4 Ways to Save More Money

Use   to tell a friend.

You should save more money than you currently do.

I can say that knowing that it applies to about 95% or so of my audience. For those of you who were struck with wild indignation because you’ve already fully funded your IRAs for 2009, you can skip this post. Teacher says it’s okay. : )

For those of you who are laid off, work in a sucky job that pays too little, or are saving up just to spend, the thought of long-term saving is dreadful. You may think, “I don’t know if I’ll ever see the payoff!” I’ve actually met people convinced their future is short.  They tell me, “I know I’m only living to 40, 50 tops, so I don’t save anything.” They must really like the thought of moving in with their kids at age 51, that’s all I know!

But seriously – how can the average person save more money? The truth is, I don’t have one answer that can work for everyone. It is too difficult to define the “average person” and put their financial needs in a little box. I can only tell you what has been foolproof for me. I can also tell you, you may have to try a number of different methods before you find one that works. Saving money is mostly psychology – so you need to find a way to fool yourself into saving more. Whether it’s for a higher purpose, or fear your significant other will take away your credit card, the answer is to find a motivation greater than whatever else you decide you want to spend your money on.

So, here are the ways I save more, and they could work for you too:

1. Prioritize. I don’t car much about my image. So, forgoing a fancy car has been very easy for me and my husband. We’d rather drive a safe, inexpensive vehicle than something flashy or fun. We save a lot of money this way. We also have nice clothes for special occasions, but in general, we lounge around in pretty grubby clothes because we don’t care much about fashion. We’d also rather spend money on Trader Joe’s wine (Their $6 Chianti is kind of amazing, by the way), or iTunes.

2. Pay Yourself as Often as You Can. I think frequency of saving matters more than the amount, because building the habit is the hardest part, you can always increase the amount, but if you never get used to saving, then you aren’t going to get good at it. So any time you have an extra penny or dollar, especially one you don’t expect, stash it away. That jumbo tax return? Wipe that spending spree out of your mind, you weren’t expecting it, so save that money because you don’t need it today. Every once in a while, shift $5, $10, or $20 to a savings account, and mark it “spent” in your mind. You know you do this all the time in real life, with impulse purchases like buying a yoga DVD that collects dust, or premium olive oil. Try to impulse save with regularity. Another neat trick, pretty much every bank will have an automatic way to shift money between accounts. Start with a savings amount you can shift on a weekly basis. Again, frequency is key. Start with $5, and increase the amount a dollar a week until you really can’t afford to save more. 

3. Make Your Money Hard to Get To. I have a bank account that is hard to access. I don’t have checks for it. And while I have a debit card for it, I couldn’t tell you where it is, or what the PIN number is. I do this on purpose, because I know that the easier my money is to get to, the more likely I am to engage in short-term borrowing that never gets repaid. You know what I’m talking about. You want a new fill-in-the-blank, so you think, “I’ll take it from savings, and pay it back my next paycheck.”  You pay back a bit perhaps, but never the full amount, and soon you get used to this little charade you play with yourself. CDs are a good option to tie up your money for a while, without the permanence and penalties of an IRA account.  Also, making the money roll automatically into new CDs once they mature is another administrative hassle to undo, so you won’t make the effort to change, and you get the bonus of constant reinvestment! 

4. Indulge on the Important Things. You can’t cut back on everything. Well, you can, but you’ll drive yourself nuts. Just like a person on a strict diet eventually freaks out and binges on their favorite snack foods, eventually gaining back all their lost weight; someone who deprives themselves of all the things they enjoy that are not free is going to give up and declare, “I gotta live my life!” and spend their savings on some ridiculous item they cannot afford. So, choose your special expenditure. It doesn’t matter what it is. It could be a daily latte. I know, this goes against the finance wisdom of all the gurus, but seriously, if you drive a clunker, but all you want is the peace and ritual of your morning latte, there is no one who should advise you to give it up. One hard and fast rule: any indulgence should not be bought on credit unless you are certain you can pay it off within 3 months. And even at that, you should just wait the 3 months until you accumulate these funds you are so “certain” of. Save up, then spend.

Hope this all helps!