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Saving money can be as daunting as it is necessary. Sometimes it is difficult to know where and how to start, especially if you have not learned money managing techniques. Following are some habits of effective and successful savers. Adopting these habits can help you reaching your financial goals.
Make saving a habit
In the same way that lifestyle changes succeed where fad diets fail, turning the act of saving into a lifestyle will bring long-term success. Rather than looking at saving as a categorized act that only applies to a handful of circumstances, successful savers instead take the position that everything they do is an opportunity to save. They habitually think twice before spending money, and not only through the act of handing over cash or a card, but in the small decisions like turning on a lamp and using electricity they will have to pay for later. Mindfulness toward saving isn’t relegated only to shopping and savings accounts, but is also in the actions you take throughout the day.
Pay yourself first
Does your savings account look like you thought it would ten years ago? Does it even exist? Successful savers pay their future selves first, no questions asked, so that ten years down the line they actually do have more money in savings and investments. The higher the percentage the better, but regularly pay something to your future self. Be realistic and take into account your income versus necessary expenses. Start low and work your way up. Studies have shown that participating in savings plans can actually help create savings habits elsewhere in your life. If 5 percent of your income seems like something you can’t currently live without, calculate that dollar amount and find other places to curb spending in your budget. Do the long-term math. Going out to eat once a week might not seem like a big expenditure, but if you put $25 in savings every week, that is an additional $1,300 per year. In ten years, you will have paid yourself $13,000 just by skipping dinner at a restaurant once a week.
Have solid goals
Successful savers know what they want. Setting concrete goals for your financial future gives you something real to save toward. Long term goals are crucial, but don’t forget to give yourself achievable short term goals as well. As an example, you might consider building a savings account equal to three months’ pay in one year, paying off credit card debt in five years, and having the equivalent of your salary in savings within ten years. Other goals can be saving for a trip, paying for your child’s education, or buying a first home. Whatever goals you set, make them achievable, then set out to achieve them.
Make informed decisions
Smart and successful savers look before they buy. Comparison shopping should become habitual, and convenience spending kept to a minimum. Consumers often initially comparison shop for services such as electricity or internet, but successful savers continue the process after service has been established, routinely comparing plans and competing services to make sure they are getting the best deal for their money. Keep in mind that a service contract is not always the best way to save money, as no-contract services allow you to shop around and switch plans without termination fees. For example, no-contract cell phone use is on the rise, both because it is cost-effective and because there are specified limitations on services so there are no ugly overage surprises on the bill.
Some bills will increase in certain seasons and decrease in others. Home appliances have a limited life span and will eventually need to be replaced. In temperate climates, you will need summer and winter clothing. Holiday and birthday related gift-giving roll around every year. Smart savers anticipate these needs, and that anticipation saves them money. If your electricity usage chart looks like a roller coaster over the course of a year, consider average billing if it is available. Make a list of gift ideas and buy them in advance when you find them on sale. Purchase seasonal items you know you will need far enough in advance that you aren’t paying full retail prices. Don’t forget to donate items you will no longer need so that others can save, then take that tax write off.
Never shop without a list
This goes for more than just the weekly groceries. Shopping as a form of recreational activity is one of the most dangerous things for your wallet and savings account. Smart savers make lists and stick to them. Keep long-term lists of things you anticipate needing. If your microwave is on its last legs, jot that down on your long-term list, then buy it when you find a deal. Create a discretionary budget for occasional items you enjoy buying, like books or coffee or toys. Knowing that you have money set aside for it gives you room to enjoy it, but knowing you have a set budget allows you to make better decisions in how you spend it. Also, take advantage of comparison shopping engines such as Google Shopping, Shopzilla, Nextag, Amazon Product Ads, Price Grabber, etc.
Life happens. Smart savers know that to maintain good saving habits they need to occasionally adjust their budgets. The important thing is to always keep your long-term goals in mind, even if those also occasionally need to be adjusted.