You would think saving money would be straightforward. The truth is, it’s not.
According to findings by JP Morgan Chase, families require around six weeks of take-home income in fully liquid assets to handle significant fluctuations in total income and expenses.
Whereas nearly two-thirds of households lacked this requisite savings threshold to account for them.
What’s worse, Bankrate’s 2020 January Financial Security Index survey showcased that only 4 out of 10 adults in the United States would be able to cover an unexpected $1,000 cost in car repair or emergency room services.
This constitutes 41% of all Americans.
As you can see, saving money clearly isn’t an easy task for most people.
Therefore, you aren’t alone.
Luckily, saving money doesn’t have to be too difficult.
Below, I will be going over exactly why you aren’t able to save money successfully and some adjustments you can make to begin succeeding at it.
Reasons why you can’t save money
1. You fail to budget
The majority of people and families who dedicate time and energy to budgeting will experience success with their savings efforts.
Budgeting will help you not only identify how much expenses you have to account for, but it can help you identify critical areas where you might be siphoning money from your savings.
This is especially true if you utilize some sort of budgeting app, website, or you turn your spreadsheet into a graph.
Having a visual aid that you can use can help you identify you’ve been spending a whopping 15% of your total budget towards the ten’s of streaming services that you subscribe to to ‘save money’ over cable.
Personally, I am using Albert (affiliate link) right now.
It’s an automated budgeting app that does all the heavy lifting for me (plus it’s free).
Also, Albert has a micro-savings feature where it will deposit small amounts into your Albert savings account that you won’t even notice.
In the last two weeks alone I’ve saved $101 by doing nothing, and I haven’t even realized that money was missing from my checking account.
You can pay extra for guided advice and a 1% APY in your savings account, but you don’t need to.
2. You’re “saving money” by buying things you don’t need
Many people have this misconception that anything that is a good deal or that is heavily discounted offers savings potential.
Nothing could be defined as savings unless you were set on purchasing it in the first place.
For instance, you see a TV heavily discounted on Black Friday you might think “wow, it’s $500 off.”
So you decide it’s a must-have deal.
You scored $500 in savings.
You didn’t actually need a brand new TV, nor were you planning on getting one anyway.
Instead, you convinced yourself you ‘saved’ money by spending money just because it was a good deal.
This is precisely how the retail industry wants consumers to think.
This is why they advertise Manufactured Suggested Retail Prices and continuously offer discounts and coupons to drive them down.
That way, you think you are getting a deal that incentivizes you to purchase things you don’t actually need.
Don’t fall in this trap, and you’ll quickly see how many more zeros end up in your bank account.
3. You are not prioritizing your debt
One of the major things that get people in trouble with being unable to save is having too much-accumulated debt.
According to the New York Federal Reserve, consumer debt approached $14 trillion after the second quarter of 2019.
This total debt includes four distinct areas of debt: home, auto, student loans, and credit cards.
The average amount of household credit card debt sits at $8,398.
As you can see, this is a staggering figure.
Unfortunately, the average Annual Percentage Rate (APR) among credit cards is a whopping 16.88%.
Therefore, doing quick calculations, the average household is paying an extra $1,417.58 in credit card interest rate alone.
This means they are paying more than the median monthly payment for U.S homeowner’s mortgage, which sits at $1,100 according to the latest American Housing Survey from the U.S Census Bureau.
Because credit card interest rates are so high, you need to have a plan to zero-out your credit card debt as soon as possible to begin building up your savings.
Come up with a realistic budget and set aside as much money as you can to pay off your debt.
If possible, you can leverage balance transfers to lower-interest credit cards.
If your credit is good enough, you may even qualify for introductory rates of 0% to give you 12 or more months to pay off your debt without paying sky-high interest rates.
4. You’re spending money you don’t have
Another common problem a lot of people have is the issue of spending money you don’t have.
If you have a credit card, it might not actually feel like you are spending money every time it gets swiped.
The tangible feeling of losing money isn’t there with a credit card like it is with cold-hard cash.
Even worse, mobile wallets have made it even easier to spend without the tangible feeling of even bringing out your wallet.
Because of this, more people than ever before are running into the problem of spending what they don’t have.
Re-frame your mindset around your credit cards. If possible, get rid of them altogether.
If the temptation of using your credit card(s) is too great, remove them from the equation entirely.
If you need them, try to set limits on your cards to avoid overspending.
Make a concerted effort to only spend what you can pay off at the end of the billing cycle.
5. You are living beyond your means
Whether it’s because you are comparing yourself with your friends, family, or neighbors, you are spending money on things that you cannot afford.
Whether it’s buying a new car or new clothing every seasonal change, you’re overspending.
By sticking to living within your means, you should be able to begin experiencing savings almost immediately.
6. You’re spending too much on coffee
Are you a cover lover?
Do you find yourself waiting for 30 minutes in the line at Starbucks every day?
