We all talk a lot about how to cut this cost or that… all in an effort to save money. But cutting spending only gets us halfway there. There’s a difference between paying less for things and money saving habits that actually put cash in your savings account. This post covers the best saving habits I’ve implemented that truly grow your cash reserves towards your savings goals.
Switch to Aldi and save 1000% on your groceries! (Yes, you should definitely do that!)
Buuuut, what is happening to that 1000% of grocery dollars that you didn’t spend?
In other words, not spending money is not the same as saving it.
What's In This Post
The difference between spending less & saving more
You need a system of actually stuffing money into a ‘savings’ vehicle of some type. This means savings account, paying debt, investing.
Otherwise, you know what happens…
Sweet, I just took $20 worth of stuff out of the cart before checkout. Yay for saving $20. Next day, I pick up some new shoes for one of the kiddos. Usually, I wait for hand me downs from a friend. But I ‘needed’ something quicker and I, besides, just “saved” $20 yesterday.
Cue the screeching brakes!
I didn’t save a dang thing. I simply shifted spending $20 at one store to another in this scenario.
Costs will always expand to consume all available money! You were somehow keeping your kid in shoes before. You need to keep doing that exact same thing, instead of subconsciously allowing savings one day to just disappear another.
Expenses can (and do) always expand. It’s the foundation of lifestyle creep. This is why people get trapped feeling like they never have… enough.
Our consumerist brains naturally think this way. Tax refund! Finally, we can get that new patio furniture. That raise finally came through! I can refresh my wardrobe and take a vacation. Now, if any of those things are your highest priority values and part of your vision for your life. Then by all means, that IS where you should shift your spending.
But all too often, we miss saving money for the important stuff because it keeps running through our fingers on daily life stuff we don’t think deeply about. Believing we’re broke because we don’t earn enough is a pervasive lie we tell ourselves. Because next year you’ll earn more… and still be as broke. Unless you adopt habits for saving.
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The first order of business is to shift your mindset and then to shift your habits to align with that.
Mindset shift: Savings is not what’s leftover. Your paycheck is not spending money.
Your income is for covering the necessary bills and mandatory expenses of life, then hoarding into a savings account. That’s the secret! After saving your money (including funding your emergency fund and having your irregular bills and expenses covered for the next 12 months), then you choose what to intentionally spend money on to support your ‘wants’ in life.
7 essential saving habits
These money saving habits make real savings happen & keep your money safe from unintentional spending. If you’re ready to start saving real money, these strategies will make that happen.
1. Pick a strategic savings vehicle
Open an online savings account separate from your main bank. These online banks link electronically to any other bank account to easily move money back and forth between your day to day checking to your online savings accounts. BUT the transfer typically takes about 2-3 days. This delay helps keep you from making quick decisions to ever use money from your savings account. When you decide to put money into savings, you’re sending it off to online banking land (I use Capital One), 2-3 days away. It’s a nice psychological separation.
Often, online banks offer higher interest rates for earning on your money as well. Currently, interest rates are in the tank across the board, so I won’t go out of my way to recommend this bank or that. Personally, I use Capital One for this account, which has a reasonable interest rate, as well as no fees or minimums.
2. Make recurring savings automatic
Repeated savings (monthly, or per paycheck) is a classic, but is one of the best tips on saving money. Because it works.
Pay your savings account using recurring automatic transfers from your checking account, right along with the monthly bills. This is the “pay yourself first” principle. Just like the mortgage must be paid, your dedicated monthly amount to savings must also be paid. If you’re currently saving $0 on a recurring monthly basis, start with $20 or $50. You will find a way to live without it. It’s like giving yourself a paycut… one that makes you richer. Start small, do it every single month, and then increase it each month. Even small amounts make a difference over time.
>>> Think you can’t afford to automatically save something every month?
>>> It’s probably time to abandon traditional budgeting and build a simpler, smarter spending strategy. Get your free workbook right here. Abandon the path of being broke, take action & join me on the path to amassing savings!
