Help Yourself By Avoiding These Common Savings Mistakes.
Everyone works hard for their money and most people want to hold on to some of their hard earned cash. Somehow week after week savings just doesn’t happen. This pattern can leave a person feeling exhausted and discouraged. They put in hard work but feel there is little left to show for it.
Changing the pattern and making the act of saving a regular part of your life is the way to turn that frown upside down! If you have already made the decision to save it is important to avoid these common savings mistakes. You want to be sure that your intention to save becomes a reality of cold hard cash growing in the bank. Here are some good strategies to get you on the right track.
Strategy: “I Save What’s Left Over”
The risk with this:
So you pay your bills, maybe make a few “fun” purchases too, then you transfer whatever is left over in your checking account to savings. The good news? You’re diligently trying to save.
The problem with this strategy is that when you leave money that’s earmarked for savings lying in your checking account, you may start thinking you have more money to spend than you actually should! “Because you feel more confident about your balance, you won’t mind going out and spending more,” Blaylock says.
It also may be harder to set savings goals for yourself because you probably never know how much money you’ll be able to sock away.
Try this instead: Pay yourself first.
“The first bill you should pay every month is your savings bill,” Blaylock says. Of course, only take the “pay yourself first” approach if you still have funds available to cover your regular monthly bills.
How do you put this system in place? Simply create an automatic transfer from your checking account to your savings, either from every paycheck or at the beginning of the month. If you “set it and forget it,” you just might be shocked by how quickly your nest egg can grow.
Strategy: “I Save Big Chunks of Money When I Can”
The risk with this:
If you only save big chunks of money whenever you get a windfall or feel like you can afford it, you may be an all-or-nothing saver who gets a thrill when you move the needle in a big way, or someone who tends to “borrow back” that savings from themselves. Meanwhile, one way to savings happiness is saving a manageable amount on a regular basis.
Try this instead:
Come up with a real budget for how much you have to save each month instead of guessing. And the same goes for windfalls: Decide on a specific percentage of the money you’ll transfer to savings.
“We all lead busy lives, and the last thing we need to do is keep moving money around all the time because that causes stress,” says Blaylock. For instance, if you get disappointed in yourself for having to take the money out of savings, it might derail you from saving in the future.
Pick a savings goal that is sustainable—and stick to it. You can always revisit the amount if you think you can consistently start saving more.
Sticking to a set monthly figure can also help get you off the emotional rollercoaster that can come with saving and unsaving. A lot of clients experience “feelings of exuberance when they save and then feelings of guilt when they have to take the money back,” Blaylock says. “Steady is better.” – via LearnVest
Savings Mistakes That Can Cost You
Saving money in your day to day life when choosing to buy something or choosing to cut out an expense is a huge help when it comes to finding money to put in savings.
You have to be careful when you take this approach, however, or you can find yourself working hard to save money only to find that it costs you in the end. Here is some sound advice on this topic.
You Buy Things Because They’re on Sale
Just because a product is on sale doesn’t mean you should use your hard-earned cash to purchase it.
“A lot of people will pick up something just because it’s on sale — even if they don’t actually need it,” said J. Money. No matter how good of a price you get, you aren’t saving money if you’re buying something you don’t need or won’t use.
To avoid spending money on unnecessary items, make a habit of asking yourself if you’d be willing to purchase the items at full price. Doing this can help you determine whether you’re attracted to the product or just the sale price.
It’s also wise to unsubscribe from email alerts for daily deal sites and retailers to avoid the temptation of buying discounted goods and services you don’t need.
You Waste Money Trying to Save Money
People often think that they’re saving money by filling up at the cheapest gas station, even if they have to drive miles out of their way. But they’re not taking into account that they’ve used gas to get there, a fact that likely eliminates their savings, Roth said.
The same is true for driving to several out-of-the-way supermarkets to take advantage of various sales or discounts. Similarly, consumers should be wary of shopping at warehouse clubs and buying bulk food in an attempt to save. If the items you’re purchasing can be frozen or have a long shelf life, you might be saving money per unit. But if you’re buying large amounts of perishable food that goes bad before you can eat it, you might as well be throwing your cash away.
You Don’t Set Aside the Money You’ve Saved
The fact that you’ve managed to eliminate a few bills doesn’t mean you’re saving that money long term. “People tend to spend extra cash they think they’re saving by cutting things out,” said Van Sant.
Hence, for many consumers, penny pinching doesn’t end up growing savings long term. To ensure you’re getting the most from your efforts to cut costs, arrange for saved money to be diverted automatically to a savings account.
For example, if you cut your auto insurance by $30 a month, as J. Money did, log onto your checking account to set up a monthly automatic transfer of that amount to an interest-bearing account. You can also boost your monthly 401k contributions by that amount. Then you’ll actually be saving the money you saved.
– via GOBankingRates
Are there other savings mistakes that you have made and now avoid?