Saving money starts with penny-pinching for most people. A trim to the budget here, a dollar back in the pocket there, a cheaper alternative product or two, a night in instead of a lavish dinner out. Yet many people have the same frustrating experience: They reduce their lifestyle, yet at the end of the month they don’t have any more money in their savings account than they did before. Saving money begins to feel like an endless slog with no payoff like you’re making your life less enjoyable for literally no reward.
The problem? You don’t have a plan.
Procedures and Goals
Plans are vital in life. While people who like to plan meticulously are often mocked as being “tightly wound” or “controlling,” the fact is those people get things done. If you’ve been trying to cut down your budget and you still aren’t saving a lot of money, there’s an excellent chance the problem is you didn’t have a plan in place. What happens, exactly, to the $5 you save because you went to a matinee instead of opening night of a movie? In the absence of any other plan, we can tell you exactly what happens to it: It gets spent somewhere else and you don’t even notice it. You’ve created the illusion of saving money, but you’re not actually saving.
You need a system. This can vary it can be as simple as literally paying yourself savings in cash and putting it into an envelope that you deposit in your savings account every week. For example, say you spent $8 on lunch every day at your job. To save some money you spend $10 on groceries and make 5 lunches out of that, saving yourself $30. You literally take $30 in cash and deposit it into the bank every month.
It can be more complex, of course. Maybe you need an account that’s remote and difficult to access so you don’t let weak moments ruin your savings, so you set up direct deposit to a Simple or Capital One 360 account accounts you have full control over but which take a few days to get cash out of, making it more difficult for you to blow all of your monthly savings on concert tickets.
Crunching the Numbers
A plan also allows you to track how well you’re doing. In the Lunch Plan above, you should have $120 in the bank after one month. Since you had a clear plan, it’s simple to check your balance and see how you’re doing. Without a plan, it’s a vague concept, and keeping yourself honest is difficult if not impossible.
The plan also allows you to make adjustments as you go. Sometimes we think we can cut things out of our daily budget, but as it turns out we can’t for some reason. Maybe you never have time in the morning to make a sandwich, so not only do you waste $10 on groceries you don’t eat, you still spend $40 a week on lunch out. Having a plan makes it obvious that something’s not working or not working up to your expectations, so you adjust things without losing track of your goals.
Whatever you do, once you decide to save money, have a plan. It’s the only standing between you and desperately searching the couch cushions for spare change.
Mark Quigley regularly blogs about money saving ideas and managing to avoid debt. He is the owner and director of Darcey Quigleywho are debt recovery expertsbased in the UK.