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
7 Surprising Benefits of Staying Fit in Retirement
7 Surprising Benefits of Staying Fit in Retirement

Improving your overall physical health is just one reason to stay active after 50.

8 Things You Should Replace to Improve Your Life Today
8 Things You Should Replace to Improve Your Life Today

Being frugal isn’t smart if you put off replacing these items.

Have You Heard of This Best Place to Retire in 2020?
Have You Heard of This Best Place to Retire in 2020?

The best place to retire in America is one you likely are not familiar with.

8 Secrets of an Expert Thrift Store Shopper
8 Secrets of an Expert Thrift Store Shopper

Here’s how a veteran thrift shopper scores the best deals — and turns a profit from them.

7 Common Online Shopping Mistakes That Will Cost You
7 Common Online Shopping Mistakes That Will Cost You

How many of these costly online shopping missteps are you making without realizing it?

View this page without ads

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

Get Started

Most Popular
10 Things Frugal People Never Buy
10 Things Frugal People Never Buy

If you’re a true tightwad, the mere thought of spending money on these items gives you the willies.

10 Useless Purchases You Need to Stop Making
10 Useless Purchases You Need to Stop Making

You might as well flush your money down the loo if you spend it on these things.

7 Social Security Rules Everyone Should Know by Now
7 Social Security Rules Everyone Should Know by Now

Confusion over Social Security is a shame, considering how many of us will need this money badly.

If You Find This Thrift Shopping, Buy It
If You Find This Thrift Shopping, Buy It

They don’t make coffee makers like this anymore.

7 Social Security Benefits You May Be Overlooking
7 Social Security Benefits You May Be Overlooking

There’s more to Social Security than retirement benefits.

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.

14 Things You Should Stop Buying in 2021
14 Things You Should Stop Buying in 2021

These convenient household products come with hidden costs that you might not have considered.

9 Shopping Mistakes to Avoid at Costco
9 Shopping Mistakes to Avoid at Costco

Are you missing out on serious savings at your favorite warehouse club?

Is Writing a Check Still Safe?
Is Writing a Check Still Safe?

Every time you pay by check, you hand your bank account numbers to a stranger.

6 Ways to Protect Your Retirement Accounts From Hackers
6 Ways to Protect Your Retirement Accounts From Hackers

Imagine having $245,000 stolen from your retirement account — and not being reimbursed.

The 6 Best Investing Apps for Beginners
The 6 Best Investing Apps for Beginners

If you’re looking to ease into investing in the coronavirus economy with just a little money, check out these easy-to-use tools.

10 Deep Discounts Available on Amazon This Friday
10 Deep Discounts Available on Amazon This Friday

These items are all steeply discounted — but the deals won’t last long.

13 Amazon Purchases We Are Loving Right Now
13 Amazon Purchases We Are Loving Right Now

These practical products make everyday life a little easier.

This Is the Most Dependable Car Brand in the U.S.
This Is the Most Dependable Car Brand in the U.S.

This brand’s vehicles are least likely to give drivers repair headaches, according to J.D. Power.

7 Income Tax Breaks That Retirees Often Overlook
7 Income Tax Breaks That Retirees Often Overlook

Did you realize all these tax credits and deductions exist — or that they apply to retirees?

7 Kirkland Signature Items to Avoid at Costco
7 Kirkland Signature Items to Avoid at Costco

Even if it seems you save a bundle buying Costco’s Kirkland Signature brand products, they may not be the bargain they appear to be.

7 Hidden Sections of Amazon Every Shopper Should Know
7 Hidden Sections of Amazon Every Shopper Should Know

These little-known departments of Amazon are gold mines for deal-seekers and impulse shoppers alike.

7 Costly Health Problems That Strike After Age 50
7 Costly Health Problems That Strike After Age 50

As we age, our bodies wear down. Here is how to cut costs associated with some common ailments.

Homeowners Say These 2 Kitchen Appliance Brands Are Best
Homeowners Say These 2 Kitchen Appliance Brands Are Best

One brand takes five of the top honors, while another ranks highest in three categories.

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.