Just because the news outlets continually report a booming economy in 2018, you still need to save money. Why? It’s just plain smart, and financial experts agree that the current administration’s tax plan isn’t going to be as beneficial as they say it is… well, except for the 1 percent. If you aren’t one of that 1 percent, you can save even more money by following these six tips.
1. Utilize the Bucket Method
According to TODAY, a spending approach called the bucket method is proven successful time and time again. University of Chicago professor Richard Thaler supports this method to help people reach their financial goals. The approach is simple. Sit down with your budget and determine every expense you incur each month, including things like entertainment. Then, when your pay comes in, assign the money to two separate categories: saving and spending. Take the saving money out of your paycheck first. Set it aside in a savings or other investment account, on a separate debit card, a separate virtual account, or cash under the mattress. Then, use your spending money for bills and entertainment.
2. Use Personal Finance Software
TODAY financial editor Jean Chatzky also recommends going virtual when it comes to your finances. Aside from financial software you can load onto your computer to help you keep your checkbook straight, there are plenty of apps you can put on your smartphone to boost your savings strategy. According to Chatzky, apps such as Digit and Stash follow your spending habits and then secretly take money from your checking account to put in your savings account automatically. The apps do so subtly, so you don’t really notice. You’ll be surprised how fast your savings builds. Long Game is another app Chatzky recommends that lets you play games to win cash once you’re near an established savings goal.
3. Big or Detailed
How do you think? Do you look at the big picture or are you detail-oriented? According to research done by the University of Southern California, saving toward your opposite mindset actually helps you remain cash-conscious and achieve your monetary goals. Do you look at the big picture, i.e. you need $100,000 to purchase your dream car, then focus on the small picture. Calculate how much money you will set aside each month for your car, and then calculate that down to the day. Big thinkers save more when they focus on smaller numbers, i.e. it’ll take $28 stashed away each day to have enough to buy your car in 10 years. Detail-oriented people should do the opposite and look at that $100,000 goal.
4. Buffer Fund
What must you have no matter what? What do you spend money on anyway, even if you really don’t have it? TODAY provides examples of answers to these questions as having lunch with friends or taking advantage of sales. Do you often meet up with your posse and eat out even though you can’t afford it? Are you a shopaholic? If you’re going to spend the money regardless of whether you should, set up an account for it. Call this your buffer fund, and stash money away so you can socialize the way you wish or purchase a new outfit once a week. Take it account the temptation to which you’ll inevitably succumb, and then save for it so you don’t cut yourself short elsewhere.
5. Zen and Your Money
If you grab your phone off the nightstand the minute you wake up, you’re setting yourself up for a miserable day. Not only should you take a moment to reflect on everything you are grateful for before crawling out of bed and facing the latest bad news stream, you should also think about your money. Chatzky recommends visualizing your savings goals. Imagine yourself driving around in that dream car with the top down. Visualize the money you’ve saved thus far. Imagine how you’re going to save more. Then, think twice before making purchases throughout the day. Do you really need to make that purchase? Are you being frugal or are you wasting your hard-earned cash?
6. Think Big
Finally, a bonus tip to help you remain frugal is to think big, but not like you think. No, you can’t go spend money as if you’re a millionaire when you’re not. You can, however, think about millionaires and imagine how they got there. Chris Sacca, for example, is a 43-year-old retired venture capitalist worth approximately $1.2 billion as of May 2017. Yes, you read that right, retired at 43. How did Sacca get there? He was wise with his money, no doubt. In fact, Charles Dickens’ A Christmas Carol is the perfect example of why rich people stay rich. They hang on to their cash. The next time you decide to throw your frugality out the window for no good reason, think about retiring at 43 instead. Isn’t that better?
Don’t be a Scrooge, but don’t be careless either. Follow these tips to help you be frugal where you need to be so you have money when you want it.