Are you stuck in a cycle of poor saving habits? If so, you’re not alone. According to a study conducted by the Federal Reserve, nearly 40 percent of Americans can’t pay for an emergency expense of $400 or more. But there’s good news: with a few tips to save money I highlighted below, you can easily break this cycle and save money fast even if you live on a low income. In this article, you’ll learn how to get rid of money-wasting habits and actionable strategies to instantly reduce expenses, establish a personal budget, and learn tips to force yourself to save money.
How do you force yourself to save money?
Being good at saving money is not that complicated. It is all about understanding your income, tracking your expenses, and making decisions that align with your financial goals. If it has been so difficult to save money, check out these tips I used to force myself to save money and take charge of my finances.
1. Understand why you need to save money
To successfully force yourself to save money, you need to understand why you need to save money. Saving money requires intentionally putting money aside to achieve a specific outcome. You need to be conscious about your saving habits. Many people save money to avoid poverty; others save to invest or for retirement. Some save money because it is the right thing or simply because they want to donate their savings. What about you? Why do you want to live on a tight budget and force yourself to save money? The answer to this question will determine your savings plan and saving strategies.
2. Establish saving goals
A saving goal is crucial to your financial success. Think of trying to build a house without knowing why you need to build it or how it will look like. You can’t make the necessary modifications because you have no idea why. It will be hard to keep pumping money into the project and leave below your means without knowing why you are building the house in the first place.
But if you know the kind of house you need and why you need it, building it will be easy and faster. Even if you run low on cash, you will still be motivated to complete your project because that house means a lot to you.
Saving money works the same way. You cannot successfully force yourself to save money without having saving goals. For example, a saving goal can be buying a house, being financially independent, saving for retirement, saving for a car purchase, etc. Any financial goal that means a lot to you can be a good saving goal. Once you have goals, keep your mind on them and build a plan to help you achieve them. Your savings journey will never be the same after being clear about what you want to achieve with your savings.
3. Start budgeting your money
Budgeting is not a new concept. You probably heard of it when you were younger, and people still talk about it. Unfortunately, not everyone engages in understanding their finances through budgeting. Almost everyone knows about budgeting, but a handful of people make budgets.
Why is budgeting so important when saving money? Because it works. Whether you want it or not, budgeting is crucial in tracking your expenses and increasing your savings. A budget allows you to see where you are spending more money than you should and helps you reduce unnecessary spending. A budget makes it possible to establish saving goals and help you track your progress. The budget will allow you to set limits on expenses. A budget is everything in your finances.
Start budgeting if you want to ditch poverty and force yourself to save money. Your budget should include all your income, expenses, and savings. You should also separate your needs from your wants.
4. Open a savings account
Saving money can be challenging when living paycheck to paycheck. But, with the right saving strategy, saving money can be one of the easiest things you can do. A great way to be good at saving money is to open a savings account with your bank and allocate a small amount to the account every month. For example, you can allocate only $25 into the monthly savings account. The amount is not a lot, but it is enough to keep you in the right mindset. The interest you will earn will also be too small, but the habits you will develop will be worth it.
Once you are used to putting money into your savings account, you can move to other types of accounts, such as certificates of deposits (CDs), money market accounts, or high-yield savings accounts.
If you don’t have a savings account or a physical bank, you can still start with a piggy bank at home. You can also save money smartly by buying long-term investments such as ETFs, Mutual Funds, Index Funds, Bonds, etc. This form of saving is known as investing.
5. Establish weekly, monthly, and yearly spending limits
Just like budgeting, having a spending limit is a great strategy to force yourself to save money. Limiting how much you want to spend automatically forces you to save more money. Limitations help you build discipline and change bad money habits. Always write down the amount you must spend weekly, monthly, and yearly.
If there is an expense that is outside of your spending limits, ignore it. Unless, of course, it is an emergency expense. Other than that, ensure you do not exceed your spending limits. Spending limits will protect you from impulse shopping or buying designer clothes and brand-name products. The more you stick to this plan and hold yourself accountable on your saving journey, the more money you will save.
6. Set up automatic saving
Most people cannot save money because they cannot stop spending urges once they receive their paychecks. Instead of saving first, most people spend thinking they will save later. The sad reality is that they spend their entire paychecks by the end of the day or a few days later. If you are one of those people who can’t manage their spending urges, consider automating money into your savings accounts.
For example, decide how much you need to put into your savings account ahead of time and have that portion deposited into your savings account directly from your company. You will not be tempted to spend your paycheck if you do not receive it in the mail.
Liquid money creates spending urges. So, directly depositing money into your savings account makes your income less liquid. Automatic savings also prevent you from forgetting to transfer the funds into your savings account.
7. Contribute to your retirement accounts
There are many ways to force yourself to save money. An effective way to increase your savings is to put your money where you will earn enough return with little to no work. Retirement accounts check these boxes. It is also true that the best way to force yourself to save money is to give up your current desire for a greater return later in life.
When people hear about saving money, they usually think about a piggy bank or an actual savings account. In reality, these saving methods are not recommended as they earn you nothing, and your savings go to zero over time due to inflation. There are other better saving methods, such as retirement savings plans, that give you superior returns and ensure your future financial security.
If you have a job that offers retirement benefits, start contributing to these accounts. For example, you can contribute to your 401(k) plan and put extra cash into an individual retirement account (IRA).
If you can start early and put money away for a long time, compound interest alone will grow your account exponentially. That is how you force yourself to save money and build wealth simultaneously. You will also gain tax advantages depending on the retirement account opened. For example, contributing money to your Roth IRA will allow you to pay no taxes on qualifying distributions during retirement. Simultaneously, putting cash into your pretax 401(k) plan gives you direct tax benefits and lowers your taxable income.
If you want to save money for later use, think of your desired future lifestyle and put money away to meet that lifestyle. Do you want to retire early and travel the world? If you keep this thought in your mind and picture yourself traveling the world, giving up your current desire to realize this financial goal won’t be hard. It might be intimidating initially, but it is achievable if you stick to the plan.
8. Lower your living expenses(rent)
You probably find it difficult to save money because you live in an expensive apartment. You are doing something wrong if your rent takes over 25% of your gross income. Lowering your rent by moving into a much cheaper property can be a game changer in your saving journey.
For example, if you live in an apartment paying $3,000 monthly, you can move into a $2,000 rental home or apartment. That is $1,000 freed every month right there. You might need to move further out of the city or into a smaller apartment. But your savings will be worth the pain.
To force yourself to save money, you need to delay gratification, value the future of your finances, and stop paying too much attention to your current and short-term feelings.
9. Shop with a list
Another effective strategy to force yourself to save money is to shop with a list. A list limits how much you need to spend and what you will spend it on. This will minimize impulse purchases or buying random stuff not written on your shopping list.
Before going to the grocery store or any other retail market, list the things you need. Then, buy only what is written on the list. You will never be disappointed by the success of this strategy.
10. Pay off high-interest debts fast
Paying off debt might not sound like a practical way to force yourself to save money. But it is a smart way to save money, and the most effective financial tips take control of your finances. This is because the longer you hold debt, especially higher-interest debts, the more interest you pay. So, by eliminating your high-interest debts, you automatically lower the interest charges you pay once your debts are fully paid off. The idea of saving is that if you are not spending money on something, including giving it away in interest charges, you are saving that money.
The bottom line
Saving money doesn’t have to be complicated. Understanding why you need to save and setting achievable goals can help you create a reasonable budget and force yourself to save money. Automating your saving process and limiting unnecessary expenses can help you reach your financial goals. You might also need to try smart saving tips such as contributing to your retirement accounts and paying off high-interest debts fast.
