Most people who know me and have read the title are probably thinking “what does Claudia know about saving? She spends her money on FroYo and pink cocktails.” Settle back, haters… Those cocktails are cute and here’s an update: that’s the old Claudia. Of course I was able to save money before, but only for a short term. So when I was saving to buy my computer years ago, I barely ate for a whole month. Now I’m scared of upsetting a Victoria’s Secret model. They might look skinny and fragile but they probably haven’t eaten in ages… they can take you.
To me saving was like doing a yo-yo diet. I was able to save quickly by restricting myself way too much, then the time would come when I would spend it all at once. That is equivalent to going on an extreme diet for a while and then pillaging a bakery.
This post is for those of you who find it hard to save. I’m going to show you how I went from barely making it to the next pay check to saving more than $1,000 per week.
Here’s how I cracked the code of saving:
Some of you are going “DUH!” But first let me explain. Situations vary. Some people stay at their parents while they are saving, others have food included where they work, but what you have to factor in every time is that there are basic expenses you have to cover in a period of time, so the more you make on a weekly basis, the easier it is to save. For instance, if you pay a certain amount for rent, that doesn’t vary on a weekly/monthly basis. What may vary is the amount you make. So if you work more hours or if you have two jobs, it’s easier to save money after covering those basic expenses.
Therefore minimise expenses and maximise earnings in a determined period of time. You can minimise expenses by cooking your own food, cycling instead of using public transport or working for accommodation.
Maximise your earnings by working more and making more money. The more you work, the less time you have to spend that money.
Have a separate savings account
This trick dates back to the beginnings of monetary transactions. Think about the money pig – I mean, piggy bank…. and I hope I didn’t give you any wrong ideas. You put the money aside and you forget about it. That way you are guaranteed to save a set amount every time you get paid. Even if it is just a tiny quantity of money, it will grow exponentially over time. If you have that money in a separate bank account, leave your bank card at home when you go out with your friends or restrict the access you have to transfer money online to make sure that you don’t use that money under any circumstances.
Save a percentage of your earnings
Someone wise once said something that sounds like a tongue twister yet it will teach you the right way to save. That wise person was Warren Buffet and his quote goes like this: “Do not save what is left after spending, but spend what is left after saving.” This life hack trick doesn’t just teach you about saving but also about living within your limits.
For instance, if you go out for a drink with your friends, you get tempted to keep spending money on more drinks or even invite your friends because you love them or everyone at the bar because alcohol can make you stupid. Don’t feel isolated, it’s has happened to all of us.
However, if the money you save is on a separate account, you will be more aware of how much money you have left for the week or the month, so you won’t waste all the money you have for food, rent and transport on those drinks. If you are one of those people that spend their money on a night out, it doesn’t mean that you are a raging alcoholic, it means that you are one of my friends.
When you are tempted to spend money on something you don’t really need, you have to ask yourself how much money you have left for the rest of the week overlooking that you have $5,000 burning in your savings account. That money doesn’t belong to you. It belongs to Future You who is going to have a blast in Hawaii.
If you are going out for dinner with your friends, you have to ask yourself if you wouldn’t rather spend that money having a souvlaki in Santorini overlooking the sunset. Same goes with drinks. Did you really need to have an extra pint of beer with that friend you’ve known since forever at the local pub where they first didn’t let you in when you were 15 and then they kicked you out when you were 19? Wouldn’t you rather spend that money on a night out in Queenstown with a bunch of new friends who are ready to share incredible travel stories?
Don’t overdo it
If you put too much money aside and assign $5 for your meal expenses for the week (it depends on the country and the situation), it will cause you to turn to your savings account. That’s the whole point, you shouldn’t touch the money you put aside. If you do, what is going to happen can only be compared to breaking a diet. Let’s say you are on a diet and you have a sudden craving for a piece of chocolate. Perhaps that chocolate bar wouldn’t really affect your diet because you can then carry on, exercise and eat healthy. The issue arises when you think to yourself: “I’m going to have a piece of cake and eat at McDonald’s because earlier I had a piece of chocolate and therefore I already broke my diet.”
There’s nothing more frustrating than trying hard and accomplishing nothing. That will only cause you to lose motivation and to take much longer to save money. What’s the point of slaving yourself to save if you end up spending money on trivial things to keep you happy? You’ll probably come up with an excuse like this one: “I’ll buy it because I work hard and I deserve it,” and perhaps you do, but the point is that if you abstain now while you are saving, you’ll be able to reward yourself when you are on holidays.
Sometimes the reason why we can’t save is because we spend our money on trivial things like a cup of coffee or eating out or the bus. If you minimise those costs, you’ll be able to save quickly and that will be keep you motivated.