While that $3-5 latte might seem like a bargain as you sip it, once you add up your Starbucks spending each month, your coffee won’t taste nearly as good.
Assuming you are spending $3.50 on your caffeine fix each morning, you are spending $105 on coffee alone.
When you compare this cost to the amount you would be spending if you made coffee yourself, things get apparent.
You might be able to cut out as much as $1,000 in a single year if you find other and more affordable ways to get your caffeine fix.
Why Is Saving Money So Hard?
Saving money has become so difficult for many reasons.
Perhaps one of the main reasons is the overabundance of psychological mind games in which institutions are playing with consumers.
We are constantly bombarded with advertising and businesses, convincing us we need to buy, buy, buy.
Likewise, banking institutions have made it as easy as possible to give us the ability to spend what we don’t have.
Because of this, many people take them up on this and get bogged down with incredibly high-interest rates designed to keep you in debt.
According to a 2016 study done by Merrill Lynch, 41% of those surveyed felt that the cost of basic expenses was the reason why they could not save for retirement.
While the study is a little dated, it’s still telling.
Here’s a summary of the rest of that data:
How can I save money successfully?
There are plenty of different things that you can do to improve your ability to save.
Perhaps the most effective is automation.
Work to automate your savings as best as possible.
After all, ‘seeing is believing.’
If you don’t see you have money to spend, you won’t think about spending that money.
By leveraging automation applications and programs, you should be able to grow your savings exponentially without putting in any work.
You remove a lot of the temptation to spend if you automate the process.
Another good tactic to ensure you save as much as possible is to scare yourself into thinking you won’t have enough money for retirement.
This psychological tactic can work very well because you have a ‘fight or flight’ instinct, which can motivate you to take steps to address it.
One more good way to ensure you are saving properly is having someone there to keep you in check.
Have your partner or a family member assist you in the process.
You could help audit each other’s spending to ensure that you aren’t overspending on things you don’t need.
How can I save $10,000 in 6 months?
Do you have a specific goal to save $10,000 in as little as 6 months?
If so, you will have a tall-task on your hands.
Luckily, this goal is certainly achievable for anyone.
Below, we will be going over specific steps you should take to experience this kind of savings potential.
Step 1: Adhere to Warren Buffet’s fundamental for saving
Warren Buffet famously said the following:
“Don’t save what is left after spending; spend what is left after saving.”
This simple concept is perhaps your best shot at achieving your $10,000 savings goal.
To adhere to this fundamental, you should put savings as a priority.
Since your goal is to save $10,000, you will want to break it up into six months.
Having smaller goals that you can meet makes it not only seem more attainable, but you will be able to celebrate the smaller victories along the way.
Therefore, you would need to save $1,666.66 each month to eventually save $10,000 in as little as 6 months.
Doesn’t $1,666.66 sound more feasible than $10,000?
Step 2: Change your spending habits
Even some of the most disciplined people spend money on things they don’t need on a daily basis.
This could be something as simple as eating out at a fast-food chain for lunch every day.
Figure out what your bad spending habit(s) are and change them.
Even small changes can yield massive results when it comes to being able to maximize your savings potential.
Step 3: Put your money in different accounts
A lot of people have a single checking account they spend with.
If they don’t, they have a checking account and a savings account with the same bank.
This makes it incredibly easy to start spending your savings.
By separating your money in different accounts with different banks, you increase the amount of resistance required to spend your savings.
This simple trick can really help you start saving money quickly.
Step 4: Create a detailed budget
You absolutely need a budget if you want to experience savings.
Knowing where you need to allocate your money and where your money is being allocated every month is crucial.
After all, your budget will help you identify key areas you might need to improve on.
It will also help you stick to a set amount of spending that you have to adhere to monthly to meet your goal of saving $10,000.
Step 5: Use an app
Using an app like Mint, you should be able to minimize the amount of hassle that goes into budgeting and auditing your spending.
Having an app like Mint will help you visualize where your money is going.
This can give you a much better and more detailed overview of your finances and see your accounts growing.
Your expenses falling can really be a critical motivating tactic that can push you forward.
Overall, there is a lot that might be holding you back from your goals of saving money.
Knowing some of the bad habits you have with money can go a long way toward correcting them.
By changing the way you think about money, you should be able to have a much better chance of experiencing savings.
As you can probably tell, saving money might sound simple; but it’s far from it for most.
While some people might have a natural knack for saving, for most, it’s a learned behavior, and it requires consistent effort.
You need to change the way you think about money and your consumer mentality to begin experiencing great results with your efforts.
Stop convincing yourself that you need everything.
Learn the difference between “want” and “need.”
By doing all of these things and implementing the strategies above, you should be able to begin experiencing savings much sooner than you might expect.
Don’t allow yourself to fall into the mindset that accumulating savings is a dream. It can be your reality as soon as you make it.