It may be bad form for a personal finance writer to admit, but I wasn’t always a good saver. In fact, 10 years ago I was a college student working full time with $5 in her savings account – the minimum to keep it open.
There wasn’t any good reason for it. I made enough money to cover my expenses. I could have put some aside for a rainy day, but things looked sunny and I told myself I’d start saving later.
Then it started to rain.
The company I worked for went under. I had no income and no savings to speak of. For two months I got by on credit cards and small loans from my parents, and I ate a lot of ramen noodles. Not a high point in my life.
So when I got a new job I told myself savings were a priority. Of course, it was easier said than done and it took a while for saving to become a habit, but I pulled it off. Here’s how:
1. Set a goal
Some people are natural savers. Other people (myself included) need a bit of a push to save money. Despite my good intentions, I ended up blowing my first few paychecks once I was employed again. Then I realized I would need to trick my brain, so I gave myself a small goal: save up one month’s worth of expenses. As a reward, I’d splurge and buy something under $30 I wanted but didn’t need.
Spending money seems like an odd way to reward yourself for saving it, but I needed an incentive at first, so I set a small limit to keep things under control.
To this day, if I don’t put saving first, I’ll find a way to put it off: I could save some of this paycheck, but I really need new tires, the dryer needs repaired, I want to take a few days off. There is always something that seems to need my money.
The best way I found to avoid the “but I can’t right now” syndrome is to automate. I have an automatic transfer from my checking account to my savings account set up for every payday. The move happens before I even know my direct deposit went through, so I don’t have a chance to miss the money.
3. Keep the change
It may seem old-fashioned, but I saved $150 in a year by putting my change in a jar at the end of the day. Every time the jar was full, I’d roll the coins and deposit them at the bank so I wouldn’t be tempted to spend them.
Ten years later and I still put my change into a jar every night. So far, I’ve saved more than $500 in change alone.
4. Cut some frills
I was raised by two very frugal people so I’ve never been a big spender, but I did make a lot of little purchases without realizing how quickly they added up. For example, I went to Starbucks five times a week. At $3.60 a pop, it added up to $72 a month. I also stopped at a drive-through every day on my way home from work and bought a large drink for $1.18, which added up to $23.60 a month.
When I started saving, I cut out those two things and added the money to my savings account every Friday. In a month, I saved about $96. In a year, I was up to $1,147 in additional savings.
5. Stash windfalls
Unexpected money has always been a big problem for me. If I get a cash gift from a family member, a bonus at work or a refund on my taxes, I want to go out and buy something. Usually something I don’t need like a new laptop or a bigger TV.
To break the habit, I started putting the windfalls straight into my savings account. If I want to take the money out, I have to withdraw it, which is usually enough to stop me from actually doing so.
6. Increase your savings rate
A personal finance book I read suggested automatically putting your raise into your savings account. The theory is that because you were used to living on your previous income, you won’t miss the extra money. If you can do that, I congratulate you. I just can’t bring myself to deposit my entire raise into my savings account each month.
Instead, I split the difference. If I get a 4 percent raise, I’ll put half of that in my savings account each paycheck and keep the other 2 percent for expenses or fun money. This way, I’ve been able to increase my savings rate throughout the years without having to live like I’m still in college.