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20 Better Money Habits to Help You Increase Your Savings

20 Better Money Habits to Help You Increase Your Savings

Isn’t it frustrating to feel you can be saving more?

You have great intentions at the begging of each month–yet somehow you spend most of your money. Are others able to save more because they’re naturally gifted?

If you’re struggling to save money, you’re not alone. Data shows more than half of Americans aren’t able to cover a $1,000 expense.[1] Is the solution to be the average and continue saving little money?

Of course not.

You’re an action taker–someone who doesn’t settle for mediocrity. This is why you’re reading this article now.

The truth is saving money won’t be easy.You’ll have to break bad habits and learn new strategies. Most of them will be simple but will need a focus on discipline. If you’re done aimlessly spending your money, you’ve come to the right place.

But first, be clear of why you want to start saving.

Most people talk about retirement. Others save for a vacation trip. So, is there a right answer for what you should save for?

It depends.

Saving for retirement is a must, but once you’re tracking this goal, it’s time to get intentional. As you already know saving isn’t easy, and you’ll need to change your perspective if you hope to save more.

Grab a sheet of paper or use your smartphone to jot down what having more money will make you feel.

Will you be able to sleep better at night? Do you want to start a business but can’t go all in because of your current job? Do you want to feel great whenever someone talks about money?

Get intentional and think what having more money will bring to you. Use these reasons as your north start. The next time you’re tempted to spend money remember why you’re saving in the first place.

Then, start adopting better money habits. Go through this list and note which habits you’re weak and strong in:

1. Be Honest About Your Bad Habits

The most important habit you can learn is to face reality.

The reason why you haven’t been able to save for a long time is that you’ve delayed accepting the facts. I get it, it’s not easy to accept you’re not saving as much as you should. It’s easier to ignore this and spend the money you could be saving, hoping you’ll have enough left over.

Go ahead and admit to yourself you’ve been lying to yourself for some time now.

This isn’t to make yourself feel bad. Instead, be proud of yourself for being honest and show self-compassion. Now you’re aware you carry bad habits and it’s time to get to work.

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2. Recognize Your Money Mentality

When you hear “savings,” what comes to mind?

Do you get excited because you’re on track for retirement? Or, do you cringe knowing you have been spending your money poorly these past few weeks?

The truth is you’re not saving because of the stories you’re playing in your head. Set some time in your calendar to interview yourself.

Figure out what money stories you’ve been telling yourself and challenge them. For example, if you believe you should spend your money as it comes–ask how this has resulted in the last few years. Your goal is to challenge bad money stories to create better ones.

3. Define Your Needs and Wants

It’s okay to like expensive brands. The problem is trying to buy everything because you want to keep up with friends and family. As Paula Pant states “you can afford anything but not everything.” This is why you need to define what your needs and wants are.

Create a list of items you truly need. For example, cell phone, and food, house are needs. Then, create your list of wants for items such as high-end shoes, latest smartphone, etc.

You shouldn’t buy everything from your wants list immediately. Instead, pick one and create a budget for it. Save money first and reward yourself with an item from your “wants” list once you’ve reached a savings goal.

4. Understand Your Cash Flow Using Top Tools

You may believe you understand your cash flow (money coming and out of your account.)

You get paid twice per month and spend an approximated amount of your salary on expenses. The rest sits on the same bank account without a purpose. This is a recipe for disaster.

Instead, use money tracking apps to better track your cash flow. Sync up all your accounts and let Personal Capital do the rest.

5. Learn How to Set SMART goals

You already know that saving without intention doesn’t work.

But, stating you want to retire happy isn’t enough. You need to set SMART goals. Think of SMART goals as ones you can take action on and track.

For example, “I want to be rich” isn’t SMART. Neither is “I want to be a millionaire.” But, “I want to save $500,000 within the next 10 years” is SMART.

The purpose of creating SMART goals is to be able to track your progress. How else would you know if you’ve reached your saving goals? Review your current financial goals and make them SMART.

6. Use Tools to Track Your Expenses

If you can’t manage your money well, you’ll always spend it poorly.

