How To Save Consistently Using How Your Mind Works

You’re sitting in the living room, you stand up, your phone falls from your lap, and it breaks. Or you’re driving your car, and a warning light comes on. You take it to a mechanic and find out you need a new alternator. 

What do you do when unexpected expenses like these pop up? Do you pay for it with cash in your bank account? Do you put it on your credit card and pay it off at the end of the month? If you’re like 32% of Americans, you find covering a $400 unexpected expense challenging. You put it on a credit card and pay it off over time – thus carrying a balance and paying high-interest credit card fees. Or you can’t pay for it, so you do without a phone or a car until you can scrap together enough to cover the expense. 

We’re not out of the woods yet for the 68% of Americans who can cover a $400 unexpected expense. In 2022, the American Psychological Association found that 83% of Americans said inflation caused them stress and 66% said money caused them stress. Of those stressed by money, 57% said the primary source of stress is having enough money to pay for things right now, while the remaining 43% are stressed about saving enough money for the future.

Putting aside money for the future can be tricky when expenses pile up today or you’re wondering if you’re saving enough for the future. In this article, we cover why you need to save, 4 simple steps to save money, and 10 strategies to save consistently using how your mind works.

Why you need to save

We save so we can handle emergencies and achieve our financial goals. With savings, we feel prepared to handle emergencies and secure our financial future. 

1. We save to handle emergencies

Life brings pleasures like dinners surrounded by good food and loved ones or a good day at work when you knock it out of the park. But it also brings tough times like you lose your job or your mom has a health crisis. Having money on hand to tackle whatever emergencies life throws at you is vital. Without savings, unexpected expenses can become a financial crisis. You resort to high-interest debt like credit cards to cover costs. Credit cards charge 16% to 25% in annual interest. To avoid this, you save. You create an emergency fund – money set aside to cover unexpected expenses, such as medical bills, car repairs, or job loss. An emergency fund relieves financial stress and provides peace of mind in unforeseen circumstances. It makes you feel more secure and improves your mental and emotional health. 

2. We save to achieve financial goals and secure our financial future

What does it feel like when you no longer worry about money? Do you call this financial security, success, independence, or freedom? Whichever term resonates with you, saving is the foundation. Reaching any financial goal requires saving, whether buying a house, investing for retirement, or paying off debt. It is not only how much you make but also how much you keep. Most of us aspire to live comfortably without worrying about money. By saving money consistently, we can accumulate wealth and achieve financial success.

4 simple steps to save money consistently even when you don’t think about it

To save, you either need to spend less or make more money. In this article, we focus on spending less. Here are 4 simple steps to save money consistently:

1. Reframe how you think about money

How we see money is influenced by how we grew up, our social environment, and our personal experiences. Pause for a moment and ask yourself: What is my relationship with money? How do I see money? How do I feel about money?

Sometimes, we aren’t aware of our self-limiting beliefs about money. Some common ones are – “I’m not good with money,” “Money is the root of all evil,” or “I’ll never be able to save enough.” If your beliefs about money are holding you back, let’s reframe them. For example, you can reframe

• “I’m not good with money” to “I can learn to be good with money.” Financial literacy is a learned skill. With the proper knowledge, anyone can learn how to be good with money. 
• “Money is the root of all evil” to “Money is simply a tool that can be used for both positive or negative purposes.” Think about the positive impact money can have on you and your family.
• “I’ll never be able to save enough” to “I can set achievable savings goals and take small, consistent steps to achieve them.” When you focus on progress rather than perfection, you lower the barrier to starting, and you build your confidence. Start small and grow from there.

2. Understand your spending

You cannot change what you do not measure. When you understand your spending, you can determine how to reduce it. Budgeting can seem scary or time-consuming. Use our 3 Es approach to spend on what you love and save on everything else. Classify your expenses into 3 buckets – essentials, enjoyment, and everything else. This helps you understand which things you can cut back on to create room to save. 

For example, if you love food, you can put rent and utilities in essentials, groceries and eating out in enjoyment, and all other expenses in everything else. Now you can track each bucket and find ways to reduce your spending. Start with cutting costs in your everything else bucket and then your enjoyment bucket. Finally, see if you can find deals to reduce spend in your essentials bucket.

Understanding and tracking your spending helps you uncover ways to spend less. For example, you may notice you’re spending more on restaurants than you thought. You can decide to cook more or eat at cheaper restaurants.

3. Decide how much to save and save first before spending

Now that you know how much you’re spending, you can figure out how much you can save. Start with a goal you can achieve this month. The most important thing is to build a savings habit. You can increase your savings as you spend less or make more money.

