A lot of us are struggling to save more. There are so many financial goals to meet like buying a house, a new car, paying for a college education and increasing the retirement fund. Although these saving goals are different, all of them can improve your life and give you financial security. The more you can contribute to your savings on a monthly basis, the faster you can reach your financial targets.
The money that you have in your savings account will not only help you reach your financial goals. It will also help you survive financial emergencies. In case something happens that will compromise your income or requires you to spend a huge sum of money, your savings can prove to be very useful.
Of course, saving is easier said than done. There are so many temptations when it comes to saving. When you see your money growing in your account, the temptation is there to spend it. You have to fight the urge to spend it so you can meet your financial goals. Either that or you have to grow your savings so you can spend some of it.
If you want to save more, the logical step to take is to earn more money – right? This is what most people prefer because they do not want to sacrifice their current lifestyles just so they can increase their savings.
Study shows that 1 out of 10 high-earning Americans cannot save
While earning more seems like the best course to take when it comes to saving more, it is not always the most effective. At least, this is based on the data provided by PewTrusts.org. This site studied the average American family and their respective emergency funds. In one of the data, they revealed that 1 out of 10 American families earning $100,000 admitted to not having any savings. Imagine that? The average annual spending budget for a family of four is between $40,000 to $50,000. Despite that, this 10% failed to save more.
The study also revealed that the lack of savings is causing these families a certain level of stress. They know that one emergency situation can drive their finances down.
The data from Pew Charitable Trusts also revealed the following:
- 4 out of 10 American households do not have enough liquid savings to pay for a $2,000 expense.
- 69% of those surveyed will use various resources when they need some cash. 49% said they will use credit to meet an unexpected expense.
- 8 out of 10 households admitted that their savings are not the ideal amount for their size. When asked how much is needed to reach the ideal level of savings, the average household requires $9,000.
The findings of this organization give evidence of the need to save more. In fact, another study by Pew Charitable Trusts, discussed the saving barriers that hinder people from reaching their saving goals. One of them is the unexpected expenses. 7 out of 10 Americans admitted that they cannot save because of the unexpected events in their lives. It seems like when people start accumulating money in their account, something happens that will force them to reach into their savings account. If this keeps on happening, it will really be hard for you to save money.
This study reveals that without a doubt, it is not easy to save money. Even if you have all the intent to save more, something that is beyond your control can happen to compromise all your hard work. Even if you try to earn more money, you can still lose all of that if you are not careful in securing and stabilizing your finances. If your spending habits follow that of the typical American who tries to keep up with the Joneses, you will really have a hard time increasing your savings.
What is the secret to increase your savings?
So what is the real secret to increasing your savings? If earning more does not guarantee it, what can you do?
Here are some of our suggestions to help you save more money.
Change your mindset.
Sometimes, it all boils down to our mindset. There are so many things working against our intent to save money because of how society shaped our minds. We live in a consumerist society. Everyone is encouraging us to spend our money. The idea is, the more you have, the more successful you are. If you have this mindset, then it will really be hard to increase your savings – much less improve your finances. Bigger is not always better. We need to wrap our heads around that idea.
A lot of us are also hindered from saving because we only have a small amount to save. Chances are, this small amount ends up being spent. This is another wrong mindset. A small contribution is better than nothing. That small amount will soon accumulate into something significant – as long as you commit to contribute consistently, your small savings will become big in time.
Lower your spending.
Another thing that you need to do in order to save more is to lower your spending. Why is this more important than earning more? When you try to curb your spending, you will be forced to change some of your habits to accommodate the savings. If you can develop new habits that will keep your expenses reasonably low, then that can help you increase your extra money – which you can place in your savings account.
To help you spend less here is one trick that you may want to do. Try to convert the price that you are about to spend to the hours that you need to work. For instance, you are earning $20/hour and you want to buy a pair of jeans that costs $60. That means you have to work three hours in order to afford that piece of clothing. Ask yourself if it is worth it. If it is, then go ahead and buy it.
Know the lifestyle that you need and stick with it.
Investopedia.com reveals 5 important rules that will help you live a healthier financial life. One of them is to understand and manage lifestyle inflation. It simply refers to the increase in spending that is usually associated with a salary increase. Basically, when we upgrade our lifestyle after every time we earn more, that is called lifestyle inflation. This is something that we need to stop. You have to define what you want out of your lifestyle. Just concentrate on what is important to you. What lifestyle is comfortable to you? When you have identified that, stick with it. When you get a salary increase, your spending should not increase. Only your savings should go up. It is okay to reward yourself. However, do not buy a second home if it will only make your monthly spending go up. If there is one thing that you should prioritize over savings – it is a sound investment. If that investment will help increase your monthly income, then it is worth putting your money in over savings.
When you save more, nobody benefits from it but you and your family. If that is not motivation enough, then what is? An increase in your savings will not only increase your personal net worth. It will make your finances more secure. This is a realization that you should keep in mind so you will be motivated to stick to your savings plan. The temptation may be there but if your mind is set to all the benefits of having adequate savings, then you can overcome the urges that can compromise your saving goals.
