Biggest Money Savings Mistakes People Make (without realizing it!)
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5 of the biggest money saving mistakes…
Saving money can be one of the hardest things we do. Even with a well-thought out savings plan, life doesn’t always go the way we want it. Unexpected expenses, rising costs, and loss of income can make it harder to hit our goals.
But while situations beyond our control can happen, sometimes, we have to point the finger at ourselves. Here’s a look at five of the biggest money saving mistakes people make…
1. Paying ourselves last (instead of paying ourselves first)
Many people pay themselves last, and the reasoning behind this makes sense. You get paid, deposit your money, and immediately pay your bills. This is a seemingly logical way to manage expenses and money.
The main issue with this approach, though, is that saving money gets pushed to the end of the month, and it only happens “if” there’s money leftover.
However, postponing saving until after everything has been paid can be a mistake. In most cases, you won’t have any money, or very little money, left by the end of the month.
A better approach is to take money for savings off the top. As soon as your paycheck clears your account, transfer a minimum 5% into savings (or whatever you can do). This is before paying anything else – your rent, cellphone, electric bill, etc.
Your savings account should always be your first bill.
Oh, and don’t forget to invest some of your money too. To get started, consider micro-investing/saving platforms like Acorns. You can sign up and link your credit or debit card. Acorns will round up your purchases to the nearest dollar and invest your spare change in a diversified portfolio of ETFs. So you’re able to save and invest without really trying.
As a bonus, use my referral link and Acorns will give you $5 to get started.
2. Not recognizing your spending triggers
Some people don’t save because of a spending problem. Meaning, they have enough money to save, yet they don’t because they can’t deny themselves.
Spending triggers are powerful, and these include any situation, emotion, place, or person that tempts you to spend money. And what’s interesting about triggers is that they’re subtle – so subtle that most people don’t recognize them.
Triggers are different for everyone. For some people, it might be retail tactics or pressure. For others, it can be boredom, driving past their favorite restaurant, panic buying, or social media. So even when they have a savings plan in place, it goes out the window when they’re triggered.
Now, I don’t like to make generalizations (I really don’t). But if you have an overspending problem, there’s likely a cause. To help identify this, consider keeping a spending journal.
First, write down everything you buy, and then take a few notes. For example:
- How did you feel before and after each purchase?
- Who were you with?
- Was it a planned purchase?
Hopefully these questions can help reveal what’s setting you off.
3. You’re forgetting about the little amounts
When people make the decision to save more money and cut back, there’s often a tendency to only focus on the big purchases. They might buy a cheaper car, stop shopping sprees, and forgo big purchases.
But while it’s good to watch spending on high ticket items, you must also keep an eye on smaller amounts. Spending $2 or $4 might not seem like a lot. In fact, it might feel as if you’re not spending money at all.
Yet, if you add up those small purchases over 30 days, you might be surprised by the actual amount.
4. You’re thinking, “If I can’t save a lot, why bother?”
I’ve heard people say this. And at one point, I used to believe this. In all honesty, though, it was just an excuse “not” to save money.
Understand that saving money doesn’t have to be all or nothing. A good amount is a minimum 5% to 10% of your income. But if you can’t do this, something is better than nothing. Trust me, your future self will thank you.
Truthfully, the importance of saving didn’t sink in until I had a financial emergency…and I had the money available. The fact that I didn’t have to use a credit card or borrow cash was a good feeling. I felt empowered, to the point where I wanted to save more.
Therefore, even if you can’t save a lot, save what you can. This is a financial decision you’ll never regret.
5. You’re not honest about your current financial position
When it comes to personal finance, some people ignore the reality of their situation. They envision a lifestyle that includes shopping hauls, living in a big home, driving a nice car, and taking great vacations.
There’s nothing wrong with this. However, some people enjoy these things at the expense of their savings account.
We’ve all likely known someone who appeared to have it all – but it was an illusion. Maybe they were house poor or had thousands in credit card debt with no savings – because they weren’t honest about what they could actually afford.
But had they made a few adjustments, things could have fallen into place financially.
So my advice is: Don’t be like these people. Life is already hard, why create unnecessary stress for yourself. Living within your means is one of the best gifts you can give yourself.