Resolutions 2011 – 5 Steps to Saving More This Year

Photo (cc) by RLHyde

“I’ve got all the money I’ll ever need, if I die by four o’clock.” – Henny Youngman

Nearly everyone wants to accumulate money – that’s why “saving more” is such a common New Years Resolution. But if you’ve failed at this resolution in the past, take a few minutes to review the steps below. If you follow them – all of them – you’ll end up with more money a year from now than you have today, guaranteed.

Step 1: Establish, or reestablish, your goals

If you’ve resolved in the past to “put away more money this year” and failed at doing it, the reason why is because that’s a silly goal. It comes from a vague fear that you’re not doing as well as you should, rather than from a compelling desire to accomplish something meaningful. So step one is to forgot about money and focus instead on something fulfilling that you have a compelling need to accomplish. Are you trying to retire early? Buy a house? Start a business? Fund a college education? Join the Peace Corps?

If you want to save more this year, start by thinking about what really motivates you. When you decide what that is, put a price tag and deadline on it. For example, if what you want more than anything is to achieve the security of owning your own home, what will that house look like? Where will it be? Exactly how much will it cost? And on what date will you have that amount saved? Now you’ve got a real goal, and the odds of reaching it are also real.

Once you establish your goal, visualize it as many times every day as you possibly can – the more, the better. Your goal should become a borderline obsession. The more you visualize it, the more likely it is to happen. If you’ve failed at achieving a goal in the past, this is probably the reason why: It wasn’t compelling enough to change your behavior.

Goals that get accomplished have three things in common: they’re specific, they have a time-line attached, and most important, they’re compelling. If you can create a goal that combines all three of those ingredients, you’ll succeed.

Step 2 – Find extra money with a spending plan

Once you’ve established a compelling goal that requires money, you’ll find it. How? Well, there are only two ways: earn more, or spend less. There are plenty of ways to earn more money, from overtime to eBay. You can also earn more on your savings: more on that below. But regardless of whether you make more, you should also find extra money by spending less.

Before you start seeking ways to spend less, however, first see what you’re spending now. As we suggested in the recent post, Resolutions 2011 – 5 Steps Toward a Debt-Free Life, that involves tracking your expenses with a spending plan, also known by its less-empowering name, a budget.

You can create your spending plan from scratch, use one of the budgeting spreadsheets we offer here, or use some high-tech method like Mint, Bundle, or any number of other online options. But however you do it, do it. Because tracking your expenses allows you to see if you can spend less without sacrificing your quality of life.

When you start reviewing your expenses, you can immediately start finding ways to save. For example, if you’re spending $400 a month on groceries and would like to try reducing that by $50, check out 28 Tasty Tips to Save on Food. Or, if you’d like to spend less on your monthly gasoline bill, try 28 Ways to Save on Gas You Already Know, and Maybe One You Don’t. No matter where your money is going now, you’ll probably find ways to reduce your expenses and increase your savings.

And when you start allocating your money with a budget, don’t forget to expect the unexpected. Every spending plan should have a category for “other expenses” to account for emergencies like car repairs. Otherwise you’ll continually be struggling to meet your goals.

Your spending plan is where the rubber meets the road when it comes to finding the money to meet your savings goal. Is it a hassle to keep track of what you spend and seek out ways to save? Maybe, but it must be doable, because every business in the world from Exxon to the corner dry-cleaner does it every day. And so will you if you want to reach your savings goal.

Step 3 – Pay yourself first.

Who would you rather see get rich – the local utility company, or you?

While that might seem like a dumb question, most of us behave as if we’d rather see our local utility company succeed. After all, we’re much more likely to automatically pay our power bill than we are to automatically pay into our savings account. There’s a reason the mantra “Pay yourself first” has been repeated by professionals for years – it works.

The way most people approach saving is trying to put aside “whatever’s left over at the end of the month”. But since there’s nothing left over at the end of the month, their saving program never gets off the ground. You’re (hopefully) already having money withheld from your paychecks to fund a workplace 401(k) or other retirement plan: See if your employer can withhold more and have it put in a savings account. If they can’t do it, you can – use online banking to automatically transfer money from checking to savings every month. The most important check you write every month is the one that funds your goal: automate it.

Step 4 – Maximize your returns.

If you’re like most people, you work hard for every dime you make. But there is an exception to that, because once you start accumulating some savings, they can do part of the heavy lifting.

Compound interest is one of the great wonders of the investing world. It’s a simple concept – compound interest merely refers to earning interest on your interest. But that simple concept translates into major differences in reaching your goals. Consider the following: suppose you’re able to save an extra $5 a day, or $150 a month. If you can do that for 20 years, here’s how much you’ll accumulate in various interest-earning scenarios.

  • Earn 2 percent: $44,219
  • Earn 5 percent: $61,655
  • Earn 10 percent: $113,905
  • Earn 15 percent: $224,586

As you can see, if you make your savings work harder, you’ll reach your goals faster. Of course, there’s no free lunch: you can’t earn 15 percent without risk, and risk could mean losing money and ending up farther from your goals. So before you experiment with investments that offer a greater return in exchange for more risk, it’s important to educate yourself.