Your goal should be to keep your expenses as low as possible while having a high income. The problem is you may not review your finances regularly. Because of this, you might be overpaying for your services.

Again, you can track expenses using a money tracking app, showing you the amount you spend each month.

7. Learn How to Negotiate Your Bills

Once you’re tracking your expenses, take it a step further.

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Odds are you may be overpaying for your services or pay for ones you don’t need. Negotiating your expense isn’t hard. I was able to reduce my cell phone bill $10 per month with a 5-minute phone call.

You can do the same. Saving money with your bills means you’ll have more money to save.

Organize your expense from the most expensive to the least. Then, start calling your most expensive service providers to negotiate your bills. If you fail to negotiate the first time, hang up and try again.

Most of your service providers will be big companies, so you’ll work with a different person each time. You also have the option to use services like Trim, who negotiate on your behalf. Regardless, don’t settle for what you’re paying now and negotiate your expenses.

8. Start Automatically Saving Instead

Stop trusting yourself to save money.

You’ve already seen where this has gotten you. But, don’t feel bad, we’re all human and prone to mistakes. Instead, create an automatic budget.

For example, have your money automatically transferred to different accounts. Take it a step further and open external savings accounts. This way you make it more challenging for you to withdraw your money.

Now when payday comes, your money is automatically saved.

9. Be Frugal with Your Money

It’s okay to use your money to buy things that make you happy.

But, if you’re not saving enough after cutting your expenses, you need to take a different approach. I’m against adopting frugality for the sake of doing so.

But, being frugal isn’t binary– there are different levels to frugality. If you’re having trouble saving look for areas where you can cut more. For example, instead of paying for Netflix, watch free videos on Youtube.

Repeat this process until there are no more areas left. Cutting services and being more frugal than you’re accustomed is only temporary. Once you’re able to save more, you can go back to the services you love.

10. Switch over to No Credit Card

Debt is often the reason most of us can’t save.

You may earn a decent income, but once you factor in your rent, car note, and credit cards, you’re left with little. T

he average credit card debt is around $16,000.[2] The best way to avoid credit card debt is to stop using it altogether.

Forget about earning points. Leave your credit card at home somewhere out of sight.

11. Review Your Financial Progress Daily

You need to review your finances daily

With money tracking apps, you’re able to do this with no problem. But, even if you don’t review your finances daily, create a reminder to check where you stand once per week or month.

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To encourage this habit, make reviewing your finances fun. For example, review them while eating your favorite food. Or, reward yourself with something small from your “wants” list. Once reviewing your finances becomes a habit, you’ll be in a better position to save more.

12. Shamelessly Use Coupons in All Places

You don’t use coupons only when you’re broke.

Get into the habit of using coupons to save as much money as possible. Don’t shop for your groceries and then search for coupons you can use. Instead, review the coupons available and buy the items on sale a given week.

Even if you’re able to save $5 per week, this is money you would’ve spent.

13. Pack Your Lunch to Save Money

A $10 meal doesn’t seem like a lot. It may even feel like a bargain depending on how good your food was. The problem is doing this 5 times per week, sometimes even twice per day. All a sudden, your $10 meals cost you $200+ per month.

Instead, make it a habit to pack your lunch to work. Pick one day during the week to meal prep for the entire week and watch your savings grow. Here’re some ideas for you: 25 Ideas for Delicious and Healthy Lunches You Can Take to Work

14. Leverage Tools to Cut Junk Mail

If you’re like most people, you check your email a few times per day.

Companies spend a lot of money to ensure you know about their latest sales. This will only make you want to spend more.

To avoid the temptation to spend, unsubscribe from most of these companies. Or, create a separate folder within your email provider that’s out of sight. Use services like unroll.me to easily unsubscribe from promotional emails.

15. Adopt the 30-Day Rule

Have you ever purchased something only to regret the sale a few days later?

If so, the 30-day rule is for you. Each time you’re going to make a new purchase, set it aside for 30 days. If after 30 days you still want to buy this item, do it. This won’t stop all bad purchases but it will cut the most irrational ones.

