We are going to talk about the “s” word. No, not spending. I think we all have a pretty clear idea of how to spend; we don’t tend to need too much motivation for that activity.
Saving is usually another story.
If you are like the majority of working people, you tend to spend what you make. It’s a very natural response to the hard work and time you put into earning your income. However, spending what you make or more than you make (debt) is cause for a pause. This type of lifestyle often leads to increased debt and lack of financial freedom. While you may have a great paying job today, there are no promises for tomorrow. The company you work for could go out of business, you may be faced with personal problems that limit your ability to work, or you may be suddenly forced to take on the financial responsibility of an ailing loved one. Whatever the circumstances may be, living a life with no savings is dangerous.
One of the key goals of establishing a savings account is to set aside 3 to 6 months of living expenses for emergencies. If the idea of starting a savings plan is overwhelming to you, start with these 5 steps to jumpstart your motivation:
1. Start Small – Don’t buy into the idea that you have to have thousands of dollars to start saving. This is like telling yourself that you have to run a full marathon to make exercise worth it. It’s not true. Every little bit adds up. Maybe you don’t have hundreds of extra dollars at the end of each month, but you might have $50 or $20 or even a couple dollars here and there. Chances are you can cut a couple dollars of unnecessary spending from your daily routine – do that and save it. Don’t go and spend your coffee money on an unnecessary donut.
2. Educate Yourself – Get encouraged and motivated to save by reading the success stories of other people just like yourself. Spend time researching articles, magazines, websites, and social accounts devoted to smart financial habits. You don’t have to agree with everything you read, but the more you educate yourself, the smarter you will be when it’s time to make decisions with your money.
3. Keep Track – It’s a psychological fact that when we write things down, we tend to be more committed to them. Keeping a log of your spending will help you determine just where your hard earned money is going and will illuminate areas where you can be more conscious with your money. Also, keep a savings log and note each time you make a deposit into your savings accounts, even if it’s just $10. You will quickly see how every little bit adds up over time.
4. Set a Goal – Having a very clear goal in mind will help you stay on track. Instead of having an ambiguous savings account, save for a specific vacation or a specific item that you have been drooling over. Your goal may be a material possession or maybe it’s greater peace of mind or having a comfortable emergency fund.
5. Automate – The easiest way to motivate yourself to save is to take yourself out as the middle man. Have a portion of your income devoted to a savings account and placed into a different bank account every time you are paid. Chances are you will leave the funds alone if you never see them in the first place.
This is not an exhaustive list of ways to motivate your savings, but it will get you on your way to a becoming more of a saver than a spender in the new year. Have a safe and healthy 2015!
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