A sound money management plan has one central theme that many people find tough to contend with: delayed gratification. It’s about saving in the present to reach a larger goal down the road – an ample down payment, a comfortable retirement, a relaxing vacation.
For many, moving past the knee-jerk reaction to spend every last dollar of every last paycheck is tough. They see the “punishment,” not the reward at the end of the marathon.
If you’re determined to get on the path to saving, here are some tried and true ways to jumpstart the process and keep going until you reach the finish line.
Determine Your Goals and Give Your Money a Job
Saving for the sake of saving is fine, but without the added push of something to look forward to or a burden to be lifted, the chances that you’ll keep your momentum are slim to none.
In addition, if you see saving as a broad “last step” once the last of your money has been allocated to bills and living expenses, then you are inadvertently giving yourself the option of socking it away for some unforeseen purpose, or spending whatever is left over – simply because it’s there.
Instead, give every last dollar of every last paycheck, raise, tax return, etc. a job – whether that’s padding a retirement account, accumulating savings for a new vehicle, or funding a vacation.
But every goal worth reaching has a timetable with concrete numbers attached, right?
So really get into the weeds with this. How much extra do you need to fund the lifestyle you want?
If you hope to buy a car within the next year, how much will you have to put away monthly in order to have the sizeable down payment (or better yet, cash up front) for the purchase?
Choose a Saving Mechanism and Make It Automatic
Instead of fighting every month between the side of you that wants to save and the side that wants to spend, make allocating your money to different accounts automatic.
Once you’ve determined your money goals and the timetable in which you hope to achieve them, categorize them by short-term (a year or less), mid-term (up to 5 years out), or long-term (over 5 years out). This will dictate what savings vehicle you use for each goal.
A short-term goal means you need to have the money in a place that has high liquidity or easy access – i.e. a savings account. While savings accounts do little in terms of growing your money (many have a hard enough time keeping up with inflation), you can do your research to find one with the highest interest rate.
A mid-term goal still requires some liquidity – clearly a 10 year CD would be out of the question – but you do have some room to let it grow. A shorter term CD, money market account, or short-term bonds are all viable options.
Long-term investments can handle the greater risk associated with the stock market because the funds have the time to recover after market fluctuations, thus greatly opening your options for these goals.
Once you know where to park your money and how much you are setting aside for each goal, make the transfers automatic every time you have money coming in. Most importantly: treat moving your money towards savings like you would moving your money towards paying a bill. It is a bill – one that helps brighten your future.
Create Benchmarks and Treat Yourself
With the logistics out of the way, determine your benchmarks or time for celebration.
Is it when you’ve managed to save double your current salary for retirement? Is it before that? Is it once you are 25% covered for a car down payment? Or 3 months into your vacation fund goal?
Noticing your progress and celebrating how far you’ve come (while clearly avoiding dipping into your savings in the process), is essential for staying on track and keeping your motivation up.
Knowing how far you’ve come will make the stretch to the finish line seem that much easier.
Check In Often
No matter how meticulous you might have been in the drafting and planning process, it’s important to check in on your savings goals on a regular basis.
Here are few questions to ask:
- Are you saving enough to reach your goal in the time frame allotted?
- Was your time frame realistic?
- Have your priorities changed – i.e. is this goal still important to you?
- Is your saving pace and plan of action sustainable for the long haul?
If it comes down to making adjustments or giving up, adjustments are certainly justifiable. Feeling challenged is great, feeling completely overwhelmed is something else entirely.
No matter the size of the goal, it likely feels like a huge obstacle to overcome. But regardless of the time it may take, that time will pass anyways. At least start today knowing from each day forward that you are slowly brightening your possibilities for the future.
And then, before you know it you’ll be accomplishing your goals. Whether it’s paying off credit cards, paying off student loans, paying off your mortgage, or any other goal, if you stay motivated you’ll be able to get there!
How do you get motivated to save?
Simon @ Modest Money says
I can totally agree with you…saving for the sake of saving just won’t cut it. I think our brains are wired for the path of least resistance and thus the easier option would be to just spend the money. However with goals and deadlines, the game changes. A purpose focuses your direction.
Also, its a good idea to have a guilt free spend fund, ensures you aren’t tempted to touch the savings as you delay gratification.
Daniel Evans says
I totally agree as well that having a goal based savings plan is more fun. But just starting to save, even if $10 a week, also helps to wire your brain to save without a goal, like for those emergencies.
I tried to explain to my husband that for me I have to have several goals and break them up into smaller amounts each month. This is what works for me and maybe not everyone else.