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 simple, practical steps you can easily break this cycle and successfully start saving money. In this article, you’ll learn how to get rid of money-wasting habits and find out actionable strategies on how to instantly reduce expenses, establish a personal budget, and tips to force yourself to save money.
How to 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, consider using the following money-saving tips to get in charge of your 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 that you intentionally start putting money aside to achieve a specific outcome. You need to be conscious about your saving habits. Many people save money to avoid poverty or simply save for retirement. Others save money because it is the right thing or simply because they want to donate their savings, etc. 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 how successful you become on your saving journey.
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, it will be very easy and faster to get it built. Even if you might run low on cash, you will still have the necessary motivation 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 those goals. 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 budgeting when you were younger and still people are talking 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? Because it works. Whether you want it or not, budgeting is a crucial step in tracking your expenses and increasing your savings. A budget allows you to see where you are spending more money than you are supposed to spend and helps you cut down on 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.
If you want to ditch poverty and force yourself to save money, start budgeting. Your budget should include all your income, expenses, and savings. You should also separate your needs and wants in your budget.
4. Open a savings account
Saving money can be very difficult. But, with the right 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 savings account every month. 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, then 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. As long as you are putting money away, you will be in good hands. You can also save money the smart way 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 help you save money. Putting limitations on how much you want to spend automatically forces you to save more money. Limitations build discipline and character. Always write down the amount you need to spend on a weekly, monthly, and yearly basis.
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, make sure that you do not go over 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 their 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 end up spending 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 go into your savings account ahead of time and have that portion deposited into the account directly from your company. You will not be tempted to spend your paycheck if you do not receive it in your mail.
Liquid money creates spending urges. So, having money directly deposited into your savings account makes your income less liquid. Automatic savings also prevent you from forgetting to transfer the money into your savings account.
7. Contribute to your retirement accounts
There are many ways 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 and gratitude for a greater return later in life.
When people hear about saving money, they usually think about a piggy jar or an actual savings account. In reality, these saving methods are simple forms of saving and earn you pretty much nothing. There are other saving methods such as retirement saving 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 at the same time. 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. At the same token, putting money 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 a lifestyle you want far into the future 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, it won’t be terrible to give up your current desire to realize this financial goal. It might be intimidating at first, but it is achievable as long as you stick to the plan.
8. Lower your living expenses(rent)
You are probably finding it difficult to save money because you live in an expensive apartment. If your rent is taking more than 25% of your gross income, you are doing something wrong. Lowering your rent by moving into a much cheaper property can be a game changer in your saving journey.
For example, if you are living in an apartment where you pay $3,000 per month, 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 a little further out of the city or move into a smaller apartment. But it will be worth it.
To force yourself to save money, you need to delay gratification. You need to value the future of your finances and stop giving 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 gives you a limit to how much you need to spend and what you are going to spend it on. No impulse shopping issues or buying random stuff that is not needed in your life.
Before you go to the grocery store or any other retail market, make a list of 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. This is because the longer you hold debt, especially higher-interest debts, the more it costs you in interest. So, by eliminating your debts, you automatically lower the number of 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. Having a clear understanding of why you need to save and setting achievable goals can help you create a reasonable budget and force yourself to save money. Automating the process and limiting unnecessary expenses can also help you reach your financial goals.
