What’s the best way to save money? For starters, don’t ask your friends or family or colleagues. Chances are, they’re asking the same question.
When you dig into the stats, the financial outlook for many Canadians isn’t pretty. According to one recent study, more than 32% are nearing retirement without any savings whatsoever. Another study found that 26% of Canadians have no emergency savings at all, and 40% have a cushion of a month or less. Darker still, a 2017 study round that more than half of Canadians were just $200 or less away from not being able to pay the bills. Yikes.
If you’re reading this and starting to identify with those numbers, it’s time to start looking for ways to save money, and the sooner you start the better. Saving money not only helps you set yourself up for the future, it also gives you peace of mind for today. Knowing you’ve planned for a rainy day with an emergency fund, or for retirement with your long-term savings, gives you a new sense of freedom you can’t get from frivolous spending.
Why Saving Money is So Difficult, For Everyone
The biggest hurdle to saving money is actually neurological. In layman's terms, the prehistoric parts of our brain still drive much of our immediate decision making, and those impulses are all about survival.
That means accumulating food, securing shelter, building your place in the community, and so on are a higher priority than finding ways to save money. Put another way: We’re consumers by nature, and thinking about the wellbeing of our future self almost always takes a back seat to the here and now. This, of course, is all in direct opposition to saving money for the future.
A surprising workaround for this is to look at a digitally aged image of yourself (finally, a positive use for FaceApp). One study found that doing this makes your future self more present-tense, which can make it easier to stick to your savings goals.
Whether you find the aged image helpful or not the message is clear: To make saving money a habit, you need to work around the way your brain is hardwired. For that, we turn to the science of forming habits.
Training Your Brain to Embrace a Saving Habit
When you’re trying to change your behaviour, habits are a powerful tool. Once established, they’re often carried out without you even really thinking about them, a process known in science as automaticity. So one of the best ways to save money really just boils down to forming a new habit.
The key to forming a new habit is to establish a routine, stick with it, and commit to it every single day. Do this, and conventional wisdom says you can establish a new habit in as little as a few weeks. In reality, the timeline for a new habit to take hold is different for everyone, but the key ingredient is routine.
If you’re trying to build a habit of saving money, there’s a few things you can do to make the process a little easier and increase your chances of sticking with it.
1. Set a Savings Goal
Start small and set a savings goal you know you can reach. This will build your confidence and when you hit your goal you’ll feel fantastic. Psychologically, this will help reinforce the behaviour and encourage you to reach for even loftier savings goals.
2. Save Something Every Single Day
Remember: routine, routine, routine. This is the key to habit forming, so make sure you saving something every single day, even if it’s just a dollar or two. That dollar or two might not help your retirement fund in any significant way, but it will help reinforce your saving habit.
3. Use a Spending Tracker
Savings goals can be undone quickly or they can be undone slowly. Get a handle on your small daily and weekly purchases (your morning coffee, dinner out, and so on) with a personal expense tracker. Once you see what you’re spending your money on, you can zero-in on where to cut back.
4. Follow a Budget
Once you’ve established your goals and trimmed your spending, create a pre-set budget and learn to live within it. Creating one is easier than you think. Use the envelope system, the 50/30/20 rule, budgeting apps, or a personal budget planner to get started.
5. Practice Mindfulness
Learn to recognize your impulses and practice some discipline. Delay gratification by waiting a few extra days to make a certain purchase, sometimes the impulse passes. Also learn to recognize stress-spending, and remember the more you save the less stress you’ll be.
6. Build Other Money-Saving Habits at the Same Time
One of the positive side effects of saving money successfully is it encourages you to build other healthy habits, such as eating less fast food and cooking more meals at home. This not only saves money, but is better for your physical health as well.
7. Automate Your Savings
This is a little bit antithetical to doing something every day in order to form a habit, but many people find it helpful to automate their savings contributions. Use the set it and forget approach: Set up automatic transfers into your savings account or RRSP for every payday.
Your Brain is Ready, Are You?
You know that old saying “You can do anything you put your mind to”? Well, when it comes to saving money, it’s entirely accurate. In fact, training your brain to save is one of the best ways to save money, period.
Your brain never stops growing. It’s in a constant state of change as the world around you evolves. Your brain is a sponge that’s continually soaking up new information and forming new habits, whether you realize it or not.
Fresh Start Finance serves Canadians facing all types of credit situations with practical advice and credit-building solutions. We also offer quick-and-easy secured and unsecured installment loans to help you take those first steps to a better financial future. Apply today to see how we can help!