16. Work on Important Tasks, Not Everything

“How did it get so late so soon?” – Dr.Seuss

Time is the only resource you have that money can’t buy. This is why you need to protect it at all costs. If you’re honest with yourself, you’re not being productive with your time.

Watching useful Youtube videos or spending time with friends isn’t time wasted. The problem is doing only these.

If you’re already financially well off, then this isn’t a problem. But, if you’re looking to save more money you have to be productive with your time. How?

Like money, you have to track it. Use time tracking apps to get a clear idea of how you’re spending your time. Aim to spend some of your time managing your money better and searching for different ways to grow.

17. Be a Voracious Reader

One of the reasons you’re not saving enough money is because you don’t know the potential each dollar has.

For example, if you’d invested $1,000 in the stock market, it would double within 10 years. Many don’t know this and would rather put their money in a regular savings account.

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You don’t need to be a financial expert, but you need to understand money fundamentals. The best way to do this is by reading. Go to Amazon or your favorite book store and buy any book related to money. Here’re some recommendations for you: 19 Best Finance Books That The Richest People Read

Read and apply action on anything new you learn. Eventually, you’ll know more ways to put your money to work and choose to save more.

18. Get Educated on the Go

You can learn more from subject matter experts on podcasts. Find some of the top podcasts in business, money and other important areas.

Listen to them to and from your commute to work. Listen while you’re working out at the gym.

Little by little you’ll learn new things. And one day, you too will be a subject matter expert.

19. Choose to Invest in Yourself

You are your best investment. Why?

The more you know, the more you can apply. But, you can’t grow alone. Coaches are great to have because they can view your blind spots.

Yes, they cost money but can save you time in avoiding problems most people make. During your early stages as an entrepreneur or in your career, you may not be able to afford to hire a coach and this is okay. Read and listen to podcasts to grow. Or you can practice these 3 Valuable Ways to Invest in Yourself.

Eventually, your income will grow and you can use this money to invest in coaches.

20. Improve Your Money Skills to Grow Your Income

There’s a limit to how much money you can save but not how much money you can earn. This is why you need to start a side-business. The internet has made it possible to build a business on the side while working a full-time job. Choose to start a business in an industry you’re familiar with.

Will it be easy? No, but worth the effort. If you’re still clueless about where to start, here are some business ideas.

Bonus: Know What to Do with Your Saved Money

Once get traction with saving your money, you’ll need to put it work.

At the very least, ensure your money is getting a high APY (annual percentage yield.) Search online for “top savings accounts” to find banks offering competitive savings rates.

Next, open separate saving accounts for your different saving goals. And use money tracking apps to track your progress.

Final Thoughts

Saving money isn’t easy. Many of the habits you currently have are ones learned from childhood. So, to expect them to disappear in 30 days is unrealistic. Instead of trying to master all the habits covered here, start with one.

Then, start small with your first habit. It may seem to contradict to what you’ve done in the past, but this is most likely why you haven’t made progress. The reason you’d start small is to build a strong foundation.

Imagine building a house with cheap materials to support it. It wouldn’t be long before this house collapses. Trying to build fast habits is like using cheap materials to build a house.

The reason for starting small is to avoid triggering your amygdala’s fight-or-flight response. All this means is you’d be less likely to feel stressed as you’re forming new habits.

You can save more if you commit to do so today. More important, you’ll live a happier life. Isn’t this worth all the sacrifice?

More About Saving Money

Featured photo credit: Eric Muhr via unsplash.com

Reference

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Christopher Alarcon

Finance Analyst and Founder of the Financially Well Off Blog & Podcast

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Last Updated on July 10, 2020

The Definitive Guide to Get out of Debt Fast (and Forever)

The Definitive Guide to Get out of Debt Fast (and Forever)

Debt can feel crushing, like a weight that is always weighing you down. Looking at those numbers, it can feel as if you’ll never get out from under it. However, if you really want to learn how to get out of debt, it is possible with a great deal of focus and self-control.