Investing in things like stocks and real estate isn’t rocket science, and it can pay off in a big way. I earned 36 percent on my stock portfolio last year, and more than 80 percent in less than two years. (See How I Beat the Pants Off the Pros Last Year.) While that kind of return isn’t common – nor do I expect to repeat it – it illustrates why it’s important to learn about more than simple savings accounts.

And for that part of your money that you must keep totally risk-free, at least shop to make sure you’re getting the highest rate possible. Most people spend more time shopping for milk than they do for savings rates, and shopping rates is actually easier. We have an interest rate search on this site and there are others.

Step 5 – Stay on track.

We can all think of instances when we’ve enthusiastically pursued a goal for a while, only to have that compelling desire fade over time. That’s natural, especially with goals that require years to reach. How can you stay motivated? One way is join with like-minded people that can help you you stay focused.

For example, when it comes to stocks, an investment club that meets monthly will help you learn while you earn. You can also stay connected to other people online, like me and others like me. Ask questions and join the discussion!

Bottom line? When it comes to saving more, you have the ability to make it happen. Make this the year that you stop promising and start doing.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Read Next
10 Ways to Nail Savings on Your Remodeling Project
10 Ways to Nail Savings on Your Remodeling Project

Here’s how to save on your next remodeling project with discounted materials and more tips and tricks.

21 Items to Cut From Your Budget That You Won’t Even Miss
21 Items to Cut From Your Budget That You Won’t Even Miss

Start off the new year by implementing these small-but-smart savings strategies. They’ll soon add up.

12 Tech Gadgets That Make Daily Life Easier
12 Tech Gadgets That Make Daily Life Easier

These products on Amazon will ease worries and simplify your routine.

8 Types of Companies That Check Your Credit Report
8 Types of Companies That Check Your Credit Report

Federal law lets these entities peek at your credit — regardless of whether you’re borrowing money.

The 2 Biggest Retirement Fears of Baby Boomers
The 2 Biggest Retirement Fears of Baby Boomers

Boomers have a lot of worries as they age, but two stand out.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
9 Things You’ll Never See at Costco Again
9 Things You’ll Never See at Costco Again

The warehouse store offers an enormous selection, but these products aren’t coming back.

11 Things Retirees Should Always Buy at Costco
11 Things Retirees Should Always Buy at Costco

This leader in bulk shopping is a great place to find discounts in the fixed-income years.

Over 50? The CDC Says You Need These 4 Vaccines
Over 50? The CDC Says You Need These 4 Vaccines

Fall is the time to schedule vaccines that can keep you healthy — and even save your life.

Why Cloth Masks May Increase Your Coronavirus Risk
Why Cloth Masks May Increase Your Coronavirus Risk

A new study finds that wearing a cloth mask can backfire if you don’t clean it properly.

11 Household Items That Go Bad — or Become Dangerous
11 Household Items That Go Bad — or Become Dangerous

When you get the impulse to stockpile these everyday items, pay close attention to their expiration dates.

8 Things You Can Get for Free at Pharmacies
8 Things You Can Get for Free at Pharmacies

In this age of higher-priced drugs and complex health care systems, a trip to the pharmacy can spark worry. Freebies sure do help.

7 Ways to Boost Your Credit Score Fast
7 Ways to Boost Your Credit Score Fast

Your financial security might soon depend upon the strength of your credit score.

These Are the 4 Best Medicare Advantage Plans for 2020
These Are the 4 Best Medicare Advantage Plans for 2020

Medicare Advantage customers themselves rate these plans highest.

The 15 Worst States for Retirees in 2020
The 15 Worst States for Retirees in 2020

Based on dozens of metrics tied to affordability, quality of life and health care, these are not ideal places to spend retirement.

The 10 Most Commonly Stolen Vehicles in America
The 10 Most Commonly Stolen Vehicles in America

A new model parks atop the list of vehicles that thieves love to pilfer.

This Is the Cheapest Place to Buy a Used Car
This Is the Cheapest Place to Buy a Used Car

Looking for a good deal on a set of wheels? This should be your first stop.

19 High-Paying Jobs You Can Get With a 2-Year Degree
19 High-Paying Jobs You Can Get With a 2-Year Degree

These jobs pay more than the typical job in the U.S. — and no bachelor’s degree is required.

5 Ways to Get Amazon Prime for Free
5 Ways to Get Amazon Prime for Free

Hesitant to drop $119 a year on an Amazon Prime membership? Here’s how to get it for free.

5 Keys to Making Your Car Last for 200,000 Miles
5 Keys to Making Your Car Last for 200,000 Miles

Pushing your car to 200,000 miles — and beyond — can save you piles of cash. Here’s how to get there.

26 States That Do Not Tax Social Security Income
26 States That Do Not Tax Social Security Income

These states won’t tax any of your Social Security income — and in some cases, other types of retirement income.

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

10 Reasons Why You Should Actually Retire at 62
10 Reasons Why You Should Actually Retire at 62

If you can, here are several good reasons to retire earlier than we’re told to.

7 Surprising Features That Boost Your Home Value
7 Surprising Features That Boost Your Home Value

You can add value to your home without hiring a contractor to do expensive renovations.

5 Things That Make Life More Meaningful for Retirees
5 Things That Make Life More Meaningful for Retirees

Retirees agree: These are the things that give them purpose and fulfillment in their golden years.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.