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| Saving money should be simple, fast, easy, and painless. |
Everyone talks about saving money but who can actually do it? Most of us will never become millionaires. The number one reason why we don't become rich is that we spend most of our money on things we want rather than things we need. We're not choosing between wants and needs. We spend money on what we need. But we don't stop there. We keep spending because we see shiny new things and we want them even though we don't need them.
The next time you are tempted to buy some new gadget, ask yourself, "how often will I use this over the next 12 months?" When you think about purchases that way, you can amortize their cost on a monthly basis. But you have to be honest. We stop using most new purchases within a few weeks. We either satisfy our curiosity or we just move on to other shiny new things.
The number 1 tip that all money experts share is to set up automatic deductions from your paycheck to a savings account. That is because it's easier to live on a budget for what you bring home. We don't learn this principle early enough in life to make full use of it. I am glad to see that some colleges and universities now offer personal finance advice to students, but it may be too little, too late in life. If you don't learn to be frugal from Mom and Dad while growing up, you may already have formed lifetime habits that impede your ability to save money.
Every kid now has to have a smart phone. Why? Well, parents can reach their kids more easily now. That's a good thing but the kids are using these phones for a lot of frivolous purposes. What kind of lifelong habits are they learning from easy access to expensive technology? Smart phones are not cheap.
We compensate for our bad spending habits by devising new ways to save money. Maybe it's easy and simple to stick money in an envelope, but if you really have to teach yourself to do that maybe you have to unlearn a lot of other habits too. Spending money should be your fiscal exception, not your fiscal goal. In other words, you should not be rewarding yourself with big ticket purchases for "doing the right thing".
Take losing weight, for example. Many people motivate themselves by promising to go on a nice trip or buy some really nice clothes if they lose a lot of weight. But shouldn't the reward be the satisfaction you'll feel at being slimmer and healthier? I admit that we struggle to control our weight but the reward system isn't working. Americans are still getting heavier every year and we're going deeper into debt every year. It's like we're paying ourselves off for losing weight before we lose it.
The problem goes deeper than that, of course. It's not just Mom and Dad's fault that you and I don't develop good habits while growing up. The financial industry takes advantage of consumer psychology at every opportunity. They make it easier and easier for us to borrow and spend money. How often do they make it easier for us to save money? There isn't much incentive for banks to help people save money. We have to punish them to force them to do it.
Some economists are researching ways that society and business can help consumers save money. The innovative programs may include "lottery style savings", which sounds pretty far fetched. As consumers we expect businesses to make a profit but we don't try to make profits for ourselves. Isn't that really the whole purpose of owning a business? If you make a profit for someone else at your job, then why don't you make a profit for yourself at home? And if you are a business owner, do your household spending habits mirror your business spending controls?
I promised 7 simple ways to save money, didn't I? Well, I wanted to ramble a bit before I got to MY tips. I think it's important to realize that we must change from the inside out before we can effectively save money.
1. Change your lifestyle
This is unquestionably the hardest step everyone must take to start saving money. If you keep telling yourself, "I'll save money when I get a bigger paycheck" or "I'll save money when I win a nice lottery prize", you're just deferring your savings to the future. The future is never now. You'll never save money in the future. You can only save money in the present.
Your lifestyle is the biggest source of unnecessary expenses. You can find alternative, less expensive ways to enjoy entertainment. You don't need anyone's approval to enjoy a movie at home or to eat at a less expensive restaurant.
2. Accept that you spend too much money
I know there are things I want really badly. I want a bigger, better TV. Instead of buying the latest and greatest, though, I have humbly learned to buy the models that are about to be phased out of the stores. They will last for years and cost 1/2 to 1/3 of what they originally sold for. I don't buy TVs every year, so I am just using this as an example.
Do you really need to buy a new car every 4-5 years? If you commute an hour a day to and from work you may be putting that many miles on your car. Maybe you should look for alternative ways to get to work, or move to a neighborhood where you can use mass transportation.
Say what you think about the man, but billionaire Michael Bloomberg took the train to work every day that he was Mayor of New York City. He truly empathized with the citizens he served and he also showed them how to save money.
3. Be honest with your savings contributions
By "honest" I mean, don't commit to putting back too much money at any one time. You'll just end up taking it out of savings sooner than expected.
In my opinion it's better to save $10 a week than to put aside $200 every paycheck when you know you'll have to borrow from the savings account within a few days. If you don't touch that $10 a week because it's such a small amount it will grow over time and you won't feel the deprivation.
4. Start a savings account at a new institution
Whether you use a bank or a credit union, don't put all your eggs into one basket. Go start a savings account at another bank or credit union. Make an effort to set aside money in places you don't normally think about.
By setting up an account at a bank you don't normally use you employ the "out of sight, out of mind" rule. That really works. Just be sure your heirs can find the money if you die unexpectedly. Don't let your money fall through the cracks because you thought you would always be there for them.
5. Try one new store brand every month
Most people I know won't buy the generic-quality store brands for groceries. I don't agree with their reluctance. These products are often packaged by the same companies making the big brand foods. Whether they taste differently is anyone's opinion.
You can alter the flavor of your store-bought food with seasonings and through interesting recipes. By switching one regular item that you buy to a store brand every month you'll end up saving a lot of money. These in-store brands sometimes cost about half what the major brand food items cost.
By some estimates, the average American household can save 20-25% on groceries just by purchasing less expensive in-store food items. That equates to $100 to $200 a month in some households.
6. Change your electronic habits
Two ways I have learned to save money on electricity and electronics are very simple indeed. First, I replaced all the bulbs in my home with LED lighting. It's becoming easier and less expensive to do this every year. LED lighting is the wave of the future but it's happening now.
Second, invest in some rechargeable batteries. The kits are not very expensive and they save you a lot of money over time.
By spending less money on electricity and disposable power cells you'll help the environment as well as your wallet.
7. Sell the stuff you don't use any more
Instead of waiting for everything you have stashed away to become so old and dusty that you just throw it in the trash, think about having a yard sale. Or put stuff up for auction on eBay. Or ask your friends if they want to buy some nice old things from you.
Your money isn't just tied up in old things you no longer use. It is rotting away, slowly disintegrating as their warranties expire and their technologies become outdated.
Get back some of what you spent on things that are no longer important to you. Do it at every chance you get because you'll never get rid of it all at once.
This should become a lifelong habit. You'll be able to keep the things that really matter to you and you won't be saddled down with a lot of expensive clutter.
In Conclusion
It really takes a deep internal commitment to changing how you think about the things in your life to start saving money. You just have to be dissatisfied enough with always being broke before you are ready to start saving money.
When you save money on a regular basis you realize quickly you never had to be constantly broke in the first place. You can choose to be a saver or a spender. You just have to learn to be habitual about saving rather than spending.
