When I landed my first real job after college, I thought that I would be on the fast-track to living a financially successful life. Given that I was making more money than I ever had before, my options for buying things I could neve previously afford were endless. However, despite earning a lucrative salary, I still managed to outspend myself which got me into a ton of financial issues. I ended up becoming to stressed with my financial position that I would often find myself up at night worrying that creditors would start calling me asking me for money and at this point I knew I needed to make a change; I needed to start saving money. In an effort to help you avoid the same financial challenges I used to face, here are the savings tricks that worked for me!
Trick #1: Re-organizing my wallet
In adult hindsight, I can trace the beginning of my financial woes to the state of my wallet. Before getting a job, I had never bothered to optimize my wallet because, well, why would I? To me, it was just a wallet. I didn’t understand what benefits I would attract by systemizing a wallet. It turns out, this mindset was my biggest financial mistake. I came to learn that a cluttered wallet was one of the drovers causing my overspending and the accumulation of debt. How you may ask? The thing is, when you’re not deliberate about the contents of your wallet, you risk carrying around excess credit cards than you actually need. This clears the way for making impulse purchases, all of which add up at the end of the month and leave you with a huge credit card balance.
For instance, the first step I took was to downsize to smaller wallet size. Instead of walking around with five credit cards, my minimalistic wallet only had space for a maximum of three cards. Out of these, I only reserved one slot for a credit card, and this was the one with the highest rewards. By paying off and getting rid of some of my credit cards, I also got rid of the interests and credit card fees that came with using them. Next, I reviewed my monthly expenses and decided that my credit card would only handle fixed costs. I then replaced the rest of the credit cards with a $50 bill to cater to my everyday purchases. So, if I happened to deplete this bill before my day ends, I had to carry over the remaining purchases to the next day.
Secondly, I initiated the habit of cleaning out my wallet at the end of every week. This exercise involved taking out all receipts, plus other acquired coupon cards and business cards that had no immediate use. Not only did this keep my wallet lighter and spacious, but it also gave me a chance to keep an eye on my weekly expenses. While analyzing my receipts, I could also identify and follow up on inflated charges and recover a few bucks as a result.
Trick #2: Tracking my emotions
The second trick that worked magic on my finances was getting my emotions under control. More than anything, our emotions are the strongest undertow that fuels most of our purchases. Most people spend on different things either to distract themselves from negative feelings or to boost positive feelings. What’s worse is that despite spending money, these emotions may only disappear for a fleeting moment, then resurface again after the distraction disappears.
Whether it’s anger, guilt, fear, or excitement, emotional spending will cause a big dent in your budget. Why is this so? The thing is, letting your emotions control your financial decisions will only make you fork out money on unnecessary things. For instance, have you ever gone out for a drink because you felt bored? Or made ridiculous financial promises to other people when you were excited? Eventually, you end up wasting a couple of bucks simply because you let your emotions reign supreme. Moreover, uncontrolled emotional spending could morph into a severe shopping addiction. You’ll find yourself spending beyond what you can afford simply because you crave the endorphin rush that accompanies each purchase.
So how can you subdue emotional spending? The first step to take is to master delayed gratification. Also known as impulse control, delayed gratification is the resistance to unplanned expenses. Before buying anything, ask yourself whether your emotions may be driving that impulse. Is it a necessary expense, or are you just sad, lonely, or overly-excited? Can it wait? Once you learn how to postpone your wants, impulse buying will cease to be a problem.
Secondly, setting up a celebratory fund is another trick that will help curb the effects of emotional spending. While it’s true that everyone loves an occasional treat, it doesn’t have to be impulsive. A celebratory fund is where you save a few hundreds of dollars that you spend on yourself. This way, if you feel the need to congratulate yourself for securing a promotion, you won’t have to tamper with your budget or borrow money to do so.
Trick #3: Pushing pause
In line with emotional spending, I discovered a concept known as the push pause method. The idea behind it is to breathe first and buy later, especially when it comes to big purchases. Notice that most advertisers know how to ignite a buying impulse in their target customers. You could just be chilling in your yard scrolling through social media, then you spot an advert offering a 50% discount for a flat screen TV. Of course, this sounds too good to be true. Even if you’ve never set your eyes on a TV, your immediate instinct will be to grab the insane offer while it lasts. Out of excitement and fear of missing out, you may end up spending thousands of dollars on something that’ll be useless down the road.
