Developing a savings habit can be daunting. It might feel like enough hassle tracking your money, without going the extra mile and assigning a proportion of your income to medium or long term savings. Like many good habits, it can be tough to get started.
If you're struggling, then try these simple and painless tricks to start building your nest egg. Not only will you quickly create a decent pot of money, you can also develop a habit which can last a lifetime.
1. Get the Mindset Right First
The key to developing a savings habit is your mental approach. The barrier usually is not so much about making the changes needed to save, but about getting sucked into the mindset of feeling deprived. Once you get to this stage, you are more likely to splurge, and blow the savings on something you may later regret. If you're trying to develop a daily or weekly habit, of ditching the morning coffees or paying bills on time, for example, then a habit tracking app like coach.me might help. Set your own personal goals, which you check off every day in your phone, and get reminders, encouragement, and a way of watching your new practice become a daily habit.
If you feel that you're making progress towards solid goals, saving is much easier. Have savings goals you agree on with your family, and use trackers, either online or using a pen and paper, to watch your money grow. Your bank might offer savings tracking apps and online tools, or try Mint, as a great way to keep all your goal setting and money tracking in one (secure) place.
2. Use the Tools You Have
Depending on your employer, there may be very simple ways you can get into a savings habit by having money assigned at source to various types of savings, rather than physically needing to manage it yourself.
401K plans are especially good to help you squirrel away some savings for later — with the added advantage of removing temptation by having the cash taken from your pay before you ever see it. Check out whether your employer will match contributions to make your money go even further. If your workplace offers an ESOP (Employee Stock Ownership Plan) scheme, for example, this can be an efficient way to save — although you should be wary of sinking too much into a single asset, even if you do really rate your employer!
Ask your manager or your HR department what policies they have that can help you — from reimbursements on tuition fees, mobile phone bills, commuting, or parking costs, you may find the answer to your savings problem buried in your company benefits handbook.
3. Reframe It
If you're struggling to convince yourself (or a family member) that it's worth saving, then it may help to reframe what you're trying to do. Think of your progress in terms of percentage changes, for example. If you're saving $500 for a holiday, and can manage to stash away $25 a week, then every week you're 5% closer to your goal. Quite quickly you will be a quarter of the way there, then half way, and so on. Sometimes seeing progress expressed in this way can help motivation.
Another approach is to think about the time value of what you can save. If I told you that you needed to start saving 20% of your income, you might tell me that it was impossible, or that that amount was much too high. However, if you think of this as of it as working a day a week towards your family's future, or that dream home or holiday, it may become more palatable. For that one day a week, mentally picture the money you're earning going not into a generic pot to pay bills or rent, but as a step closer to your savings goal. Even if you can only manage a half day a week, or less, it will make the work during those few hours feel somehow more valuable than the rest of the week.
4. Make It Non-Negotiable
One tactic some people claim works for them is freezing their credit cards in a large block of ice — meaning that any spending has to wait until the card has defrosted, and you have a good chunk of "cooling off" time to stop impulse purchases.
If this is too extreme, then there are, of course, other ways to be strict with yourself. One of the basic principles of personal finance is to pay yourself first. If you have some money that could be used as savings, but somehow find that by the end of the month it has evaporated, then arrange an automatic payment of your chosen amount into savings on payday. Automating your savings habit means you can't conveniently forget your personal commitment.
You could also consider banking any pay rise you get — if you get a raise of a certain amount per month, then set up a direct debit for the equivalent into savings. You will never get a chance to get used to having it, and so won't miss it when it's gone!
5. Don't Forget the Little Things
Not all of the ideas here will suit everyone, depending on your personal preference and financial situation. However, whatever your cash flow, don't forget the little things that add up. Keep a coin jar for spare change, or else for money you have mentally saved — for example, by brown-bagging it instead of buying lunch at work. Or choose a specific coin to save every time you spot one in your change. Even just saving all the quarters you come across adds up, and helps the savings habit to develop without you even noticing it.
There's an old saying which reads: "The best time to plant a tree was twenty years ago. The second best time is now." If you're putting off saving, then these simple tricks might be enough to get you building some momentum.
Developing a routine of saving is one thing we can all do. Whether it is to spend on a specific holiday or event, or to help fund a secure long term future — it is one habit that you won't want to quit.