Seven Habits of Highly Effective Savers
Saving money can be a bit of an art form. You may be fantastically frugal, but that doesn’t mean you’re maximizing your potential as a saver.
The key for highly successful savers is cultivating helpful habits that make saving money second nature.
So how do these highly successful savers get the job done?
The dollar you never see is the easiest one to save. Effective savers use the resources at their disposal to automate the savings process.
Have a standard portion of each paycheck diverted into a savings account. If you earn cash back on credit card purchases, have those automatically routed into a savings account as well. By automating your contributions into savings you can build your savings at a nice, regular pace, while never feeling the pinch of manually moving money from one account to another. If you never had the money in your checking account to begin with it doesn’t feel like such a sacrifice.
They pick a strategy that suits their personality
Everyone is different. Just because a pair of pants says “One size fits all” doesn’t mean everyone is going to want to wear it. The same goes for managing your finances and building your savings. A strategy that works for someone else may not work for you. So take the time to find a strategy that matches your personality, paying careful attention to the types of motivation that work on you.
They create and fill “buckets”
Saving money can be a bit of a joyless grind if you don’t connect that effort with the goal it’s supporting. That’s why it can be extremely helpful to create a series of savings goals with definitive finish lines.
For example, if you’re planning on taking a vacation, calculate the costs and make that dollar amount a “bucket” that you work towards filling. You can do the same thing with emergency savings, college savings, saving for a down payment on a house, etc. Labeling your accounts and tracking your progress can help give you a sense of excitement and momentum.
In every financial life the occasional tough decision must fall. Effective savers have a tendency to be effective at prioritizing. This means understanding which goals supersede other goals, and making decisions accordingly.
That may mean losing out on some short-term enjoyment, but it’s how you keep on track with those bigger, more important goals.
They step-down when appropriate
One of the fundamental keys to saving more money is spending less money. There are a lot of ways to go about doing this, but one of the simplest is to look for opportunities to step-down your spending.
Rather than radically altering your financial habits, step-down spending requires only that you reduce your existing expenses by degrees. You still dine out, but you dine out less. Small, incremental changes tend to stick easier than major overhauls.
They maximize their money
Saving is more than simply not spending. Effective saving also involves making the most of the money you’ve already saved. This means looking into alternate savings vehicles and creating a savings/investment plan that maximizes your money’s potential while also helping you achieve your goals. How much risk you're willing to take is up to you, but your money can't grow at all if it's stuffed under your mattress.
They create routines (not obsessions)
Eventually, if everything comes together, you’ll find that you rarely think about saving money. It will just be something that you do. It’s similar to exercise. When you build a routine that works for you, you just do it, without a lot of fuss. The same goes for saving money. Make it a routine that feels right to you and your savings will grow faster than you ever thought possible!
If you're struggling to get started, help is always available. Consider connecting with a credit counselor to discuss your goals and your challenges. You'll walk away with a personalized plan of action and tips for overcoming your setbacks.
Article updated September 2020