A simple 2step plan for saving more money Your Money and Your Mind
Transcriber:
Everyone’s heard of the tired old adage
of paying yourself first.
But that saying lacks
a lot of useful details.
How do you actually pay yourself first?
So today, I’ll lead you through
some changes you can make
to improve your saving strategy.
[Your Money and Your Mind
with Wendy De La Rosa]
First and foremost, you should focus on
only one goal at a time.
Typically, we think about
having multiple savings goals
for multiple things.
We have an emergency savings fund,
a vacation fund, a wedding fund,
a car fund …
But one great study compared
people’s savings progress
when they had one savings goal
compared to five savings goals.
And it turns out that when participants
had just one savings goal,
they saved more than when they had five.
The research showed that
if you made progress
in just one of your savings accounts,
you’d think you’ve made progress
across all of them.
Like multitasking at work,
splitting your attention
across multiple savings goals
just isn’t efficient.
Now, that’s not to say
that this will be your only savings goal;
you’ll have many more
throughout your life.
But I want you to think about
the one thing that you want to focus on
over the next six months to a year.
Start with your emergency savings fund,
even if it’s 500 dollars or 600 dollars,
the average cost of a car repair,
and then go from there.
Now that you have a primary
savings goal in mind,
let’s focus on helping you
increase the amount that you save.
Your main savings strategy should be
to switch from having to remember
to save a small amount every month
to saving a percentage
of your income automatically,
any time you receive income.
Now, some people advise saving
10, 15 or 20 percent of your income,
but that’s not important.
You know your financial situation.
You know how much you can manage to save.
The real trick is to find a provider
that lets you set up an
automatic savings plan
and not to have to think
about it ever again.
The “set it and forget it” approach
is shown to help you save more.
Researchers believe that passive systems
like this are successful,
because they work with
our tendency towards inertia.
You don’t have to manually initiate
each subsequent transfer,
and you won’t be tempted
to hold back a bit
every time you make a savings transfer.
I want you to take the time right now
to find a provider.
Go to your app store, download the app
and set up your automatic savings plan.
If you make these two small changes –
focus on just one savings goal at a time
and automate your savings –
you should find success,
even if you don’t think
you’re saving that much money.
And it’s easier than it may seem.
So there you have it.
We have demystified the old adage
of paying yourself first.