Frankly, most of us have fallen into a similar trap, including me. To avoid wasting money on such unplanned big purchases, I started applying the push pause. Whenever I thought of buying something worth more than $100, I would place a seven-day timespan between me and the item in question. During this period, I would completely shift my focus from the product’s superficial appeal to the inherent benefit I would obtain from buying it. I found that distancing myself from the object allowed me to think more clearly, and avoid rash financial decisions. Once the seven days elapsed, I often found that it wasn’t as necessary as I thought it was.
If you’re also losing money by purchasing expensive, useless stuff, the push pause method will help you save a ton of cash. Here’s the rule: When faced with a big purchase, don’t add anything to the cart while you’re under pressure. Instead, allow yourself a grace period of seven days. During this period, venture into the abyss of the internet to unearth as much information as you can about the item you intend to purchase. Compare prices, look at reviews, and make sure you learn its longevity based on those reviews. Chances are, you’ll discover a few dents being hidden within the insanely cheap price tag. You may also find that the product has some more affordable alternatives that serve the exact same purpose. Additionally, you should use the seven-day gap to assess the flexibility of your budget. Can you afford a big purchase without falling into debt? Will the purchase impede your short-term and long-term financial goals? If the answer to these questions is a Yes, that should serve as a big, glaring red light.
Trick #4: Use Saving Goals and Reminders
Speaking of long-term and short-term goals, you can’t save a significant amount if you don’t set them. The moment I set my mind on saving money, I realized that doing it without a plan would be a long shot. Therefore, I assorted my financial goals and ensured they fell under two broad categories: long-term and short-term goals. The short-term goals were those I intended to strike off in under a year, while the long-term goals were those I wanted to achieve beyond the period of one year. An excellent example of a long-term goal is saving for a down payment. Unless you earn a lucrative salary and have limited financial responsibilities, it will take you more than a year to save for a down payment. On the other hand, short-term goals can include things like minor home repairs, buying a friend a gift, or a mini-vacation. Separating my goals in this manner gave some context to my saving habits.
Depending on the time window and the urgency, I could easily allot an amount to each goal. Once I had a list of my saving goals, I set different reminders that would bring me back on the wagon whenever I started losing focus. Specifically, I made sure my reminders would beep around my pay dates. This way, saving money evolved into a no-brainer. For instance, I had sticky notes on my desktop, plus more reminders on all my electronic devices. Moreover, if you have someone you can trust, for example, a spouse, you can make them your accountability partner. However, the ultimate reminder is to automate your savings so that you don’t even have to think about them. This brings me to my final point.
Trick #5: Setting up automated savings from my paycheck
To fulfill my short-term and long-term savings goals, I resorted to an automated saving system. This type of saving plan gave my employer authority to release a specific fraction of my monthly paycheck directly into my savings account. On every 5th day of the month, $500 would automatically flow into my savings fund without me having to even think about it and the ensuing benefits were immense.
For one, paying myself first ensured that I didn’t divert the money I intended to save to cater to other things. Since my checking account was the final stop, I had to re-adjust my budget to make up for the money I was saving. This compensated for my wavering financial discipline, and as a result, my savings ballooned tremendously over one year.
Secondly, automating my savings made it easier to track my saving progress. With the help of saving apps and other online financial tools, I could compare where I was with where I wanted to be. I knew when I needed to pull up my socks to achieve my financial goals. This way, it became easier to plan, execute, and analyze my dreams. Actually, you can automate your savings and track them using a simple excel sheet.
If you’re interested in setting up an automated saving account, start by inquiring if your employer offers a tax-free retirement plan, maybe a 401(k). If they do, saving towards retirement is the best financial decision you can make for your future. Depending on what you can afford, arrange for your employer to make recurrent deposits of a specific percentage of your salary to your recurrent fund. Given that some employers match their employees’ retirement contributions, this is a golden chance to save money. You can also automate your savings for whatever goal you have. It could be a down payment for a mortgage, emergency fund, or your children’s college education.
There you have it. Those are the five ways I tricked myself into saving a ton of money!