Not long ago I was at friend’s house party. After a few adult beverages, the financial questions started flowing.
Being the “finance” guy in my friend and family circles, this tends to happen. I don’t mind because I love this stuff and it’s exciting for me, but it’s always interesting to see what comes up.
He looked at me and said, “Jared, how can I save more money?” My immediate response to him was, “Well, just start saving more money!”
Ok, so I was being a little sarcastic. Maybe that had something to do with the “Cervezas Mas Finas” that I was enjoying on a hot summer day. But it actually isn’t too far off from the truth.
One of the biggest problems people have is finding ways to fund their goals. They just can’t seem to figure out how to save more money.
This might be because they aren’t properly tracking where the money is going, so they don’t realize how much they are spending in areas that aren’t important to them.
Sometimes it just takes a few simple “money hacks” in order to set yourself on the right course.
Here are a few simple ways to help boost your savings.
START AT THE END
Just start saving more. I know, if you could you would. But very few people are actually saving the maximum amount they can. This means that there must be wiggle room somewhere in your budget.
If you don’t feel like going through your bank account line by line, the fastest way to increase your savings is to start at the end!
Here’s what I mean…
Let’s say you’re saving $100/week ($400/month). You’d like to save more, but you aren’t sure exactly how much more you can save. Well, one thing to do is set up an automatic transfer at the beginning of each week (You can do it monthly, but I think it’s easier to maintain smaller amounts on a weekly basis, instead of waiting for one large transfer each month) to funnel money into your savings or investment account.
If you are currently saving $100/week, increase the auto-transfer to $125/week and see what happens. If after a month you realize that there hasn’t been much of change in your lifestyle (i.e. – You haven’t had to cut back on things that you love/enjoy) then increase it another $25 to $150/week.
Keep repeating this process until you start to feel a squeeze.
If you are running out of money faster than you’d like, forcing you to make tough choices on where you’re spending your money, you know you are on the right track.
At this point you will have to answer questions like, “Should I buy the new stereo speakers that I’ve been thinking about, or should I go out to dinner a couple more times this week with my buddies?”
These are good questions to have to ask yourself because not only do they force you to think about your spending habits, they force you to consider what you truly value.
Personally, I’d rather spend more time with friends than to get new stereo speakers, so this choice wouldn’t be hard for me.
BUCKETING YOUR SAVINGS
Another way to save money is to use a strategy called “Bucketing.”
The concept is to set aside specific amounts of money you want to spend in each category or “bucket.” When you hit the amount you set aside, you stop spending in that category.
The first step in the strategy is to decide how much you want to spend in each area of your life.
- Emergency Fund
- Real Estate Purchase
Think about how much you want to put toward each category, set that amount aside in different accounts (your buckets) or even use and old fashioned “envelope” system. Once the money has run out, then you can’t spend anymore on that activity. So, if you allocated $300/month to going out to dinner with friends, once you hit that number, no more dinners out until the following month.
This is when you take a deep dive into your spending habits, going through all of your spending over a long period of time (3-6 months minimum) to see where you are spending your money. You then break it down into categories and into what is necessary and unnecessary spending.
Once you have it all broken up you will start to see where all of your money is going. The results are often surprising for most. They will see at least 1-2 areas where they are spending much more than they thought.
At this point you can start to pick the areas that you don’t value and won’t miss if you cut. You can then take some of that money and put it toward areas you have been meaning to increase, like retirement, buying a home, or even things like going on vacation or going out with friends.
The whole point is to shift your spending from areas that aren’t a high priority to areas that are.
Each of these saving strategies offers a varying level of commitment. Don’t be concerned about how much effort you have to put in. The important thing is to realize that any of them will help you move closer to your goal of saving more money.
The best option is the one that you are going to maintain. Good luck!
About the Author
Capable Wealth is a fee-only financial planning and life coaching company dedicated to helping people live their ideal lives by providing clarity and empowering them to make great money decisions. We help doctors and dentists in the early stages of their careers bridge the gap between their current life and their dream life by creating a plan to implement smart money habits. We are here to walk with you on your journey as you grow your wealth, and discover what you are truly capable of.