How to Create a Positive Habit of Savings and Live Better
Are you saving money? Do you have more reason as to why you’re not saving than money in a savings account?
I want you to remember these three phases: Saving money is important. Saving consistently is key. Saving early is impactful. And saving purposefully helps you master your money.
Why you probably can’t save money
You already know why it’s important to save money but you continuously run into the issue of not being able to save. I can empathize because I was there once.
Saving money is for everyone. It must be a priority in your life. We save money to make future purchases possible. It helps us afford our living expenses without being tied to a job indefinitely.
Learn more: How to Save Money Today
Don’t wait till you have “more” money to start saving
We all work to make money in order to spend it, not hoard cash. However, mindless spending leads to overconsumption and dissatisfaction.
Everyone can save money. If you believe you cannot, then that’s the first belief we must challenge in order to shift your mindset.
Why do you believe you cannot save money? Can you save $5 per week? I think you can. I believe in you and I want you to believe in yourself too.
Keep these in mind:
- Savings is a safety net when income fluctuates. Having a savings account, you’ll have money available to cover unexpected expenses or periods of underemployment or medical emergencies.
- Savings helps you limit credit use. Credit is a tool and when used as leverage can support wealth creation. However, mindless use of credit will lead to long-term debt that will weigh you down.
- Savings can lead to wealth creation. When you start saving money, you’ll find ways to make money with money through better interest rates or investment in the stock market.
- Savings allow you to purchase things too. Imagine being able to buy things without relying on credit. You’re focused on enjoying the product as opposed to making monthly payments.
I’m a big believer in having multiple income sources and streams. Consider taking on a side gig or creating a business that can help you increase your income to put towards your savings goals.
Pay yourself first each and every payday
Set up automatic transfers from your direct deposited paycheck to a savings account. Not only is this a good way to save money, but it will also keep you motivated. There is nothing motivating about working hard all week long only to see each penny earned go towards expenses and bills.
Gain peace of mind and pay yourself first to build a savings account to cover emergencies.
Learn more: How to Pay Yourself First: A personal finance golden rule
Choose to have a purposeful savings strategy
A very important process I created helped me save more by allocating my money to achieve specific goals. I describe this purposeful savings strategy in more detail in my book, You Only Live Once: The Roadmap to Financial Wellness and a Purposeful Life.
With the purposeful savings strategy, you want to save for rainy days, emergencies, short- and mid- and long-term goals. It’s about being specific so you can be clear on how your money will be used to live your dream life.
Rainy Day Fund
Rainy day fund helps you cover expenses related to unforeseen events. I suggest having the equivalent of your auto insurance deductible. For example, if your auto insurance deductible is $500, have $500 in your rainy day fund. After using the money to cover expenses, make sure you’re contributing to get it back up.
Opportunity Fund
Opportunity fund covers a period of unemployment or underemployment. This savings account should be used to cover your living expenses. It’s not used to buy the new pair of shoes or cover the expense of changing a flat tire. Have at least 6 months of living expenses.
Experience Fund
Experience fund is two-weeks of salary to cover expenses related to vacations or long weekends. You need time away from work where you can disconnect and recharge.
Freedom fund
Freedom fund is a savings account I recommend for everyone. The goal is to save enough money to cover your living expenses for an entire year. Freedom is the opportunity to leave a job to explore new interests or take a sabbatical.
Find the perfect savings account and apps to help you save more with ease in the financial marketplace.
Learn more: Emergency Fund: Why You Need It and Why It Matters
Identify your short, mid-, and long-term savings goals
What are the things you’d like to purchase, accomplish, or experience? Be specific about your financial goals.
I find creating two columns on a sheet of paper to be quite helpful. On one side write down everything you want to do or have. On the other column, decide when you’d like to accomplish those goals.
Short Term
Identify your short-term goals such as saving for a vacation, holiday spending, expected taxes for the year.
Midterm Goals
These savings goals are tied to bigger purchases such as home and auto purchases, college expenses, and a dream vacation.
Long Term and Retirement
Everyone should save for retirement. Retirement isn’t an age. It is a financial number. You can retire when you’re 70 or retire at age 30. It all depends on how much you save, invest, and control your lifestyle expenses.
Finally, I want you again to remember to save now, save consistently, and save early.
Now, what are you saving for? Are you ready to shift your beliefs about money and prioritize saving money?
