Are you a spender or a saver? Or are you somewhere in between?
I don't think I am talking out of turn when making the observation that most people want to be savers - even if it is a question of putting money away for old age through a pension scheme - but few of us actually save enough money to maintain a reasonable level of financial security (either in the present or in the future).
So to help us understand the process of saving I would do a little study with a couple of friends of mine who I know are good savers.
- What makes them good savers?
- What do they do day to day, month to month, year to year that makes them successful savers?
- What can we all learn from them that will help us become successful savers?
What I concluded was that it is actually all down to habit - and that adopting successful saving habits can make saving money considerably easier. A few small changes, regularly and consistently executed, might be all you need to have a financially abundant future.
Saving is a slow process and can require many years to see results. However, the changes you put in today and the habits you adopt (no matter how old you are) will dramatically influence your results over time.
So here we go .... think about adopting these habits and become a successful saver (with apologies to Stephen Covey):
1. Savers pay themselves first.
Savers make it a priority to pay themselves first and treat paying themselves as much as a priority as paying the bills (if not a higher priority).
If you are not a saver then there is a good chance that you will pay all your bills and then spend what is left.
This mindset is really the key to saving successfully. Make a habit of saving a percentage of every dollar, pound, euro you earn or receive.
Start with 2-3% if that's all you can afford, and give yourself a pay rise every year or so.
Avoid spending this money on anything else by treating this as an essential
2. Savers save automatically.
It's much easier and more effective to simply have the money removed from your paycheck before you have the opportunity to spend it.
Setup a savings account and divert your savings into it as you would do paying any other regular bill.
Set it up to take the money out as soon after being paid as possible so you don't even notice it
3. Savers keep their spending in check.
The less you spend, the easier it is to save.
Go through your spending over the last month and determine if all your money was well spent.
If it wasn't, carefully monitor your spending next month and think about how much your spending is costing you.- every $100 saved (rather than spent) at a reasonable 3% annual interest rate will be worth $180 in 20 years time, and if you are lucky enough to get a 10% interest rate that same $100 would be worth $730 in 20 years time
What if you avoided spending that $100 and saved it instead?
Look at all your outgoings and determine what you can do to cut back as much as possible so you can save
There are some great ideas in our money saving ideas category
4. Savers avoid debt.
Trying to save while in debt is like walking through treacle, or maybe walking up a hill and never getting to the top.
Consumer debt is an obstacle to achieving any financial goal so if you are unable to pay cash, you simply can't afford it your purchase.
The exception would be very very low interest (or no interest debt) and anything you need to purchase which could be classified as an "emergency" (which would ideally be funded from an emergency fund)
5. Savers have goals.
Saving is easier if you have a clear picture of the reasons you are saving
Everybody's goals will of course be different so write down around 5 key financial goals which you want to achieve
These could range from retirement goals, to being able to afford to send the children to private school
You may have a goal to live in a particular area, or afford a particular type of car
Write them down, make them meaningful and work towards achieving them
6. Savers take regular measurements.
You'll find that most savers are very aware of how much money is in their accounts and how much they've saved and spent.
They're on top of exactly what goes out of their accounts and how much should come out of their accounts that month
They will always have a snapshot in their head of where they are and where they want to be
7. Savers are financially responsible in general.
They pay their bills on time.
They know how much debt they're carrying.
They have an emergency fund for the future.
Do you know anyone that saves well, and the rest of their finances are a mess?
Saving effectively is part of taking responsibility for all aspects of your financial life. It's possible to save enough money to secure your future and retirement. Having more effective habits will enhance your results. With a few minor adjustments, you can watch your savings grow. Our lives are the result of our habits. Create habits that support your financial well-being.