Are you aware that, according to research, nearly 60% of adults do not have enough money saved to cover a $1,000 emergency? Nearly a third of those people would have to resort to getting a loan or credit card to pay for any unexpected expense, which as we all know adds up to a lot more money in the long run with interest and fees.
It is really no surprise then that Americans are just not saving enough money. Even when we go back and look at things historically, the average American savings rate really peaked in the 70s with the savings rate of about 12% and since then has been a slow and steady decline.
So guess how much the average American is saving in 2020? Are you sitting down? We are talking only 3.5% of their income and that also includes IRA and 401k contributions. When you account for inflation, they are pretty much saving nothing.
What’s even more disheartening is that during recessions, savings immediately spikes upwards then as soon as the economy starts doing better, the savings rate starts trending back down.
This tells us that people can and do cut back then they need to, however as soon as things start looking optimistic, they go back to their normal spending and start saving less.
Below are four money saving tips that I have found work exceptionally well to save a lot more money without feeling like it is hurting your lifestyle, like skipping meals or working three jobs. Having the right money saving strategies are important to keep your sanity.
Think on that purchase
My first of these four money saving tips is to think about it. If I have something I wish to buy, I don’t buy it that day. Instead, I plan to purchase it tomorrow. This is about cutting out impulse purchases that you make, without probably even ever realising you do. Many studies have shown that shopping actually releases dopamine in the brain, that brings about a sensation of happiness and well-being.
If we go even deeper into the research on the effects of shopping on the brain, they have actually found the real dopamine hit doesn’t come from buying the item, instead it comes from the anticipation of buying the item itself.
We could basically conclude that buying something won’t necessarily give you that rush of excitement that you’re looking for. You can actually receive the same enjoyment from shopping if you just window shop and don’t actually buy anything at all. The bonus to this method is that it also happens to save you a lot of money.
When I sit on purchases for a day, more times than not, the desire to buy that thing just subsides and I no longer want it the next day.
How much work is that worth?
Another of my money saving tips is to consider how many hours you will need to work to pay for that purchase. Let’s say you get paid $20 an hour at work, and you want to buy a computer game worth $80. That game will cost you four hours of your time to pay for it. You will effectively work half a day for free, just to pay for it.
We are all acutely aware that we have a limited amount of time on this planet. We know it is up to us to make the best use of that time. We also know that we should spend our money on the things that are most important to us. Because our time is such a limited resource, we should avoid wasting our time working for things that don’t bring us joy or value.
By working out the work hours an item costs, it makes you reconsider whether or not that thing is actually worth buying at all.It works out easier not to buy something than it is to make more money to pay for it.
Choose the item or the cash
Assuming you’ve waited the twenty four hours, and you have calculated the work hours you will do to pay it off, and you are still keen on buying something, then think to yourself if someone offered you the cash equivalent for this item, right now, what would you rather?
We can often forget about how much something actually costs because we just want it right now. However, when you start being conscious about the choice between buying or getting paid that same money, which would you choose?
If you apply this question to everyday purchases that you normally don’t really spend much time thinking about, this really gets you thinking about what’s important and what’s going to give you the most long-term value.
Just this simple exercise helps make you question the benefits of saving money, rather than the temporary joy of buying that thing that you want. Look around your home at all of the things that you’ve bought. How much of that do you wish you could trade back for what you spent on it?
Watch your savings
The fourth and final of my money saving tips is a tactic to see the benefits of all these items you aren’t buying. That is to transfer the money you would have spent, into a special savings account, so you can begin to see the immediate results of saving, by having more money in your bank account.
So an example would be instead of spending $20 at work on lunch, instead you cooked at home and that only cost $5, so transfer the $15 into this account. Now, if you do that every single time you cut back and save money, you’ll just watch those savings grow over a short period of time .
Once you begin seeing this working firsthand, you will get really excited about having extra money in savings, and you will be more likely to remain doing this. See? You don’t need to make drastic savings changes such as starting skipping every second meal, you just need to spend smarter where you can.
So, to start saving money in a way that won’t significantly hurt your lifestyle, follow the above four money saving tips every week. Again, these are;
- Think on that purchase
- Calculate the work hours a purchase really costs
- Choose the money or the item
- Watch your savings grow
All the best for growing that bank account – I know you can do it!
About Lauren Clarke
Lauren writes for a number of influential blogs and clients, across the globe. When not blogging, you can find her with a glass of Australian red wine in her hand, reading a book. Lauren’s recent work can be found here.