Here are ten easy strategies to increase your savings level without becoming cheap.
Strategy 1: Don’t become emotionally separated from your money.
Remember when a grandparent or special aunt gave you a dollar bill? As a child, you enjoyed simply having the money, looking at it, and even counting it. You knew exactly how much you had and you planned exactly how you were going to use it.
How things have changed! Now your paycheck is direct-deposited and you charge most every expense. You don’t have a clue how much money you have in your wallet until you find yourself at a place that doesn’t accept credit cards.
This emotional separation from your money makes it much easier for you to spend more. Try using cash instead of credit cards for a while. Keep track for a couple of months and see if your expenses decrease. Handing over six hard-earned twenties is far more difficult than charging $119.40 on a credit card.
Strategy 2: Understand and be honest about expense classifications.
Think of discretionary expenses as “wants” and nondiscretionary expenses as “needs.”
Look at the examples of nondiscretionary expenses. See how there is little you can do—in the short term—to reduce those expenses? As a result, you need to focus your energy on monitoring your discretionary expenses. But be careful. Frequently, people categorize wants as needs. Incorrectly labeling your expenses limits your ability to take advantage of additional savings opportunities.
Think about decisions you make every day. Are the bulk of your purchases legitimately needs, or do you just view them that way? Eating is a need. Eating out is a want.
Expense Classifications
Primarily Non-Discretionary: Housing (rent or mortgage), taxes, student loans, car payment, insurance premiums, groceries, gasoline, utilities, commuting expenses (public transportation or parking at the office), doctor’s appointments and medicines, work clothes.
Primarily Discretionary: Restaurants/bars, coffee shop visits, premium movie stations, movies/DVD rentals, vacation and travel, charitable contributions, gifts, concert or sporting event tickets, non-work clothes, lunch while out working, cell phone.
Strategy 3: The time to lower your “needs” spending was yesterday.
Despite successful efforts to limit discretionary spending, many people still struggle with saving. Typically, this is because their nondiscretionary expenses are just too high for their income level. The best way to handle this is to avoid the situation in the first place.
It is you who must care enough to review your spending priorities before you make a commitment to an apartment lease, mortgage, or car. Just because someone will sell you something doesn’t mean you can actually afford it. You determine your nondiscretionary expenses when you sign your name. Keep that point in mind next time. Knowing that additional nondiscretionary expenses could take a significant part of your monthly income for a year or longer just might motivate you to not choose the one with “all the extras” for “just a few more bucks a month.”
Strategy 4: Enjoy free stuff.
Depending on your interest, you can go on a long hike, sit in a park, talk with a friend, read a book or newspaper, lie on the beach, or play sports with friends without spending a dime. Many people think they can’t have a good time unless they spend a fair amount of money. But that belief is based on what has been successful for them in their recent past, not on reality. When you were younger, there were hundreds of days in which you had no money to spend, yet you were as busy and as happy as ever (maybe happier—you weren’t worried about the money you were spending.) Can you try just a day or two like that this month?
Strategy 5: Major on the major.
Don’t spend much time evaluating minor expenses, such as where to buy pizza. Rather, put major focus on major purchases. A car and a place to live are obviously major expenses. What else is major? Regardless of your age, financial aptitude, or income, a good rule of thumb is to treat anything you can’t pay for entirely when you buy it as major. Spend serious time evaluating those purchases to ensure you can afford what you are buying, and you value every feature you’ll be paying for over the upcoming months and years.
