Many people consider making financial changes as part of their resolutions for the new year. If you want to get savvier about your savings, here are three ways to go into money-saving mode.
1. Set specific savings goals.
If you’re always promising yourself you’ll “do better with money” or “save more” in the coming months, rethink your goals. Having the intention to spend less and save more is a start, but without concrete goals, you’re unlikely to achieve them. To make effective changes, you must be clear on what those changes look like.
What specific behaviors do you need to change? What time frame are you trying to meet? What are you saving for? Why do you want to change your spending and saving habits? Understanding the motivations behind your savings goals can help you achieve them.
2. Keep track of your spending.
You might think you know where your money goes, but unless you keep track of where you spend every dollar, you can’t really be sure. Keeping track of your spending might seem tedious, boring, and even pointless. But when you see where every dollar goes, it can be eye-opening. You may be leaking money in ways that you never understood before.
Keeping track of your spending isn’t about identifying if you’re overindulging or spending recklessly, so don’t be too hard on yourself. It’s about understanding your habits over time to identify where to make small changes to save more.
3. Analyze how your brain thinks about spending money.
To understand your financial habits, you have to figure out how you think about spending money. Take a few weeks or a month, and don’t buy anything that isn’t essential. This experiment is not to save money but to figure out how you feel about spending. Every time you’re tempted to buy something non-essential, you’ll notice. All those times you reach for your wallet without realizing it becomes isolated incidents, and you can think about why you spend as you do.
After your period of not spending, rebuild your spending habits by adding back in the things that matter to you the most. This process helps you stop unnecessary automatic spending and can help you make big changes.
You don’t have to give up buying everything you love or go on a crash budget to save more money. By understanding your spending habits and how you feel about spending money, you can identify the key areas where you need to make changes and move forward from there.
Any opinions are those of Thomas Fleishel and not necessarily those of Raymond James. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Every investor’s situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment. Prior to making an investment decision, please consult with your financial advisor about your individual situation.