Hey everybody! Today I have a great guest post for you from Joe over at Average Joe Finance (love that site name btw!) After you read the article, consider heading over to Joe’s blog and show him some love.
Why do you save money?
Are you looking to buy your first home? Or maybe you’re saving for retirement?
No matter what the reason, reaching a long-term savings goal can be a challenge. I know when I used to set a new goal, I would start out strong and then tend to lose motivation before I reached the finish line.
I was determined to find a better way. Something to help me stay motivated for the long-term. Through some research and trial and error, I’ve come up with five ways to keep me motivated. Hopefully, they will help you stay motivated with your savings goals.
Turn Your Goal into a Game
If you’re a competitive person like me, then this may be the only tip you need. One of the reasons we fail to stay motivated is because we lose interest. Sure, you realize that not out to eat or waiting to buy a new car will be worth it in the end, but the day to day act of saving just isn’t all that exciting.
That’s why I like to gamify my savings goals. Instead of setting one long-term target, try breaking it up into smaller, shorter duration ones. Then tie mini-rewards to reaching each of those targets.
Let’s say you want to save an extra $1,200 next year. Instead of looking at it on a yearly basis, break it down to $100 a month targets. For each month you hit your target maybe you treat yourself to dessert. If you go 10% over your goal, maybe it’s dinner and a movie. If you miss, maybe you have to skip your daily Starbucks for a week.
Whatever it is, find rewards that you enjoy and will keep you engaged. Once you have a tangible reward, you’ll be looking for more ways to save.
Automate Your Savings
Another one of my favorite ways to boost my savings is to take myself out of the equation altogether.
It’s easy to think about how much you’ll save each month when you’re reviewing your budget. But when you’ve just received a paycheck or out at the store shopping, remembering to save can be difficult. When we have to consciously decide how much to save, we tend to save less.
By automating your savings, you remove that conscious decision.
What I did to automate my savings was to first set up a separate bank account. This account is only to save money. I don’t use it to pay any bills. Since it is strictly for savings, I signed up for a higher yield online account. No point in letting your money collect dust in a savings account when it can you interest!
With the account set up, I created an automatic transfer from my main bank account each time I get paid. This way, the amount I want to save never hits my main account. Instead of being able to “justify” not saving a particular week, I took that option away. Plus, since it appears like I have less money to spend, I actually started spending less.
Yes, you read that right, I’m suggesting that to stay motivated to save you should actually spend money. The key here is to only splurge every once in a while.
Think of saving money like dieting. Most people on diets crave the foods they used to eat. Sure they can fight that craving for a while, but eventually, they give in. Instead of going back to the diet, they view it as a failure. Yet, giving in to a craving shouldn’t be seen as a failure. We’re humans, not robots, so it’s impossible to think that you can eliminate your favorite foods forever.
Saving is the same way. As you cut out your favorite luxuries in order save money, eventually you’ll have a craving to spend. Knowing that you can’t hold back that urge forever, try splurging on something small.
By splurging on a small luxury, you can satisfy the urge to spend without derailing your overall savings goal. Once you realize that you can’t limit yourself forever, you can learn to manage the urge to spend responsibly.
Get a Savings Buddy
Having a friend save with you is a great way to hold you both accountable. It’s a similar idea to a workout buddy. Getting up and going to the gym can be a challenge if you only have to answer to yourself. But if your friend is getting up and going as well, you won’t want to let them down.
Having a savings buddy works the same way. It’s easy to make excuses to ourselves about why we went out to eat or didn’t save as much this week, but it’s difficult to make excuses to a friend. Just being accountable to someone other than yourself is an incredible motivator.
You could also continue this tip and the gamify one together. Instead of just holding each other accountable, place a wager on who will reach their target each month. Maybe the one who misses their goal has to buy the other one lunch. If you miss your goal one month, I’m sure you’ll be twice as motivated the next month so you don’t have to pay up.
Picture the Future
Close your eyes for a minute (well read the rest of this paragraph first then close your eyes). Imagine yourself 20 or 30 years in the future. You’ve just finished your last day at work and tomorrow you’ll be starting your new life in retirement. What do you look like? Are you healthy? Do you have grey hair? Just take a few minutes to think about what your life is like at that moment in time.
Now think about how much you should save for retirement. Studies have shown that the simple act of visualizing what our future will be like helps us stay more committed to saving. It turns out that people are usually present-oriented. Meaning, we think of our present and future selves as two different people.
Thinking about your future self and what your life will be like for even just a few minutes helps to close that present-future gap. Something happens in our minds that allows us to see that future person as us and not as a different individual. By doing so, you’re more likely to save more for the future and to stay more committed toward your goal.
The next time you are saving for something, remember there are ways to keep yourself motivated. I few simple changes can mean the difference between struggling and excelling at reaching your target.
If you’ve used any of the tips or have some of your own, let me know in the comments, I’d love to hear about your experience.