3 Reasons You Probably Don’t Save Enough

Whether your main financial goal is to pay off debt, buy a home, or retire comfortably, chances are that saving money will be instrumental to achieving it. Yet too many of us just aren’t saving enough. Why is that? The following are the three main culprits I’ve found and what to do about them:

1)You have nothing left at the end of the month.

This is one of the most common things I hear. Fortunately, there’s a simple solution. You’ve probably heard the term “pay yourself first.” The idea is to have your savings automatically set aside before you even have a chance to spend it. One way is to have your savings taken out of your paycheck  by contributing to your employer’s retirement plan or HSA account.

Another is to set up an automatic transfer from your checking account to a savings or investment account each month. Online banks like Capital One 360 and Ally Bank can be particularly useful for this purpose since you can link your existing checking account to individually labeled multiple savings accounts with no minimum balance requirements. You can have one account for emergencies, one for a vacation, and another for the holidays.

2)You don’t want to track every nickel and dime you spend.

Some people do and it works well for them. I have to admit that I’m not one of those. The important thing isn’t knowing where every penny goes but making sure your spending stays within the limits you set.

Instead of tracking every expense, I give myself a monthly “allowance” of money to spend on any discretionary expenses I want like shopping and eating out. However, when the money is gone, it’s gone until the next month. (If you have trouble staying within the limit, you might want to put your allowance in a separate checking account and use cash or debit cards instead of credit cards.) If I spend less than the full allowance, I roll the money to the next month in case I want to splurge on something in the future.

3)You don’t want to feel constrained.

This is why budgeting is often thought of like dieting. No one likes to be denied things they want. But reducing your saving isn’t the only way to have more money to spend. Another solution is to reduce your fixed expenses, especially big ones like housing and transportation.

The next time you’re in the market for a new home or car, think twice before committing to spend a large chunk of your paycheck on a more expensive option. Unless you purchase something unsafe or very uncomfortable, your happiness level will likely adjust to whatever you purchase. You certainly won’t feel more constrained driving a Ford than a BMW. Both will get you from point A to point B. But by driving a less expensive car, you can free up hundreds of dollars each month to be spent however you like.

I’ve personally found that paying myself first, keeping my fixed expenses low, and giving myself an allowance for discretionary expenses to be the most important factors in being able to save. Do you have any culprits that make it hard for you to save or any strategies that you’ve found to make it easier? Feel free to share your thoughts in the comments section below.

 

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