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Trick Yourself to Save Money

A client told me, “I’m just trying to save more than 4% of my income!” . But then I thought, “Well, it used to be 0% so that’s progress!”

Ughhh… optimism. Sometimes it makes your eyes roll. You may agree with what Louis C.K. says about optimists,

You have to be stupid. That’s what optimistic means, you know? It means stupid. An optimist is somebody who goes, ‘Hey, maybe something nice will happen.’ Why the f*%^ would anything nice happen?”

Or you can choose to believe in the Lucille Ball approach,

“One of the things I learned the hard way was that it doesn’t pay to get discouraged. Keeping busy and making optimism a way of life can restore your faith in yourself.”

Guess what? You’re not going to save $10,000 this year if you haven’t trained yourself to save $1,000. So remain optimistic and don’t get discouraged. Try to focus on making baby steps towards bigger amounts . Now here’s the tricky thing, get started!


Lazy Economics

One of the easiest ways to begin saving money is to understand that you’re lazy. Richard Thaler describes a fascinating story in his book, Nudge: Improving Decisions On Health, Wealth, And Happiness. You can see me explain this story in my Toastmasters speech:

Wow! A 33% increase in 401(k) participation rates by eliminating the first and most intimidating step. Life gets busy and people avoid responsibilities they don’t understand – especially when these responsibilities are jargon-filled investment options.

Now the trick is to have systems – like the automatic 401(k) plan – work in the background of your life to help you save money. The easiest way to do this is to leverage technology. Keep reading to learn how you can do this for yourself!


How You Can Save More Money

Are you feeling motivated yet? Good! Below are some steps to help you create your own systems and then you can go back to being lazy!

  • Open Your Savings Accounts

To make things simple, let’s identify three types of savings categories.

1) Uh-Oh Fund

Your roof caves in. Your car engine keeps making that noise. You lose your main source(s) of income. You need to pay for a medical emergency. Your uncle passes away suddenly and you need to book a plane ticket for the funeral.

These all sound like plausible life events, right? A rule-of-thumb in the Financial  Planning world is to have at least three to six months of your livelihood expenses sitting in an Emergency Fund to help you pay for “curveball” life expenses.

2) Grey-Haired Money

According to a GoBankingRates.com survey, Americans are lacking in the retirement savings department. Just look at the below graphic.

retirement

Lots of Baby Boomers and Generation X-ers are scrambling to save more money as they approach their “ideal retirement age.” Scrambling fits as an appropriate term where many people are sacrificing their livelihoods during their last working years in order to save more. We also hear of the many people who are working longer on account of  their lack of savings.

Millennials can learn from their mistakes and we can proactively plan early so we don’t have to be ultra-frugal during our later years. Again, the trick is to get started!

3) Financial Milestones

Saving money doesn’t always have to “blah, blah, blah.” Create a fun savings goal. A down payment for a house. A new car. A dream vacation. A Dr. Seuss painting. Whatever fits your fancy. Choose something to get you excited to save money.

Great job! You now know where to save money. A good strategy is to open separate accounts for each savings goal. Talk to your current bank first and see how much they charge for multiple savings accounts. If they charge fees on these accounts, look into online banks like CapitalOne 360 to help you start saving.

  • Define Your Dollar Amounts

Another rule-of-thumb in the Financial Planning realm is to create your budget like this:

50% Livelihood Expenses

+ 30% Fun Money

+ 20% Savings Goals

Your After-Tax Income

This 20% savings goal may seem daunting at first but don’t get discouraged. If you’re nowhere near that amount, remember what Captain Barbossa says in Pirates of the Caribbean: Curse of the Black Pearl:

“The code is what you’d call more ‘guidelines’ than actual rules.”

Start “chipping-away” by at least putting small dollar amounts in your separate savings accounts. You can always increase these numbers later to get closer to that 20% goal… but, get started today!

  • Set Up Automatic Transfers

Online banking’s Bill Pay feature is glorious! Use this system to schedule recurring transfers to your savings accounts. You can schedule the transfer for the 1st of the month or the day after your paycheck hits your checking account. Make the money vanish from your checking account automatically into these “#Adulting” accounts so you’re less tempted to spend.

Remember, saving money is easier when it’s Out-of-Sight-Out-Of-Mind!

  • High Five Yourself For Being Responsible

Congratulations, you’re “#Adulting!”

Yes, saving money feels annoying since you’re preventing yourself from enjoying your hard-earned money. I get it. But, whenever that day comes when you need money – an emergency, retirement, or your financial milestone – boy, you’re going to be thrilled you have these funds available.


So what are you going to do? Accomplish one of your saving goals right now!

Thanks for reading and if you want guidance on how to navigate your personal finances, please get in touch with me or learn more about Well-Rounded Success’ Services on the website.

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