October 4, 2019
Our daily lives are ruled by habits. Big or small, bad or good, they all contribute to our health, our relationships, and our finances.
Saving is one habit that’s considered good to have by many. But as it turns out, this habit is not all that common.
The typical American household has just under $9,000 saved in a bank account.
So how do we fix this? We make saving a habit.
We are all under the control of our habits. But the good thing is, once we’re aware of the habits we can change them and create better habits.
It might seem difficult to change habits that we’ve had for years or even decades, but over the years a lot of research and books have been published with conclusive scientific proof that we have can have power over our habits.
Quite simply, because things add up.
Having the habit of spending all or more of your annual expenses can quickly add up to a lifetime neck-deep in debt with little hope of getting out.
In contrast, a lifetime of consistently saving and investing even small amounts can create massive wealth later in life.
When you take into account compound interest, you can come up with life-changing amounts of money.
Here are 9 ways you can make saving a habit. The more of them you do, the higher the chance of creating that habit. It takes just around 60 days to break or form a habit so remember to keep at it.
Any habit starts with you. You have to find out your personal values and what you really find important. Finding real reasons to save can give you visceral motivation that can create real change in your life.
If you have difficulty saving then you also have to accept that the problem is there in order to start dealing with it.
Also, problems with uncontrolled expenses can make savings moot if the spending exceeds the savings. So identify that and take care of it first.
Create SMART goals (Specific, Measurable, Achievable, Realistic, and Timely). When you have direction, making progress is easier since you know what you want to move toward.
Having financial milestones help, and the more personal and important they are to you, the more likely you are to follow them. Creating a full-fledged saving and investment roadmap can be a huge motivator.
One mistake a lot of people make is to set lofty goals and start by making leaps and bounds that are unsustainable. If you put too much pressure on something it might break, and that includes habits.
Start with saving small amounts and make those transactions consistent. When you make saving a routine you won’t need to make a conscious effort to save since it’s already natural.
We live in a high tech world. Recurring payments like bills and subscriptions are already being set up to deduct a specified amount from our accounts on a regular basis.
So why not use this for your own advantage? Consider your savings as your most important recurring payment and schedule automated deposits.
When you do automated savings you won’t really need to think about saving since it’s already done for you.
When doing things on our own it’s easier to slip back into old bad habits. When you’re accountable to someone else, it’s a whole other story.
Here are a few ways to do that:
An obvious method of motivation is to receive rewards when making progress on savings. It can be a bar of chocolate you eat after saving $1,000 for the month.
You can use the milestones and goals you set on number 2.
This is pleasure motivation at it’s finest.
This is the opposite end of the spectrum as rewards. But it’s definitely effective to hit your savings motivation from both directions.
You can make a bet with friends how much you’re going to save this month. You can even make it a competition! Whoever doesn’t hit their savings goals has to do 100 pushups or something like that.
If lost potential drives you, use fear of missing out and figure out how much you are really missing by not saving and investing.
When you have a bit of money saved up another option to keep you motivated is to invest.
Watching your money grow can be addicting. It can feel amazing when you calculate your net worth and see continuous positive progress.
Just remember that investing has inherent risk. But you can minimize risks by using strategies like Dollar Cost Averaging.
When you make things easier to do, there’s less resistance. There’s a lower chance of inaction caused by laziness and demotivation.
Which of these two plans sound more like people will follow through and finish?
Making things easy is a sure way to guarantee progress and give a more pleasurable experience. This is the same reason why investing with DiversyFund only takes 4 simple steps to get started.
Small changes can bring great results. Even if you only start out by saving small amounts, forming the habit is what’s important.