How to trick yourself into saving more
Some of the best surprises are simply a result of things being forgotten. You know that feeling you get when you chance upon unexpected cash in an old pair of jeans or a jacket you haven’t worn for months? Well, you can get that excitement regularly by making a few changes in your life that build "hidden" nest eggs and make saving easier. You just need to start with a mental bypass for some of your money.
The best way to trick yourself into saving is automation. In other words, set it up so that money gets transferred into your savings account every time you get paid. The next step would be to implement a setting where the amount you’re saving automatically increases after a certain date or whenever you get a pay raise. Automation is so effective because it doesn’t require us to think about saving at all, it’s all done out of sight, out of mind. Automating your savings could be as simple as setting a regular direct debit with your bank a day or two after your salary typically gets deposited.
Easy Habits Die Hard
While it’s easy to hand off some of your fiscal responsibilities to robots, tricking your mind by using simple and incremental rules can be a shortcut to healthier financial behaviours. That can start by deciding on a simple saving rule of thumb that fits into your personal life. There are plenty of rules out there, but it’s important to find one that you can stick to and helps you get closer to your financial goals.Rules of thumb are great because they’re so simple. Research has found that rules like “save at least 10-30% of your income in a month” correlated with greater financial well-being. Consistency is key.
Find Your Focus
Once you find a rule that fits, start the process of building it into a habit, so say the behavioural scientists. First, find your cue. That can be a day (like every Monday I have to do X), or the start of the month, or whenever you get paid. It just has to be something that is dependable and that you will remember. This "cue" will be your trigger or reminder to follow your rule. Once you have that process in place, all you need to do is keep it up. Repeating a rule is the key to making it into a habit. Again, the behavioural economists tell us to try to include a few rewards or incentives for following your rule to help. These rewards should be something simple and low-cost, like a fancy cup of coffee or an hour reading a guilty-pleasure novel.
Over time, you may need new tricks and rules of thumb when your financial situation changes - especially when your salary increases.
Tricks Change with Time
Avoid spells being cast your way that affect the spending side of the saving equation.
A rule of thumb here might be to indirectly trick yourself into saving more by re-evaluating what you actually need to spend. People don’t go out to eat dinner because they need food. They do it because they want to connect with friends or experience something novel.
They’re meeting needs for social connections, for convenience. In this way, you can evaluate whether needs can be satisfied in other, less expensive ways.
One of my favourite recommendations for saving on a regular basis is by using the MyWallSt to invest any spare, disposable income into some of the best stocks in the world. This is killing two birds with one stone where you scrape the spare money you didn’t need each week into an investment portfolio and over time your stocks will increase significantly.
For more information or a consultation contact Conor at www.tarafinancial.ie