Personal money management skills are not taught through formal education. Most people develop spending and saving habits by observing their family members’ behaviors over the years. If your family members have excessive or impulsive spending habits and seek instant gratification from purchases, there is a good chance that you may develop these habits yourself.
Recognizing that you spend excessively and have trouble saving regularly is a sign that your financial education was not sound, and that substantial change is in order. Learning how to transform spending behaviors into saving habits is challenging, but it is not impossible when you have the right strategy.
Start Tracking
Some people who have trouble saving money believe that the issue stems from a lack of funds. After all, if you do not have money to save, it makes sense to assume that a cash shortage is to blame. Tracking your funds is the first step to take to adjust this line of thinking. This process shows you exactly where each penny that you earn goes. Through financial tracking, you may be surprised to learn how much money you squander away. This is money that you could be saving regularly if you adjust your habits. Remember to track credit card purchases as well. Just because you do not immediately pay for purchases in cash does not mean that these are not legitimate purchases that need to be accounted for.
Automate the Savings
Regular saving is a habit, and you need to adjust your financial behavior to be a saver. Spenders who have trouble saving money often find that they have no money left over at the end of the month to save. This is the problem. Saving money is a priority, and spending should come only after you have met your savings goals. Automating your savings ensures that you save money regularly. You can start with a small amount of money, such as one percent of your income. Set up an automated transfer of funds into your savings account immediately after each deposit is scheduled.
Periodically, make gradual increases to the amount of money that you save. Your spending habits will decrease accordingly. Because this is a gradual change, it may be easier for you to live with. While saving may seem impossible, remember that if you can afford to live with $100, you can afford to live with $99.
Organize Your Budget
To properly manage your finances with savings as a priority, a proper financial organization is necessary. Some people can effectively budget with a basic Excel spreadsheet. Others may need to use the classic envelope system to allocate and spend funds intelligently. Understand that you have a set amount of money to save and spend.
Train yourself to be aware of each purchase that you make regardless of how small it may be.
Examine how you can afford to make the purchase and what you may need to give up in exchange for making that purchase. You may equate financial freedom to being able to buy anything that you want. However, financial freedom actually occurs when you have more money than you need.
Saving = Happiness
Many spenders who struggle to make lasting behavioral changes are trained to equate spending with happiness. This is actually a psychological fallacy. Impulsive purchases may bring inherent joy for a short period of time. However, when you dig deeper, you can make the mental connection that impulse purchases actually cause you to be broke and to feel sad or guilty long after the initial happiness has passed. Understand the long-term impact of overspending and a lack of savings on your happiness and well-being.
Train your brain to find joy in saving money rather than in spending it. When you save money, you can make purchases with cash and without feeling guilty about it. You may even find a greater sense of peace because your regular financial stress decreases. Focus on the fact that saving money gives you positive results over the long-term. It may even help you to have savings goals, and you can find increased satisfaction when you reach milestones with your savings efforts.
Final Thought
Some people are raised to be spenders, and others are raised to be savers. While you may seemingly be at a financial disadvantage if you watched your family members spend frivolously rather than save regularly, you are not locked into this financial lifestyle. Through financial education and focused effort, you can change your mentality about finances. More than that, when you change your way of thinking about money, you can then focus on changing your habits and finding savings strategies that work for you.
When you are financially literate and aware, you can enjoy substantial improvements in your financial well-being and security in the years to come. Now is the time to take an honest look at your financial habits and to develop a strategy to improve this important aspect of your life.
