7 Habits to Boost Your Savings
March 21, 2023
by Kimbree Redburn
The past few years have highlighted the need to have savings. Life is nothing if not unpredictable, and savings, whether for an emergency, your future, or your spring break trip, is a key piece of living a financially healthy life.
When starting to save, most people look at their expenses and income, and this is a great place to start! But, when it comes to saving money, our habits, or the things we do consistently, are as important as our budgeting skills and income.
Building good savings habits takes time. And it can be tough to know exactly how to get going, but don’t let that keep you from getting started.
Here are 7 habits to boost your savings that you can start today!
Savings Boosting Habit #1: Treat Saving as an Expense
One of the most common mistakes people make when starting to save money is saving what’s left over after their other expenses, both needs and wants, have been covered. This is because the tendency is to spend the money when it’s there.
Instead, one of the best habits you can build to boost your savings is to treat savings as an expense. You’ve probably heard the old adage, “pay yourself first.” That means making saving a priority when you get paid.
How to pay yourself first:
- Look at your expenses and income and see what you can afford to save.
- Put this amount in your expense plan and treat it like a bill or necessary payment. This means you’ll move money to your savings at the same time you pay your necessary bills and debt repayments BEFORE you start spending money on your wants. If it helps, you can think of it as a payment to your future self. This will ensure that you are saving some money each month towards your goals.
PRO TIP: To make this savings boost even easier, you can automate it. There are two main ways to automate paying yourself first:
- If your employer uses direct deposit to pay you, you may be able to set up a second account to place a certain amount of your paycheck into. That way, you don’t have to think about it.
- You could set up a recurring direct transfer from your checking account to your savings account that will take place after each paycheck arrives in your checking account.
Savings Boosting Habit #2: Impose a Waiting Period
Have you ever found yourself running into the store “just to look around” and leaving with a random $200 purchase you just had to have? If so, you’re not alone.
In 2021, a survey by Slickdeals found the average American spent just over $300 a month on impulse purchases. While that may not seem like a lot, over a year, that’s $3,600 that could have been saved or invested.
In fact, impulse spending can have a big impact on your bottom line.
One way to decrease your impulse purchasing is to give yourself a waiting period.
If you are out shopping or find yourself browsing online and come across something you suddenly want, don’t buy it on the spot. Instead, make a note of where it is and how much it costs. Then tell yourself if you still want it after a set period of time (usually 24-48 hours), you’ll try to work it into your budget.
This practice can help you save money over time. Often, you want things you see, and when you buy them, your brain rewards you with dopamine and endorphins. But the pleasure you feel from these chemicals is temporary, and when it’s gone, it may be replaced with buyer’s remorse.
In some cases, this can even lead to more spending to get another hit of the positive chemicals. By giving yourself a waiting period, you can take a step back and evaluate if you really want or need the item or if it was just an “in the moment” response.
Savings Boosting Habit #3: Make Saving as Easy as Spending
Spending money is so easy these days it’s almost effortless. In fact, a 2022 Survey found 88% of consumers have at least one shopping app on their phone. This makes it easy to overspend. Plus, bored scrolling and engaging with ads on social media can lead to unplanned spending. When spending is this easy, it’s important to make saving money equally easy for yourself.
This means you need to be keeping tabs on your spending. You could do this in several ways.
Put your bank or financial institution app on your phone, and check in with your finances regularly. Use an app like Mint, YNAB, Monarch, or another personal finance tracker to stay on top of your spending and saving. You could even track your spending using the notes app on your phone, a spreadsheet, or with the classic pen and paper.
The important thing is to regularly check your finances.
This allows you to see where your money is going, prepare for big bills or expenses you might have coming up, and see if there is money you can tuck in savings.
Being aware of your spending will help you as you work to save more. And in order to keep yourself aware, you need to make saving and checking in with your money as easy as it is to spend it.
Savings Boosting Habit #4: Break Down Bigger Goals
Saving for the future can seem daunting. When your goals are bigger (like a trip…or even a house), sometimes progress can seem so slow or so small that it doesn’t seem worth it.
Looking at the big picture can be helpful, but it can also seem so big or far away that it can be demotivating. Instead, break your bigger goals down into smaller pieces and give yourself a timeline to complete them.
For example, let’s say you have a friend planning a destination wedding in a year, and you REALLY want to go. The total cost for the trip will be $2,500, and on your current budget, you just can’t see a way to make that happen. But you have 12 months to get the money, and you get paid twice a month. That means you’ll have 24 paychecks between now and the wedding. So, you’ll need to find $105 per paycheck to save to reach your goal!
Breaking your overall savings goal down like this has a few benefits that will boost your savings. First, you have a small, specific amount you need to find in your budget to save. Second, you know how often you need to save the money – each paycheck. This helps give you a clear plan to reach your goal and will help you be more successful over time.
Savings Boosting Habit #5: Know the True Cost and Plan for Maintenance
Sometimes, even when you’ve budgeted for the initial cost of something, owning it can still impact your ability to save in the future. This is because things like a car, house, or pet often come with additional expenses that add up over time.
Knowing the true cost of what you’re planning to buy or already own can help you save money in the long run.
Take owning a car as an example. Your expenses don’t stop when you purchase the car. You’ll need to pay for gas, insurance, annual registration, and routine maintenance to keep your car on the road. Knowing these costs, or being able to approximate them, allows you to factor them into your monthly and annual expense plan.
For expenses like gas that occur monthly, you can simply add the average you expect to pay to your monthly spending plan. For other less frequent expenses like insurance or registration, you can save a portion of the monthly payment each month, so you’re ready when the bill is due.
Knowing and savings for the true and long-term cost will prevent expenses from sneaking up on you and having to dip into your savings to cover costs that are expected.
Savings Boosting Habit #6: Keep Yourself Covered
Accidents and emergencies happen. And they can be a big drain on your finances if you’re not careful.
Having enough personal insurance through term-life insurance, medical insurance, and disability insurance, and making sure your property is protected with car, home, or renters insurance can help you when things go wrong.
While paying for insurance might seem counterintuitive when you’re working to save money, it’s a good habit to start that can save you money over time.
A medical emergency, car accident, or an issue with your living situation, like a fire or a burst pipe, could cost you lots of money. But, by being properly insured, you share the risk of these occurrences with your insurance provider.
So, when things go wrong, you’ll be responsible for covering your deductible and any co-insurance payments, but your insurance provider will help pay the rest. Having proper insurance helps emergency expenses hopefully stay smaller, allowing your savings to keep growing over time.
Savings Boosting Habit #7: Start Small
It can be hard to feel motivated to save when you don’t have much money to save in the first place. But it’s better to start small than not to start at all.
Even starting with $5 or $10 a month, you’ll be saving toward your future. This will help you be better prepared when opportunities or emergencies arise.
Starting small also helps you build the habit of saving into your normal behavior. As you receive raises or adjust your budget and have more money to save, it’ll be easier for you to adjust to saving larger amounts of money.
When people decide to start saving money, the first thing they look for is expenses to cut, followed quickly by ways to increase income. And these are two very important components of saving money. But, the habits you build around spending and managing your money are equally important.
Your habits will help you stay on track and keep saving even as your financial situation changes or unexpected expenses pop up.
Just remember that small consistent changes over time can yield huge results!