How to Build Savings from Zero
Start Small. Think Big.
A recent survey of 1,000 adults suggests that 66 million American adults have zero dollars saved in case of an emergency. That merges nicely with a report that came out earlier this year from the Federal Reserve, which looked at the economic well-being of American households. And let me tell you, things are not going so well for us. About one-third of 5,695 respondents to a 2015 survey revealed they would have trouble dealing with a $400.00 emergency.
If this sounds familiar? Here are a few ways we can make a change.
Start small.
If you have never saved anything in your life, save twenty dollars a week or thirty dollars a week. Pick a number that, regardless of disaster, you can achieve.
After you do that, put the money in a separate account and review it once a month. After three months, consider an increase. After three more months, consider an increase again and keep repeating.
The reason people typically fail at saving is because they start too high. So you set yourself up for failure. Start small. You will be so excited that you met your goal, you will automatically want to do more and achieve more. When you start small, you set yourself up for success. Success begets success. I have never had anyone try this who did not succeed.
Reward. This is important, whatever the reward be, make it something free.
For instance: If you save twenty dollars a week, then every time you hit one hundred saved, treat yourself to something sweet for example ice-cream. No one can say no to ice-cream.
Whatever you do, make it something that really nurtures you. It doesn’t matter what it is. A hot bath will work. But when you give yourself the reward, you are reinforcing the behavior you want.
Shrink. One thing that probably keeps most people from saving more is that there may not be enough money to go around. That’s definitely the case if there are expenses that could be easily cut, or debt that’s weighing you down.
When talking with clients that are beginning to put together a plan to save money, or begin their accumulation phase, the first thing I advise them to do is pay off any high-interest debt like credit cards.
Paying off high-interest debt is the most important first step in beginning any type of savings. I consider this part of a savings plan because everything you pay off, you are eventually saving money on high interest.
Simplify. Assuming you have a bank account – a Federal Deposit Insurance Corporation (FDIC) study suggests that nine million Americans don’t – the easiest way to save money is to set up a savings account and then direct a specific amount to go regularly from your checking account to your savings account.
Every time your paycheck hits your checking account, you should instruct your bank to move a set sum directly into your savings account, this makes it easy and convenient.
Eventually, you won’t even miss the money because it’s automatically disappearing, and you’ll get used to working with the money going into your checking account.
