[New Year Update] Saving money is one of the most popular New Year’s resolutions. To help you achieve your financial goals in 2017, we’ve brought back our post on improving money habits to save more. Happy New Year from everyone at CUTX!
63% of Americans have less than $500 in their savings account. That means, for millions of people, a $1,000 emergency becomes a giant headache, setting finances back for months. It means playing catch-up and stressing out about deciding which bill, the gym membership or cable bill, can be skipped this time around. Thankfully, it all boils down to money habits, and like all habits, we can retrain ourselves to change. We can take control of our finances so that $1,000 emergency is nothing more than a minor inconvenience.
Now, I know what you’re thinking: “Easier said than done.” We often have the best intentions when it comes to our finances, but it doesn’t always work out. We find ourselves getting behind or living paycheck to paycheck. Well that’s what I’m here for. As your financial counselor, I want to help you by offering a few simple methods to help you save more. By focusing on recognizing your own money cycles, separating wants and needs, and giving yourself real reasons to change, you can get ahead and start paying yourself first!
4 Money Cycles: What’s Your Spending Cycle?
The first step to saving is to recognize how your money is spent. Read about the four spending cycles below and wait for that, “Hey that’s me!” moment. If you fall under cycles 1-3, then there’s work to be done. If you find yourself in cycle 4, great job, but keep reading, you still might learn something new.
- Cycle 1: Earn/Spend/Earn/Spend
If you’re caught in this spending cycle, you might feel that you’re living paycheck to paycheck. Simply put, you earn money, spend it, earn some more, and spend that too!
- Cycle 2: Earn/Spend/Borrow/Spend
Do you have trouble denying yourself of anything? If you always have to have the latest and the greatest, you might fall under this cycle. People in this cycle have no qualms about getting into more debt to make that purchase. Ahh feels good doesn’t it? But for how long?
- Cycle 3: Earn/Spend/Save
Though members in this group truly want to save, the problem is that most of the time, there isn’t any money left because something always comes up. You’re almost there, but you’re just not making the progress you want.
- Cycle 4: Earn/Save/Spend
This group hits the nail right on the head. People in this group pay themselves first; they earn money, save immediately, and budget what’s left. Rightfully, savings is the priority.
Separate Needs and Wants
For most, saving first means spending less. To cut down, you need to separate needs and wants. Necessities like groceries and rent need to take priority over other purchases. Like a kid in a candy store, it’s pretty hard to remember that you don’t need that new phone. To help, make a list. Simple yet effective, make a list of everything your money may go to. From there, identify each item as a need or a want. After saving, take care of your needs first and then you can start checking off those wants. You probably won’t purchase all your wants, but the feeling you get from financial security will get you through the month just fine!
Reasons to Change: Get Motivated!
If you don’t have a reason to save, it’s difficult to commit. I offer four reasons to change below. Come up with your own to really get motivated. For many, that extra push is all that’s needed!
- Improving Money Habits Can Improve Relationships
Studies show that money is the number one cause of stress in relationships. Get a grip on your finances and take that stress away.
- Improving Money Habits Means Less Stress
Stressed out about creditors calling? Asking yourself who you should pay first? These are a giant burden and don’t go away without improving the situation first.
- Improving Money Habits Increase Workplace Productivity
Money worries can follow you everywhere, even at work. Debt collectors may call you at work, and there’s the possibility of garnishments taken from your paycheck.
- Improving Money Habits Means More Fun
Simply put, it’s hard to have fun when money is always in the back of your mind. Freeing yourself from a limited spending cycle, means having more fun!
At this point, you’re probably pretty excited about the thought of improving your money habits. Good! It’s the catalyst you need to make real changes that will improve your personal finances and quality of life.