Working in the financial industry I knew how important it was to save money. However, knowing that didn’t make me save more. I remember telling myself I just needed to make more money. When that didn’t help. I tried budgeting but failed miserably with that too.
Eventually, I realized the problem wasn’t the lack of money or budgeting. My problem was my beliefs about money and savings. Shifting my mindset has helped create a positive relationship with money that’s created better savings habits.
Are you saving money? Or are you finding excuses to not save?
I want you to remember these three phases: Saving money is important. Saving consistently is key. Saving early is impactful.
Why you probably can’t save money
You already know why it’s important to save money but continuously run into the issue of not being able to save. I can empathize because I was there once. The reason many of us have failed in saving is due to instant gratification and over-consumption.
There are many ways to start saving money, but the biggest challenge is overcoming your beliefs. Saving money is for everyone. It must be a priority in your life. Again, we save money to make future purchases possible. It helps us afford our living expenses without being tied to a job.
Shift your mindset and prioritize saving overspending.
How can you save money? Open up savings accounts with your current financial institution or find financial services companies online. I set up automatic transfers and rules that transfer money from my checking account into my savings buckets.
Don’t wait till you have “more” money to start saving
Everyone spends money because we make money to spend it. Accepting this truth has helped me curtail spending on a whim that would impact my ability to spend with a purpose. Mindless spending leads to overconsumption and dissatisfaction. Your probably not saving because you believe your time at work must be represented by what you can purchase at this very moment.
Everyone can save money. If you believe you cannot, then that’s the first belief we must challenge in order to shift your mindset. Why do you believe you cannot save money? Can you save $5 per week? I think you can. I believe in you and I want you to believe in yourself too.
Keep these in mind:
- Savings is a safety net when income fluctuates. Having a savings account, you’ll have money available to cover unexpected expenses or periods of underemployment or medical emergencies.
- Savings helps you limit credit use. Credit is a tool and when used as leverage can support wealth creation. However, mindless use of credit will lead to long-term debt that will weigh you down.
- Savings can lead to wealth creation. When you start saving money, you’ll find ways to make money with money through better interest rates or investment into the stock market.
- Savings allows you to purchase things too. Imagine being able to buy things without relying on credit. You’re focused on enjoying the product as opposed to monthly payments.
Choose to have a purposeful savings strategy
A very important process I created helped me save more by allocating my money to achieve specific goals. I describe this purposeful savings strategy in more detail in my book, You Only Live Once: The Roadmap to Financial Wellness and a Purposeful Life.
With the purposeful savings strategy, you want to save for rainy days, emergencies, short- and mid- and long-term goals. It’s about being specific so you can be clear on how your money will be used to live your dream life.
- Rainy day funds help you cover expenses related to unforeseen events. I suggest having the equivalent of your auto insurance deductible. For example, if your auto insurance deductible is $500, have $500 in your rainy day fund. After using the money to cover expenses, make sure you’re contributing to get it back up.
- Emergency funds cover periods of unemployment or underemployment. This savings account should be used to cover your living expenses. It’s not used to buy the new pair of shoes or cover the expense of changing a flat tire. Have at least 6 months of living expenses.
- Experience fund is two-weeks of salary to cover expenses related to vacations or long weekends. You need time away from work where you can disconnect and recharge.
- Freedom fund is a savings account I recommend for everyone. The goal is to save enough money to cover your living expenses for an entire year. Freedom is the opportunity to leave a job to explore new interests or take a sabbatical.
Identify your short, mid-, and long-term savings goals
What are the things you’d like to purchase, accomplish, or experience? Be specific. I find creating two columns on a sheet of paper quite helpful. On one side write down everything you want to do or have. On the other column, decide when you’d like to accomplish those goals.
Identify your short-term goals such as saving for a vacation, holiday spending, expected taxes for the year.
These savings goals are tied to bigger purchases such as home and auto purchases, college expenses, and a dream vacation.
Long Term and Retirement
Everyone should save for retirement. Retirement isn’t an age. It is a financial number. You can retire when you’re 70 or retire at age 30. It all depends on how much you save, invest, and control your lifestyle expenses.
Finally, I want you again to remember to save money, save consistently, and save early. Now, what are you saving for? Are you ready to shift your beliefs about money and prioritize saving money?