It just dawned on me that many people approach how to save money just as they approach how to lose weight. Rather than consistently working out, pushing yourself to the limit, and being on a strict diet, many people take “diet pills” or drink bottles of slim fast, thinking they would experience the same result. The same approach is usually followed when it comes to save money. They google “the best way to save money” and always, there would be a ton of list showing someone how to save money:
There you have it: 100 Ways to Save Money: 1. “Drink water when going to restaurants” 2. “Turn off the lights” 3. “Quit smoking” 4. “Make your own lunch” 5. And the list goes on…..
I am sorry to break this to you, but none of these craps are going to work. Why? There are three reasons.
Reason 1: We are creatures of habits
Chances are many people have already try at least some of these techniques before, but how long did we last? Our habits are much more powerful than we think. Our daily activities such as brushing our teeth, driving to work, and walking around the neighborhood, are mostly guided by our habits. We do it without thinking about it. So while it sounds great to start “turning off the lights” and order “water when going to eat,” what usually happen is that we rebound to our natural habit after a few days.
Reason 2: We don’t have enough will power
According to a study by the American Psychological Association (APA), we must think “willpower is like a muscle”, so when we exert our willpower, it begins to lose strength. The article suggests that people with less money faces more frequent and difficult financial decision, therefore, depleting their willpower even quicker. In other words, we don’t not have enough will power to go through the day dealing with stress and continuing disciplinary spending actions, for example, order water instead of soft drink.
Reason 3: We don’t actually realize the saving
So you cut the cable cord, changed your car insurance plan, and have been making your own lunch, but somehow at the end of the month, you are still living paycheck by paycheck. That is because mental accounting is different from actual accounting. Our brain is flexible when it comes to managing money. We save money on one thing but spend it on another thing; unfortunately, through selective memory, we only remember the time that we save and not the other way.
Enough of all the reasons why we can’t save money. Let’s talk about how you can actually save money.
Here are the steps to the proven method on how save money:
Step 1: Establish a stretching but achievable goal.
This is the most important step. If you have a quantitative goal, you can visually see your progress. As we have learned earlier, saving is mostly about mindset and habit, not technique. So when set a goal, we can see the progress we’re making and are less likely to revert to old spending habits. Make sure your goal is obtainable.
Step 2: Create a budget.
The only way to achieve your goal is to have an action plan. How much are you going to spend and how much are you going to save. An important note about budgeting is that it is a continuing process not static. You set a budget, reconcile, and adjust it to best fit your lifestyle. Furthermore, save to spend, instead of spend to save. Don’t fall those “on sale” or “buy in bulk” to save scam. Here’s a great book that can help you with your budgeting process.
Step 3: Have a piggy bank
You don’t need an actual bank, but you do need something to put your saving. A saving account will work. The goal is every time you save, you will realize the saving. So when you cut the cable cords and eliminate that $100 bill a month, put $100 a month in the piggy bank or saving account so that you actually realize the saving. Additionally, set up an automatic monthly transfer into a saving account. Save before you spend.
Step 4: Commit, commit, and commit
We all have unexpected situations that arise. That is steps 1 and 2 are very important, as this is where you set aside money for an emergency fund. However, once you figure out your budget and set an achievable goal, commit to it. Do not let yourself talk you into dipping into the savings.
Step 5: Use technology to exceed your goal
Use mobile app like Qapital, Digit, Dyme, or Acorns that will help you to save a few extra bucks on the side effortlessly. These apps are great for saving the spare change. It is a great complimentary to your saving plan; however, it should not be the only saving approach that you use.
Follow this proven method and let me know if it help you on how save money.