Set a SMART savings goal – specific, measurable, achievable, relevant, and time-bound. For example, I want to save $200 monthly for the next 12 months to build an emergency fund for peace of mind. $200 monthly is specific and measurable, and 12 months is time-bound. It is achievable if you have examined your spending and know you can set aside $200 monthly. “To build an emergency fund for peace of mind” make it relevant – you know why you’re saving. When you are tempted to spend the money, you can look at this goal and remember that you’re doing this to have peace of mind. 

Save first before you spend. This helps you reframe your priorities and consider saving more important than spending. 

“Do not save what is left after spending; instead, spend what is left after saving.”

Warren Buffett

4. Automate your saving so you don’t need to think about it

This last step is critical. It makes it easy to save without doing anything. You save by default when you automate your saving. You can set up a recurring transfer request from your checking account to your savings. Or you can have your employer split your paycheck – pay some of it into your checking account and the rest into your savings account. 

The easier you make savings, the more likely you will save consistently in the long term. Each small amount you put away makes a big difference over time. If you save $200 monthly, you will have $2,400 at the end of a year and $12,000 at the end of 5 years. This is without factoring in any interest on your savings or any return you get if you invest this money.

10 strategies to save using how your mind works

There are always temptations to spend. You walk outside or scroll through social media, and ads persuading you to spend pop up. Here are 11 strategies to use how your mind works to help you resist temptation and save:

1. Make your future self real

Multiple scientists have shown that our future self seems like a stranger to some of us. When Psychologist Hal Hershfield showed people pictures of their older selves, they allocated twice as much money to a savings account. Use a free photo-editing app like FaceApp to age a picture of yourself. Save the image and look at it whenever you need the motivation to continue saving.

2. Start with an achievable goal and celebrate your wins

Start small with an achievable goal. If you have never saved, try saving $50 or $100. You can do this right now before you track your expenses or create a budget. There, you’ve done it. You’re officially a saver. By celebrating small wins, we increase our motivation and confidence. Saving no longer seems as challenging.

3. Keep why you’re saving front and center

Why are you saving? Is it for an emergency fund or a down payment on a house? Knowing what the money is for helps you resist spending it. That $100 in your account is not just $100 – it’s the house you’ve always wanted or the nest egg that’ll give you peace of mind when an emergency happens. 

4. Save in a separate bank account

Use a different account and make it easy to save and hard to withdraw. For example, my savings account has no debit card and no cheques. I have to initiate a bank transfer to withdraw from my savings. If money is easily accessible, we spend it. “Out of sight, out of mind” helps you leave your money alone to grow.

5. Switch to a high-yield savings account 

Most major banks give you about 0.01% annual interest on your savings. Switch to a high-yield savings account and get over 300x more in interest. Imagine you have $10,000 in your savings account. After a year, you will earn $300 instead of $1 by moving your savings to a high-yield savings account. Knowing you will make money from your savings can motivate you to save more.

6. Track your progress with a friend or family member

Surround yourself with people who share your goals. You can learn from and motivate each other. Check your balance and see how much you’ve saved. Seeing your balance grow may inspire you to save more.

7. Spend on what you love and save on everything else

Think about your purchases last month. Are there any you regret? Take a look at your credit card statement. Are there some purchases you forgot you bought? The first time I looked through my statement, I was shocked. I cut back my spending by over $500 the next month with no change to my quality of life. Reduce your spending on things you’ll later regret or forget. But give yourself room in your budget for joy. It is hard to save long-term if you aren’t enjoying your life. You can keep your “enjoyment” spending reasonable or find free or low-cost options. 

8. Set balance alerts for your credit cards

Set spend rules for yourself and use balance alerts to help you stick to them. For example, I use my three credit cards for different expenses. One is for essentials, one for enjoyment, and one for everything else. I set balance alerts on my credit cards so I know if I’m overspending in any category. 

9. Use cash instead of credit cards to pay

You feel more pain when you pay with cash than with cards. The money feels more real. If you need help reducing spending, try paying with cash instead of cards.

10. Focus on the process and not just the outcome 

We can stay motivated by focusing on the process, even when we face setbacks. For example, you have saved $10,000 for a down payment on a house and have $20,000 to go when you suddenly lose your job. It takes 2 months to get a new job, and you’ve used $6,000 of your savings. That’s okay. Focus on the process. You continue to save $1,000 each month. In 6 months, you are back to $10,000. You’re on track to get a house, even if it will take a few months longer. The key to achieving our financial goals is sustaining our behavior over time. Save some money every month for many years, and you can complete everything on our financial success list.