If you’re a spender by nature, saving money probably falls somewhere in between stepping on a Lego and getting a root canal on your personal pain scale. The problem is that when the refrigerator goes on the fritz or your roof springs a leak, you may end up regretting your less than frugal ways.
A new year is a good time to make a fresh start where your spending and savings habits are concerned. If you’re new to saving or you’ve tried to save in the past but you keep hitting a brick wall, here are some helpful tips for beefing up your cash reserves in 2017.
1. Put Your Goals In Writing
Keeping a mental inventory of your goals means you’re not chasing bits of paper but it’s not a foolproof system for building up your savings. It’s like going to the grocery story without a list. You always end up spending more than you planned and you inevitably forget the milk.
Before you do anything else, take the time to spell out exactly what it is you want to do savings-wise in the new year. For example, “save for retirement” is a good goal to have but it’s too vague to be actionable. “Save 10% of my income in my 401(k)” on the other hand gives you something specific to work towards.
2. Prioritize Your Savings
If you’re lagging behind where your savings are concerned, you may be tempted to try and catch up all at once. This can backfire, however, if you’re trying to save for retirement, grow an emergency fund or put money aside for your child’s future college expenses.
When you’re working with limited funds and trying to spread them between multiple accounts, it can take longer to see the savings start to add up. You may get so discouraged that you just decide to bail out altogether. If you have several different savings goals you want to work towards, start by focusing on the one that’s most important to you.
For example, if you want to put $5,000 in emergency savings and $5,000 in an IRA, think about which one is going to make the biggest difference in the short-term. If a disaster strikes, having some money in the bank means you don’t have to charge up a credit card to cover it. On the other hand, if you’re in your 40s or 50s with nothing saved for retirement, maxing out your IRA may take precedence over a rainy day fund.
3. Break It Down
There’s a saying that the best way to eat an elephant is one bite at a time and that same method applies to saving money. If you’ve set a goal of saving $10,000 in 2017, for example, you’re going to need a plan to make it work. That’s where dividing your goal into manageable pieces comes into play.
Over 12 months, you’d need to save $833 a month to add up to $10,000. On a weekly basis, that’s roughly $192. Take a look at your paycheck to see whether that’s reasonable, based on what you’re earning and how much your expenses are. If it is, then you’re already ahead of the game. If it’s not, take a closer look at your spending to see what you can cut out of your budget in order to swing saving the amount that you’re aiming for.
4. Create Reminders
Defining your goals is a step in the right direction but it can be easy to lose sight of them if they’re tucked away in a drawer somewhere. Tack a list of your goals to your refrigerator or the bathroom mirror so that you’re looking at them a few times a day. That way, what you’re saving for is always at the front of your mind.
Here’s another trick I’ve used with some success. Whenever I have a savings threshold I want to hit, I change my email password to a phrase that reflects the goal. For instance, if you want to save $10,000 for an emergency fund, you could change your password to something like “Save$10000”. Every time you login to your email or social media accounts, you’re driving the savings message into your brain.
5. Get a Partner
Working towards a goal on your own is tough, especially if it’s something you’re not used to doing. Enlisting a friend or family member to be an accountability partner can give you the motivation you need to keep going. They may provide advice or just encouragement but the main thing is that they help keep you on track.
Choose someone that you know to be financially responsible, instead of that one friend that always wants you to go out to dinner when they know you can’t really afford it. Give them a heads up on what your goals are and schedule regular check-ins where you share your progress.
6. Automate It
Automation can be your best friend when you’re trying to save more money and you want to avoid unnecessary headaches. It’s really as simple as linking your checking and savings account, then scheduling regular transfers between the two. You could transfer a few bucks each payday or a set amount one specific day of the month. Either way, you can relax knowing that the money’s getting moved into your savings account automatically.
Having a money fairy magic a wad of cash into your bank account would be nice but it’s not realistic. The truth is that saving money takes work, especially if it’s something you’re not used to doing. Keeping these tips in mind can help you grow your savings in the new year without a lot of unnecessary hassle.
What are your savings goals for this year?