3. Park all new money into savings first
Regardless of any intended use of any ‘extra’ money that heads your way (i.e. windfalls), always put that money in savings first. As a habit. New money must always go to your savings account to cool off. That automatic reflex to put the money in savings will help replace the automatic reflex to buy something instead. Plus, you’ll have that added “think twice” built in when you have to pull the money back out of your savings account (that takes 2-3 days, see #1) to spend.
4. Never cancel recurring savings, even if you need it
This is really the same principle as parking all your ‘extra’ money in savings first. It’s a money mindset thing.
All unobligated money should live in savings. Read: You always carry out your recurring savings. If money is needed from savings, that is a decision to be made, a line item to write out (if you’re using my spreadsheet), and a transfer out to be made. But making that intentional withdrawal choice is a separate decision from your commitment to always, without fail, move money into savings every month.
In short, always save. Then decide how to utilize that savings. I’ve had months where I’m pulling $2,000 out of savings to pay taxes or something. But I still set up a transfer for my monthly $2,600 to move into savings (our savings rate peak, by the way!). And I set up a separate transfer to take the $2,000 out. Yes, mathematically this was just a net transfer of $600 to savings that month. But there’s something critical about the psychology of faithfully committing to your monthly savings rate. And treating all other transfers separately.
5. Track it & project it out
Line item in, line item out. Write in a spreadsheet line item (or whatever method you choose) when you make a deposit (Woot! That always feels good!). And then write in a line item when you make a withdrawal and note the specific reason- recording it makes you think twice about how purposeful or necessary a spending choice it is. And having all those transaction line items in one place helps you weigh choices right next to each other.
Get ready- this is the best tip for saving money. It’s all about seeing it build up… in your BFF spreadsheet. Using my spreadsheet, I also project out the savings. It’s easy and so motivating to see how that $100 per month piles up to $1200 at the end of the year, plus the $500 bonus from work and $800 back at tax time. You can see all that anticipated money add up in your projected savings account spreadsheet. Seeing you’re on track for $2,500 from zero is very motivating to stick with it.
6. Get hooked on amassed vs piecemeal spending power
I got hooked on the power of saving up at a very young age. My first goal was to buy my own horse. I never (of course) bought the horse of my ten year old dreams, but I did buy a very nice computer set up to take to college. I really enjoyed customizing my own Dell laptop to head off to school, which was completely paid for by my 17-year old self. And for context, that was 2001 when a top notch laptop and accessories was about $4,000!
Probably the next time I spent a few thousand dollars in my still quite young life was to travel to New Zealand for 10 days to be part of my friend’s wedding and travel outside the country for the first time in my life. That was when I was living off of $1,400 a month in graduate school. So how did I do it? I had the savings. I had that money already from consistently putting money away all the years of college and grad school before that. Just $50 a month for 6 years is $4,000. So, ultimately, all that consistent saving (instead of eating out and ordering cocktails to the end of 100% of my money) ultimately bought me a once in a lifetime trip when the opportunity arose.
Ultimately, realizing the power of saved up cash, instead of credit card swiping all of it away on the everyday stuff, is very motivating. Always save something for the big stuff. You’ll get hooked too.
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7. Make money hoarding your thing
Feel like a rebel? Then find something to rebel against that translates to putting money in the bank. Become an anti-consumerist- take that marketing geniuses! And adopt a knack for piling up your money, instead of piling up things. A little dose of money hoarding is a good way to get focused on the act of literally saving money. Instead of the false mirage of “saving” money by spending it (i.e. deals, coupons, sales), the falsehood we are all led to believe from marketers.
Key Takeaways
With these seven saving habits in mind, you can take your efforts to spend less… and pair them with a real set of strategies for truly saving more. Socking away cash to savings will enable you to maintain a fully funded emergency fund (to avoid credit card debt!) as well as the cash needed to fund your other two layers of savings.
Over time, good money habits (good saving habits) like these will become second nature. And turning these strategies into your own saving habits will quickly put (& keep!) thousands in the bank to support your financial and personal goals.
Related reading:
- Tracking Savings: Your Key For Turning Dreams Into Reality
- Organizing Personal Finances: A Simple 5 Step Method {+ free workbook}
- Vision for your life: where is your money taking you?