Getting out of debt isn’t impossible. Like any big goal, all that it takes is an action plan to identify where you are and creating a plan to zero out your debt.

Identifying All of Your Debts

The first part of paying off your debt is getting a complete picture of what you owe. When you have everything written out in front of you, it makes it much easier to create an action plan. Depending on how much you owe, it might also help you realize it’s not as bad you might have originally thought.

Here’s how you can get started identifying your debts:

1. Own Your Debt

Before you start identifying all of your debts, take a moment to process that you have debt but want to get out of it.

Forgive yourself for any past mistakes, missed payments, or overspending. It might be painful to accept how much debt you have at first, but you must own it.

2. Make a Debt Tracker

It’s astonishing how few people ever created a tracker to understand their total debts. Most likely, it comes from not wanting to accept the guilt of having debt, but, if avoided, it can make it nearly impossible to get out of debt.

Open up a new Google or Microsoft Excel sheet and list out all of your debts. Start with the name of the creditor, interest rates, total balance, loan term length (if any), and the minimum amount due each payment. This will include student loans, credit cards, and any other type of debt owed.

3. Get Your Debt Number

Once you’ve made your debt tracker and taken the other steps, identify your total payoff number. This is crucial, as you will have a starting point and a clear goal that you are trying to achieve.

Prioritizing Your Debts

All debt is not created equal. It’s imperative to understand that there are different types of debt.

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1. Understand Bad and Good Debts

Bad debts are usually paying for things you want instead of always need. While there might be some emergencies that max out your credit cards, often times it’s excessive spending[1].

There are three main types of bad debt:

  • Credit Card Debt: The average American household owes over $16,000 in credit card debt!
  • Auto Loan Debt: According to CNBC , the average auto loan in the US is $30,032!
  • Consumer Loan Debt: Consumer loan debt isn’t as common as credit card and auto loan debt, but it’s still considered bad as interest rates are usually between 10-28%.

Good debt is identified as investments in your future. Here are three common types of good debt:

  • Student Loan Debt
  • Mortgage Loan
  • Business Loans

2. Decide Which Debt to Pay off First

Once you know each type of debt and their interest rates, you can begin to pay off debt quickly.

Focus on paying off bad debt first, regardless of if it is a credit card or auto loan. Start by paying off the loan with the highest interest rate first.

If you have several credit cards with different interest rates, you want to focus on the one with a higher APR. You will actually save more money by eliminating the card with the highest interest rate.

3. Don’t Pay the Minimum Amount

Paying the minimum amount digs you into a hole as interest rates will offset your payment. Even a small amount more than the minimum can help you pay off debt much faster.

Removing Obstacles to Pay off Debt Quickly

Creating a debt tracker and prioritizing a plan is simple, but avoiding temptation can be difficult.

1. Set a Reminder to Track Your Debt

“If you can’t measure it you can’t manage it.” -Peter Drucker

It’s so important to track your debt to ensure that you get it paid off quickly. Similar to working out and measuring your results, you need to track your debt constantly. Start with a weekly reminder, where you sign on and log your updated number. Did you increase, decrease, or stay the same?

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Regularly tracking your student loan balance can be incredibly motivating, as well. You will get a huge confidence boost each time you see your total debt amount decreases.

Set weekly and monthly goals so you can have short term wins and keep the momentum going.

2. Hide Your Credit Cards

If your biggest debt is credit cards, you need to eliminate temptation and remove them from your wallet.

Some people have gone to extreme measures by freezing their credit cards. Why? This would create an ice block around your card, which would require you to chip away at it slowly. This will give you time to think if it’s the best idea to buy that thing you’re about to buy.

3. Automate Everything

Willpower can be a huge downfall to paying off your debt. By automating your bills each month, you will ensure that willpower isn’t involved.

4. Plan Ahead

Getting out of debt will require some sacrifices, but with enough planning, you can make it work.

For example, if you know that you have a friend’s birthday or family dinner coming up, plan ahead for the costs. Whether you need to cut back on spending the week before, pick up a side job, or meet them after dinner, do what is needed.

