Saving money isn’t easy, especially with low interest rates, stagnant wages, and the rising cost of common items. We’d all like to save more money but it’s not always easy. Unexpected surprises, hidden expenses, and optimistic mental accounting are just some of the reasons your rainy day savings would barely stretch.
There are ways to take control, though. Here are three simple but important habits to help get your savings moving in the right direction.
1. Know what really happens to your savings in today's market
The phrase ‘putting money under the mattress’ is used a lot, but there’s some truth in it, albeit not in a literal sense. Putting your money in a checking account these days isn’t a great way to grow your savings. While it’s fine for day-to-day living costs, interest rates for current accounts are so low that you could end up losing money. As the cost of living rises, your money will be gradually eaten away. It’s a bit like eating celery – it’s literally more effort than it’s worth.
2. Be realistic
One of the quickest ways to break any commitment to trying to save money is by being unrealisatic. It’s like joining the gym. Getting in shape is a consistently popular New Year’s resolution, yet people quit in droves after just a few weeks.
Why does it happen? We get disillusioned when we don’t see quick results and feeling like a failure makes us all the more likely to quit.
The lesson here is to work out what you can honestly afford to save. Much like the gym - saving money isn’t about instant results, and often slow and steady is the way forward. For that reason, don’t sweat the small stuff too much – you’ll find lots of articles telling you to quit the daily lattes and, while that’s fine in theory, if you start robbing yourself of life’s little pleasures or tightening your belt too much then you’ll find it’s much harder to keep going.
Remember, it doesn’t have to be all or nothing – employ some moderation, but keep at it.
3. Have a plan and set goals
Like getting fit, it’s much easier to make progress when there’s a goal in mind and something to work towards.
Have a plan for how much you want to save each month, but get some goals in place too. It could be something short-term like a vacation or a new car. Or, you could be looking at medium-term goals like paying for the kids’ education, a wedding or, well, a really big vacation.
If your time horizon is ten years or more into the future and it’s money you can honestly afford to do without – or even lose – you may want to look more seriously at investing. Just remember that all investments can go up or down in value, so it’s important to understand what you’re getting into and to take independent advice.
Make a list of goals. The best way to get started is to get started. Knowing what you want is the first step to working out how to get there.