“Save, save, save” is what you are told whenever you come into a little money — whether it is from a new job or a windfall. Regardless of the source of income, you shouldn’t spend it all because you’ll never know when you might need that money. But, to many people, trying to save is often a fruitless endeavor. Here are seven tenets to staying on track when saving.
1. Spend less than you earn.
This is simple math. Every wealth-building venture in the history of the world was built on this logic. If there is more money going out than coming in, you’ll never be able to accumulate savings. So, even if you can keep just $25 of every paycheck, you are on track to successful saving.
2. Set goals.
Establishing end-points are essential to the saving mentality because it is easy to lose focus and motivation when you save blindly. It helps to have something to look forward to, so that you can see the result of your hard work. An emergency fund, a home down payment or an extra student loan payment are just some examples of savings goals.
3. Be realistic.
It’s easy to overestimate your savings potential when you conjure up the determination to be an aggressive saver. But, you should not set lofty goals that are outlandishly unachievable under your current financial situation because your failure to meet those goals will eventually deter you from saving. Being realistic with your savings venture would help keep it going.
4. Think short-term and long-term.
Your 65-year-old self is just as important as your 35-year-old self. So, don’t simply save with a short time horizon. Look further down the road. It is easy to think about next month or next year and forget the days of retirement. Some people do it the other way around — fixating on having $1 million when they leave the workforce. A healthy split between short-term and long-term savings will help address life’s various financial needs.
5. Keep track.
What good is saving if you don’t track your progress? You’ll lose focus if you forget that you are saving with a purpose. Also, you’ll miss the milestones on your savings journey, which provide that motivational boost to save even more. There are account alerts and personal financial management tools out there to help you keep track of your savings.
6. Don’t compare yourself to others.
Family, friends, and strangers may choose to flaunt their “apparent” wealth with a nice watch, car or home. That is their choice and is totally unrelated to your financial situation. So you have no need to buy similar things to match their appearances. It is called “personal” finance for a reason. Save, and spend, on your own term — not anyone else’s.
7. Live a little.
While diligent saving is a good practice, it doesn’t mean that you cannot spend a little to reward yourself from time to time. A little pampering can help to relieve that stress that may come with the persistent drive to accomplish savings goals. So to avoid savings burnout, treat yourself occasionally to things you like because that’s what you are saving for: to live comfortably.
Simon Zhen is a research analyst for MyBankTracker. He is an expert on consumer banking products, bank innovations, and financial technology.
Simon has contributed and/or been quoted in major publications and outlets including Consumer Reports, American Banker, Yahoo Finance, U.S. News – World Report, The Huffington Post, Business Insider, Lifehacker, and AOL.com.