You’d love to save more money to your savings account, 401(k), and investment accounts, but it can be a challenge. Life gets in the way and you can’t seem to get ahead. This is often true regardless of how much money you make. In today’s blog post, I share one simple trick that you can use to start saving more money so that you can build up your net worth!
Why People Don’t Save
How many times have you said, “If only I made a little bit more money, I’d be able to save more.”? Well, here’s the hard truth – saving is not really dependent on how much money you make. It’s about how much you spend.
I’ve worked with many people over the years who make a great income, yet they struggle to save. And in many cases, when I start diving into their income and expenses, I discover that their income far exceeds their expenses. You may be asking, “How can they struggle to save if their income is greater than their expenses?”.
The answer is simple. People don’t account for every $10, $15, or $20 purchase they make. In other words, small purchases throughout the year add up to thousands of dollars. That is money that essentially walks out the door and you have nothing to show for it. This is your discretionary income that could otherwise be used for saving, but now it’s gone.
There is a simple fix to this problem. You must “pay yourself first”, meaning pay yourself before you pay your bills.
This may seem scary, but it works. Just think about your 401(k) plan at work. You contribute to it, which reduces your paycheck, but you’ve automatically adjusted to live off of the lower amount. And, the same thing can happen if you start paying yourself.
The key to paying yourself first is to set up an automatic transfer from your checking account to your savings or investment account on a set day each month. You don’t have to start out big. In fact, most people like to start out small to get a feel for the lower amount that is now in their checking account. You can always adjust from there and increase or decrease your savings as necessary.
By implementing this simple “pay yourself first” tip, you will be well on your way towards building up your net worth and finally feeling like you’re making progress!
Today’s blog post was all about just sharing one simple tip that you can implement right away rather than giving you a list of 25+ tips (there’s more than enough of that online). However, stay tuned as we will be sharing more detailed budgeting and savings tips over the next few months.
In closing, please comment below about whether or not you “pay yourself first” and how you overcame the fear that you might not have enough money leftover to pay your bills.
CERTIFIED FINANCIAL PLANNER™