A lot of the people that I have counseled don’t have anything in savings. I would probably say that in the 5 years that I have been a certified financial counselor, the majority of the folks that I counsel have nothing in savings. The majority of my clients are clearly living paycheck to paycheck and don’t have a savings safety net.
I don’t get stressed out very often (thankfully), but just the thought of living paycheck to paycheck stresses me out. You never know if your job is going to be there tomorrow, if your car will break down, or if you will become injured. Having a savings account isn’t just to save up for vacations or a new TV; savings is there to support you and your family when disaster strikes. Saving must be a priority in your budget.
What Is the Alternative to Saving?
There is only one alternative to saving and that is to rack up more debt. Without money in savings, you can always use your credit card the next time the car needs to be repaired or you need to go to the emergency room. Using credit sounds too easy. What is the catch? You already know the answer. Using credit means taking on more debt. That debt needs to be repaid in the form of monthly payments to your creditor. Taking those payments out of your monthly budget means even less available money to make ends meet and to put into savings. Pretty soon, you are in a cycle of crisis-debt-crisis-debt.
Ask These Questions Before You Say that You Can’t Save
If you believe that you can’t save or that you are incapable of saving, then I would start by asking yourself any one of these questions:
- Have I recently gone out to eat or sat in a drive-thru?
- Have I gone to the movies lately?
- Have I purchased anything recently that I didn’t really need (think of grocery store items or luxury material things)?
- Have I been going to the casino?
These are just a few questions to get you thinking. If you answered “yes” to any of these questions then the good news is that you actually ARE capable of putting money into a savings account. All you need to do is put the money you would have spent on any of these things in your savings account instead of spending it.
Apprisen’s book: Simple Steps To Save Money is a free resource full of advice on saving money. Get your free copy here as well as other budgeting and saving tools.
How Can You Save?
So how do you establish a savings account? Start by reviewing your monthly spending plan. Determine what your monthly income is. Consider both gross and net income. However, remember to also base your spending plan on your net (take-home) income. Then consider your entire monthly costs of living. Before you can determine your savings contribution, you need to know where all of your money goes each month. Reviewing your checking account statements could potentially show all of your spending if you don’t regularly use cash. If you do normally use cash, then log each purchase. Apprisen offers a tool called a “Fitter Finder” that helps track all spending. This will help identify where your struggles tend to be and allow you to cut back in luxury spending and prioritize those funds on savings. Your goal should be to have your savings account grow every month.
Remember, no amount of savings should be considered insignificant. If you can truly only afford $10 or $20 per pay check, then it is always better than nothing and will eventually grow into a significant amount. A good goal to set would be to contribute 8% of your monthly net/take-home income to savings.
Here are some additional strategies that you can use to build your savings.
- If you receive a tax return or a bonus, instead of spending it all, try putting a large portion of it into savings. Only then should you treat yourself to something nice or pay extra on a bill with the rest.
When you pay off your vehicle, continue making those payments to yourself by depositing the extra money into your savings account.
- If you quit smoking, then you could save the money that would have been spent on cigarettes. For some, this amounts to $150-$200 per month. That’s potentially $2400 per year!
If you implement these kinds of basic strategies, then you will have a high chance of successfully establishing and maintaining a savings account. These activities will also give you a mindset that places a strong emphasis on long-term financial success. The personal benefits of saving include: less stress, less worry, less anger, more happiness, more confidence, more success, and more security.
Lastly, automate your savings. Have money deposited directly into your savings account before you even see it. You will be less tempted to spend the money if it is already sitting in the bank.
Everyone’s story is different, but the strategies on how to save money are the same. Your financial future begins now. It’s time to get to work!
A Quick Reminder: You’re Not Saving if You Don’t Leave the Money in the Bank
A few years back I worked with a family that had been preparing for Christmas shopping. They knew that they had been putting a particular amount of each paycheck into their savings account. This should have added to what they had left in savings from the previous year. However, when I was discussing their savings account with them, they noticed that it hadn’t increased to what they planned. In fact, it was right around where it had been the previous year. If they had been saving a portion of each paycheck for a whole year, then where did the money go? After reviewing their savings account activity for the entire year, they noticed a large amount of withdrawals. Needless to say, they figured out why their savings account hadn’t grown. The positive that I was able to give them was “At least you have a savings account with something in it. You can always build on that.” The real lesson for you to learn is, don’t remove any money from your savings account unless you really have no other choice or you’ve met your goals.