I am really bad at saving. I am a shopping addict. I love to eat out at restaurants or order take out. I travel often and I am not one who is good at finding a discount code. My friends once told me that someone could sell me a can of air and they were right. (Technically I do own a can of WD40)
If this sounds like you, you are probably thinking it is impossible for you to start to build a savings fund. But it is extremely necessary. I came to this realization when I decided I didn't want to rent an apartment my whole life, I wanted to buy something in the next 5 years. So, I had to learn how to save. Here is how I did it:
Step 1: Create a budget
I discovered what is called the 50/30/30 budget, and I have written about it before. This rule says you can spend 50% of your net after tax income on needs, 30% on wants, and 20% should be sent away to savings.
To start to outline this, you can either write down all of your expenses every month, and make sure they fall into this framework. Or you can buy this budget template that I created to help keep you on track.
Step 2: Cut back
I know you hate to see this part of the process, I did too, but its for your own good. I am not saying to take drastic measures and stop eating out at restaurants entirely (unless you seriously need to) I am just asking you to do it less often. Or to take a look at some things you may not need in your life. Like that monthly subscription you always pay because you signed up for the free trial and forgot to cancel, or your 5th Sweetgreen salad that week. Even if you can find 10-20 extra dollars you can put away now, it will make a difference in the future.
Once you determined how much you'll be setting aside each month, here is my biggest tip.
Make it automatic.
Step 3: Automate your savings
I have my finances set up so that I never even see the money I am saving enter my checking account. The easiest way to do this is to open a savings account and route part of your paycheck to savings and the remainder to checking. If your employer doesn't have these fancy bells and whistles, set up an automatic transfer scheduled for the day after you get paid. The chances of you not spending that money are significantly higher if you never see it as available in the first place. Soon enough you will learn to live off only the money in your checking account.
Pro Tip
When choosing where to send your savings, don't just use another checking account, and don't think you need to limit yourself to just one. I have multiple savings accounts, each tied to a different goal (house, vacation, emergency, etc). Seeing things in this way helps me bucket my money and motivates me to save more to reach the goal.
Also, not all accounts are created the same. Don't use a checking account. Try to use a high interest savings account to take advantage of compounding interest. This means you earn money on the savings you have put away, and then that money gets added to your balance and you earn money on that as well each month. It allows you to actually grow your savings in a way beyond just adding funds.
There are two more pro tips I have for you, but they deserve posts all of their own.
Invest your money
Always use a credit card
Starting to save is like starting to go to the gym. It absolutely sucks in the beginning, but then you get used to it and it sucks a little less. In the end, you have to do it because it is what is best for you.
*This is not intended to be financial advice. Do not open a credit or investment account without fully understanding the terms associated*
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