. You can't have everything you want (even if you can afford it!), and you can't give to others everything they want or think they need. Caring for others is very important, but if you aren't in a position to save to care for yourself, you're also likely not in a position to do that for others.
7) Control your budget; don't let it control you! Don't overwhelm yourself with sticking to a rigid, controlling budget. Having a budget is a great thing, but it needs to be a tool to help you, not a tool that creates more stress. Deviation is ok. Sometimes things come up. You have to make yourself be the boss, not the budget. This means that sometimes you chose to honor the budget, but on some occasions you treat yourself. Make a budget that is realistic and leaves margin. This is the best way to not simply feel constrained and pressured by your budget. A budget that is overwhelming is a budget that will not be followed very long. This will lead to a failed attempt to save and will further a defeatist attitude.
So these are my quick tips for how to begin transitioning from living paycheck to paycheck to actually saving money. You have to change both your mindset and your habits. You have to learn to deny yourself. And you have to learn to make tough choices. I promise you that it can be done. You just have to make the effort. Desire is not enough.
Comments
Post a Comment