The ability to consistently save money to ensure the ability to meet future needs should be the goal of every household. Unfortunately, this is not the case. Most families in the United States live a lifestyle that is at or above their current means. Those who are successful at saving money have some things in common. I believe that success leaves clues. If you desire to accomplish something that you have not been able to do to this point, observe those who do it well, and you will discover certain patterns that you can incorporate into your own efforts. To help you identify some of the clues left by successful money savers, I have compiled a list of 10 of the most common practices of people who are incredibly successful at saving money.
1. Build a Bucket Platform
Building a bucket platform is another way of saying creating an allocation system that identifies the categories the define your spending habits. One of the primary causes for failure to save money is the inability to keep track of your spending. When you create financial buckets that identify how you spend your money. You can start with three major categories such as non-essentials, non-essentials, and savings. Obviously, you can break each of these categories down into multitudinous subcategories that can elucidate your spending patterns.
2. Create an Off-Limits Fund
Even when people are able to save money, there is a tendency to dip into the savings for non-essential purchases. As long as you are constantly dipping into your savings, you will never accumulate the funds necessary to meet future needs or to handle unforeseen emergencies. In a consumer-driven society, there is a proclivity to buy shiny things, and this is especially true when it comes to young adults. By converting your savings into a type fund that cannot be easily accessed, such as stocks, bonds, or precious metals, it will be more difficult to raid the account to buy shiny things.
3. Avoid Paying Retail
An erroneous postulation is perpetuated among consumers that retail prices are written in stone. The truth is that in most cases you can find ways to pay less for items you want. You should develop a habit of asking for a discount. Not only does asking for a discount help you avoid overpaying for things, but it also will train you to develop a habit of caring how much you spend at all times. Just by comparison shopping, you will find out how much money you are leaving on the table by paying the full retail price.
4. Set a Savings Goal with a Purpose
Not only is it paramount that you set a savings goal, but the goal you set must have a meaning. Don’t just pick a number out of the sky; that will be too arbitrary to serve as motivation. You should sit down and look at how you want your future to look, at what age you wish to retire at, and how you want to live after you retire. This will help develop a clear understanding of how much you will need to save to live the life you desire to live. Give your goal a purpose also gives it power.
5. Live Below Your Means
The average family in the U.S. lives so close to their means that if they lost their primary source of income, they would be homeless in three to six months. While having money is important, living below your means is one of the essential elements of financial stability. Regardless to the amount of money you earn, if you spend it at the same rate you earn it, you are flirting with financial disaster and the chances that it will eventually catch up with you is very high.
6. Focus on Appreciating Assets
Another way that people work against themselves when attempting to save and create financial stability is that they accumulate more liabilities than assets. Liabilities cost you money over time. Liabilities are also purchases that depreciate in value after the purchase, meaning that they are never worth what you spent to acquire them. You should focus on buying assets, things that appreciate in value or at least hold their value.
7. Take the Soda Bottle Test
One of the common complaints of families is that they cannot afford to save any money. The truth is that they cannot afford not to. One way to train your mind that you can save money is by taking the soda bottle test. Get a two-liter soda bottle and put a $5.00 bill in it every day for 60 days. Not only will you realize that you can save, but you will also see how quickly your savings will add up.
8. Always Maintain Multiple Sources of Income
While creating a nest egg through a legitimate savings plan has its benefits, the best way to ensure your future is to create multiple streams of income that will ensure that you always have money coming into your home, even if you walk away from your career or job. Find ways of generating active and passive forms of income.
9. Automate the Saving Process
If you are like me, you have a million things going at all times and taking the time to move money from one account to another for the purpose of saving and investing can easily slip your mind. You can also be tempted to spend that money instead of saving it. By automating the savings process, you will reduce the temptations and ensure that the money is always where it should be. Most banks will allow you to choose a set amount to move from your checking account to your savings account.
10. Save Your Raises
This habit sort of piggy-backs off of the “live under your means” principle. One way to ensure that you live under your means is to place your raises in compensation in savings or find solid, low-risk investments to engage. Good savers don’t increase their lifestyles every time they get a raise; they focus more on increasing their savings and retirement contributions.