5. Live Cheaply

The only way to get out of debt is to make some sacrifices on your spending habits. Find ways to save money each month so you can apply that amount to your outstanding debts. Here are some ways to save money each month:

  • Live with roommates
  • Cook dinners and prepare lunches for work instead of eating out
  • Cut cable and choose Netflix or Amazon Prime
  • Take public transit or bike to work

Finding the Lowest Interest Rates

The higher your interest rates, the harder (and longer) it will take you to pay off any debt.

If possible, you want to find ways to lower your interest rates to help get out of debt quickly. Here’s how you can get started:

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1. Maintain a High Credit Score

Your credit score will have a large impact on your ability to refinance your loans and receive a lower interest rate. If you have a low credit score, it’s unlikely you will be able to refinance your loans. Use these credit tips to increase and maintain an excellent score:

  • Never miss a payment
  • Don’t exceed 30% of your credit limit
  • Don’t sign up for more than one card at once
  • Limit hard inquires, like auto-loans and new credit cards
  • Monitor frequently with free credit-tracking software

2. Find Balance Transfer Offers

Start by opening a free account on credit.com. Credit.com offers you the chance to open a free account and see what type of balance transfer offers you can receive. Some of your existing credit cards might already have 0% or lower APR balance transfer offers available.

Contact each of your credit card providers to ask about lowering your rate for a one-time balance transfer offer[2].

If you do take advantage of this option, make sure that you use a balance transfer and not a cash advance. Cash advances have a ton of high interest fees (15-25%, depending on your credit card) and will only compound your debt problem.

How to Get Rid of Debt Forever

Setting up a plan, removing temptations, and getting the lowest interest rates is the first step to get out of debt.

1. Keep Monitoring and Adjusting

Once you have a plan, don’t get comfortable. Track your debt payoff plan and make the necessary adjustments when needed.

Monitor your credit scores with a free site like CreditKarma. The higher your credit score climbs, the more likely you will be to secure a new, lower-interest loan.

2. Earn More Money

There are only so many ways to save money. Instead of clipping another coupon or making sacrifices for your morning coffee, find ways to earn more money!

Think about it…it is much easier to find ways to earn an extra $1,000 per month than find $1,000 to cut from your budget.

Here are some examples of ways to earn more money:

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Talk to Your Boss

Have a conversation with your boss about current salary and/or commission rates. If you’re not satisfied or want a change, don’t be afraid to look around at other positions. Some of them might even have a student loan debt reimbursement plan!

Start a Side Hustle

This could be coaching students on the weekends, driving for Uber, or taking paid online surveys. There are tons of ways to make money outside your 9-5. Now that you have a clear plan to pay off your debts, you’ll be more motivated than ever to figure out creative new ways to earn money.

Build an Online Business

There are so many websites and blogs that earn money from ads, affiliates, and other online products. Find your niche and get started.

3. Celebrate Your Wins

As you progress in your debt payoff journey, don’t forget to celebrate your wins. You need to always reward yourself for the hard work and discipline that is required to get out of debt.

While you shouldn’t celebrate so big that it increases debt, make sure to factor in little rewards to keep you motivated.

4. Set New Financial Goals

Eventually, with a plan and these steps, you can rid yourself of your debt. Once you do, make sure to celebrate your monumental achievement, but don’t stop there.

Now, you can focus on acquiring wealth and increasing your net worth. Set new financial goals so you have a new target to aim toward. Here’s how to set financial goals and actually meet them.

These could be anything now that you are debt free! Think about where you want to travel, buying your first home, or saving for your future retirement. Just like before, make sure that your goals are specific, measurable, and achievable.

Conclusion

Congrats, you can now set a plan in motion to finally pay off your debt quickly (and hopefully forever)!

Remember, if you want to get out of debt quickly, it’s not always easy. Just like any big goal, there will be sacrifices, challenges, and problems to overcome.

More Tips on Getting out of Debt

Featured photo credit: Pepi Stojanovski via unsplash.com

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