People who are successful at saving money typically have habits that help them be successful. In this article, we talk about three of these habits – one of which will surprise you!
Below is the podcast version of this article. The podcast explains things so much better than a blog post. I invite you to listen and also hear some examples and enjoy some laughs! You can subscribe to the Podcast by opening your favorite podcast app and typing “Balanced Working Moms” into the search or click here for a link to the podcast on iTunes.
Before We Begin
Before we begin, I want to acknowledge that some people are out of work and struggling as a result of COVID. The suggestions below may not apply in a crisis situation, such as when someone is out of work. You may not be able to apply these tips for now, but keep them in the back of your mind and come back to them when things go back to normal.
A Modest Home
If you came to visit me, you’d feel very comfortable in my home. That’s a polite way of saying my house is a modest, average home.
It’s not big or fancy, but it’s a lovely home and we’ve made a lot of improvements over the years. It’s a good size for our family.
Why am I talking about my very average house?
Well, when we bought it, the market was starting to go up. It was before the real estate bubble burst.
We were told that we could borrow A LOT more than we felt comfortable with borrowing. We were encouraged by our bank (and a realtor we fired) to spend three times our combined salaries on a house.
Ignoring Common Wisdom
We were newly married and didn’t know what the future would bring. We wanted children and knew that daycare and other expenses wouldn’t be cheap.
We decided to ignore common wisdom at the time and instead, get a house in a price range where we’d feel comfortable with the payments, now and in the future, when our expenses would be much higher.
Was this the right decision? Sometimes I wish we bought a fancier house. Now that we’re here, I don’t want to go to the trouble of moving.
But financially? It was for sure a win.
The First Habit of Successful Savers: They Live BELOW their Means.
According to the book, Millionaire next door, most millionaires are self-made and work at average, everyday jobs. And they live next door to people who have a fraction of their wealth, because they live below their means.
According to the book, the most common brand of wristwatch that a millionaire wears — Seiko! Steve Jobs was known for wearing a Seiko watch. He didn’t wear a fancy watch, even though he could definately afford to. Instead, he chose to wear a watch that was reasonably priced and known for it’s quality and reliability.
The advantage of living below your means is that it helps you not worry about money. It means that when you WANT to spend, you can. It becomes your CHOICE.
When it’s a choice on whether to buy something, it feels really good. You don’t feel like a victim who CAN’T buy what you want. Instead, you CHOOSE to live below your means and not buy things. This way, when you want to spend, you can. And that, more than anything, will make you feel rich 🙂
The Second Habit of Successful Savers: They Save Automatically
This habit is actually related to the first habit. It goes hand-in-hand.
Here’s how it works.
You set up automatic payments to yourself. You can do this in many ways, such as a retirement plan, automated savings, college payment plans, mutual funds, etc.
This lets you “pay yourself first.” As a result, your take-home pay may look really low. You may earn a decent amount but once your employer takes out a huge hunk for your retirement, your kid’s college fund, and your long-term savings, your take-home pay isn’t looking so great.
So, back to habit #1. You live below your means. You have less money because you’re paying yourself and saving automatically.
Instead of seeing that money as “real” money you can use, you’re saving it, perhaps even before it even hits your paycheck.
See the genius of automated savings?
If you don’t have a lot of money, you can save what you can. And once you get in the habit of automating your saving, you can always increase it.
However, just the act of saving automatically will help you develop this habit. It’ll force you to live a little below your means, even if only by $5 a month. And then it’s a two-for-one. You get in the habit of saving automatically + living below your means. Total win-win!
The third Habit of Successful Savers: They Don’t Have a Budget.
Okay. This last habit may blow your mind and make you question my sanity. But stick with me a minute.
Let’s say you’re doing #1 and #2. You’re living below your means, you’re saving automatically, I think you’re doing great.
But here’s the problem with a budget. It’s very difficult to stick to it and in my opinion, it gives you the wrong mindset.
See, when you CHOOSE to live below your means, you have freedom. You’re playing a game. You can afford something, but you don’t CHOOSE to buy it so you can save your money.
But when you have a budget, you’re not ALLOWED to buy something. It’s no longer your choice.
You see how that creates a mentality of “not enough?” It’ll perpetuate the feeling of being poor, feeling like you’re always doing something wrong or not getting something you really want?
Budgets are Like Dieting – Difficult to Stick To
Now, if and you have a budget and you stick to it and everything is going well, ignore my advice.
However, if you have trouble sticking to a budget and find it impossible, you’re not alone.
Like diets, most of us can’t stick to a budget because it feels very restrictive. It’s like a teenager who wants to do something and isn’t allowed. Which of course, makes her want to do it even more.
I found a great quote from a blog called Minding My Thirties. In the blog, which is about financial mindfulness, Liz writes:
“Budgets are a lot like dieting. Temporary solutions to a long term ‘problem’. They just aren’t sustainable. If you want change, change your mindset. If you want progress, build habits and systems.”
It’s a Mindset
Be aware that how you think about money influences whether or not you’re a successful saver.
When you think in terms of abundance, you create more abundance.