Saving money can be challenging. How many of you have a number in mind of what you’re going to sock away in savings only to have that number cut in half or absorbed altogether by an unexpected expense? This is both frustrating and annoying but it’s also very common. Life gets in the way of our financial goals sometimes.
Rather than giving up on the concept of saving money, here are 3 tips you can use to get ahead and make sure you have enough cash on hand to manage household expenses.
Keep in mind, this exercise assumes you’re already investing in a 401K or some other retirement plan.
Set Realistic Goals
If you make $5000 a month and your expenses are $3500, it’s not realistic to think you can save $1250 on a consistent basis. Leaving yourself with $250 for fun, food, gas, etc. is a recipe for failure. It’s not impossible to pull off such a stringent budget, but it’d be difficult to stay the course without faltering. This is especially true for someone who’s just starting out and learning how to save.
Using the example above, setting aside $500/mo in savings is a better goal. Keep in mind, this takes into account either zero debt or very little debt that needs to be paid off. If you have debt, using the Dave Ramsey method of saving $1000 while aggressively paying off anything you owe is your best course of action.
Even if you’re only able to save $50 a month, you’d have $600 by the end of the year. This would place you 60% toward a $1,000 emergency fund goal.
Patience is Key
Being inpatient can be a major impediment to financial success. Wanting something now versus waiting until you have the money to pay for it is one of the many reasons Americans are struggling with credit card debt. It’s very easy to use easy credit to buy the things we want. After all, it’s called easy credit for a reason.
It’s not necessarily feasible to wait until you have cash to pay for everything. If your dream is to put a pool in your backyard that will cost you $120K, you may be waiting many years or a lifetime for your dream to come true. Taking a more reasoned approach, saving for half of the total while taking out a loan for the rest makes more sense.
Of course, avoiding large purchases on depreciating assets is the best course of action. In reality, I’d never recommend taking a loan out on anything. Paying cash for everything is always best.
Stay the Course
This is perhaps the hardest concept when it comes to saving. As mentioned earlier, life is full of unexpected expenses. There’s no way around them, you’re going to be faced with navigating choppy waters with your money sooner or later.
Similar to a diet or exercise regiment, saving money takes discipline and self awareness. You also need to hold yourself accountable for poor spending habits. There’s little difference between having a third slice of pizza and hitting the “add to cart” button on Amazon. They’re both easy to do and start with a feeling of euphoria but are often followed by pangs of regret and self loathing.
Discipline with money is difficult. There’s a reason most people have bad spending and budgetary habits. Being successful with your money takes effort, desire and self motivation.
Speaking of self motivation, it’s time for a run. Although I had success saving money this month, I was less successful avoiding that third slice of pizza last night.
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