Want to Start Saving More? Treat Your Savings Like A Bill
I'm here to end the myth that you need to make more money to save, or your income needs to increase substantially. Savings isn't about making more money, it's about prioritizing your finances before spending on any other external outputs. Take this from a suburban black girl who only made about $40k a year before starting her own business. But even with that $40k, she could pay off all her debts and build a solid investment fund and savings within three years.
Many people ask me how I did it, and it's safe to say that all it took was a clear strategy and persistence in prioritizing my financial health first - before all else. I started treating my savings like a bill. Treating it like any other expense that I had because ultimately, I knew that I had the goal to save up enough money to move out of my parents and put a down payment on a home, and invest towards my retirement. Neither would I be able to do if I didn't learn how to start saving and putting my finances first.
Pay Yourself First
Sure self-care Sundays are still a thing, but is it really self-care if you're still avoiding looking at your bank accounts and budgeting? Ideally, when it comes to saving you want to apply the strategy of paying yourself first. This is truly encompassing the whole idea of what financial wellness should look like, but a lot of the time we're focusing on getting our spiritual, mental, and emotional state together and not taking into account that a lack of financial stability can add to our stress and poor emotional states.
If we're constantly overwhelmed or anxious about our money then that's going to have a direct impact on how we show up in all the other areas of our life. We tend to underestimate just how much money drives the majority of our decisions in our day-to-day life, from deciding if we can go out to eat with our friends or which insurance plan to choose from.
Paying ourselves first is not just about automating your expenses and bills; it's about treating your savings like all your other monthly fixed expenses. So this would include all your necessities to survive, such as rent, hydro, groceries, and perhaps your phone bill. I'm not going to tell you how much you need to save, but of course, the more you can save, the more you can eventually start to put into your long-term investments. I usually recommend my clients try to save by creating a small percentage of their calculated monthly net income (pre-tax) and automate this process. Even if you only have $10 to spare from each paycheck, get into the habit of putting even the tiniest amounts away into your savings.
Avoid Strict Budgeting Rules
So many people fail to budget and accurately manage their finances because they're taught that budgeting is boring and full of making short-term sacrifices for long-term (not guaranteed) gains. Budgeting tactics nowadays seem to be filled with tedious spreadsheets and stashing envelopes, and rigid numerical systems, which most people just don't have the time for. I want to put my money into my savings and not really have to care about figures and spreadsheets and highlighters - so, I try to make things as easy and as seamless as possible. At least, that's what has worked for me, and it may not work for you, but that is another strategy you can try to add to your "pay yourself" tool belt.
Creating a system where you calculate all your fixed expenses and assess your total monthly income will help you see how much net income you have at the end of each month that's been going towards unnecessary spending. In doing this, you'll be able to decide on a percentage or amount that you'd instead like to put straight into your savings each paycheque before spending your money on variable things. This system easily cuts out the complex budgeting routines others talk about and can be easily automated so as to not miss making any payments.
Set Up A Different Savings Accounts
Another thing I like to do is set up different savings accounts because this is going to encourage and motivate you to want to save more than you already are. One given savings account would be your emergency fund, and then another short-term savings fund could be for a downpayment on a home or for travel. A great way to motivate you to pay yourself first is to create catchy and fun names.
Each savings account should also be in a separate account from your chequing to avoid dipping back into your savings unnecessarily. The harder it is to get into your savings account, the better. Many of my clients come to me not because they don't make enough money, but because they can't seem to keep up their savings. As soon as they build it up, it gets depleted just as fast.
This is why treating your savings like a bill and keeping your various accounts separate can really help in creating a solid foundation that will last for years to come.