According to a recent Bankrate survey, 21 percent of Americans don’t save any portion of their annual income. Twenty percent save 5 percent or less, and only 16 percent save more than 15 percent. No matter where you find yourself, the following psychological tricks may help you increase your savings rate in the upcoming year.
Think big but start small. Break your long-term goals into mini goals, e.g., a target amount you want to save in the next three months. As an added incentive, you might plan a small reward when you reach your immediate goal.
Calculate purchases differently. To weigh how much you really value something you’re tempted to buy, look at its price tag in the number of hours you’d need to work to pay for it. Or, picture a stranger holding the item you’re considering in one hand and the amount of cash it costs in the other. Which is more appealing?
Put off the urge to splurge. It’s easier to delay gratification than deny it. So, wait 24 hours before making small discretionary purchases or 30 days before making bigger purchases. The passion for the item will often wane as time passes. Accelerate your savings and reset your purchasing appetite by designating a few weeks or a month as a period of no unnecessary purchases.
Automate your savings. Since most of us aren’t impulsive savers, we need to be intentional savers – putting money aside before we succumb to temptations to spend. So, increase the amount of your check that goes to your 401(k) or ask your employer to split your direct deposit into your checking and savings accounts.
Make wise purchases. Comparing prices and reading reviews usually results in securing better values and slows impulse buying. Timing is another way to save. When possible, purchase clothes and food in season. Shop for a new computer in April, mattress in May, television in November or home appliance in December.
We hope this reminder encourages you to double-check your financial stability and e to save. Take the time this week to call our office to set up a review of your retirement plan or to receive help with explaining the importance of savings to younger generations. We are always happy to help.