Now that the new year is upon us, many Americans will try to turn over a new leaf and make saving money a priority.
If putting more money in the bank is a top goal, you may need help to overcome the odds of slipping back into bad habits. Here are a few ways to make your new savings goal a success.
1. Set measurable and attainable goals
Setting goals is important, but establishing the right goals is crucial.
For example, a goal of “Save more money in 2020” has the right intentions, but lacks a way to measure success.
Instead, get specific on the amount, the date and the purpose. A better goal would be “Save $2,000 for the down payment on a car by April 1.” This way, you’ll know exactly what you need to do and by when. The more specific the goal, the better the chance of completion.
Having a purpose is important for motivation too. Which gets you more excited: saving $1,000, or saving $1,000 “for your next vacation”? No matter what the money is for, picking a specific cause gives the whole process meaning and urgency.
Keep goals realistic. Planning to save 50% of your income this year when you didn’t even save 5% last year is setting yourself up for failure.
2. Break your goal into easy steps
Breaking down goals into manageable bites makes big numbers less intimidating.
Don’t try to save $5,000 for the year. Instead, save $100 a week. Yes, the goals are the same, but which sounds easier?
3. Make saving like paying a bill
Additions to your savings account should be like any other regular bill you pay. The only difference is the payee.
Include savings in your budget, and write a check to deposit into your savings account when you’re sitting down to pay the bills. To make the process easier, set up automatic deposits into your savings account. Schedule transfers on your payday and move the money before you can spend it.
4. Start tracking expenses
Tracking your expenses is crucial to see where your money is going, and how you can save.
For example, maybe you think you spend $200 a month eating out. But tracking might reveal that you actually spend double that amount.
There’s no way of knowing what you spend until you’re tracking every dime. Use a budgeting site like You Need a Budget to help with the process. For more, read “4 Rules for Creating a Painless Budget.”
5. Find the money
Creating a goal to save more is a start, but the real challenge is finding the money within your budget to make it happen.
After you track expenses and know where your money’s going, you’re in a position to spend less. One way to do that is simple — cut back on discretionary spending such as eating out.
However, try to avoid a “dollar diet.” Diets are about deprivation, which is why they’re so hard to stick with. When you’re trying to squeeze extra money from your budget, first try to gain without pain by having the same quality of life for less.
For example, if you eat out with a coupon, that’s gain without pain.
Wherever you’re spending money now, you can typically find ways to spend less. To get started, check out “Stop Overpaying for These 13 Things.”
6. Track your progress
Tracking your goals is important for two reasons: to check up on your progress and to stay focused.
Remember: Out of sight is out of mind. Keep your goal in sight, and remind yourself why it’s important to achieve it.
7. Reward yourself
Saving money sometimes requires sacrifice, but don’t forget to give yourself a break along the way. Kids have to go to school, but each school day also includes a recess.
Did you meet your savings goal for the month? Treat yourself to a $5 latte, or whatever you consider a guilty pleasure. But don’t feel guilty — you’ve earned it.
Do you have tips for saving more in the new year? Share them in comments below or on our Facebook page.