Save Money With This Quick Two-Minute Drill

January 13, 2014

It is playoff time in the NFL and just four teams are left with a shot at the Super Bowl. (That’s Denver, New England, San Francisco or Seattle just in case you aren’t a fan of pro football or have managed to avoid the fanatics in your life that do care about the proverbial pigskin.) In the spirit of playoff season, I thought that I would accept a challenge from a colleague to put today’s blog post on the clock. 

My challenge: In two minutes or less, provide a brief yet insightful action plan about increasing savings that works in the real world and anyone can fit into their busy schedules. Challenge accepted!  Start your stopwatch because the offense has the ball and it’s time to get those savings plans in motion (tick tock).

1. Prioritize saving. Money is merely a tool (albeit an important one) and there is only so much we can do with it so prioritizing our competing wants and needs is essential.  In essence we can earn it, spend it, repay debt with it, save it, or give it to others. Perhaps the biggest mistake that we make with our money involves how we order these actions.

The majority of Americans put spending right after earning. No matter how good your intentions may be, my experience is that this is a great way to get on the fast track to disappointment. Even if you aren’t living paycheck to paycheck and you are in a good financial position, a purposeful spending plan can help you maximize your savings potential.

Unfortunately, not enough people out there are turning their good intentions into a personal spending plan that encourages saving. The trick is not really a trick at all. Move spending to the #2 position (or at least to #3 right after giving to others if that’s an important value of yours).

This is the classic piece of advice to always pay yourself first.  Financial planners suggest this all of the time and it sounds like common sense. Commit to putting savings at the top of the priority list (as opposed to the “whatever is leftover at the end of the month gets socked away” approach).

Automate your savings. I’ve found that the next key step is to automate your savings. Automation will help simplify your life and give you a psychological edge when it comes to following through with a savings plan. Set up a direct deposit into savings or schedule regular contributions from your checking account.

If you had trouble with raiding the savings account in the past, consider making it a little harder to access your savings.  Perhaps try using a bank or credit union on the other side of town or an online institution. You can compare savings rates at sites like DepositAccounts or BankRate.  Just remember that getting into the game of making savings a habit is initially more important than securing the highest interest rate. Finally, don’t forget to set specific goals and track your progress, especially if you are saving for multiple objectives (emergency fund, vacations, car replacement, etc.), which is also recommended.

Identify ways to cut expenses and save more through…you guessed it – budgeting.  If you want to have more money to save and/or invest, you first need to have an idea of where your money is going.  Some people track every dollar using online budgeting tools such as Mint, YNAB, and Personal Capital.  Others prefer using Expense Tracker worksheets.

Once you know where your money is going, consider the (Mostly) Painless Ways to Save Money.  The main idea is to identify how much you have available to save.  Then, put savings at the top of your priority list as is shown in this Easy Spending Plan.

So put yourself on the clock and take action with your own two-minute drill.  You might not feel the same sense of pressure as those NFL players trying to punch a ticket to the Super Bowl but the stakes are your financial future and that is enough to keep us all a little motivated. Just don’t get a delay of game penalty and let the clock expire before you accomplish your savings goals.

(Yeah, I checked my stopwatch and I went a little over on my two-minute drill blog with some poor clock management at the end.  Oh well. Hopefully, your savings account will benefit from my lost challenge!)