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Saving – 3 Simple Strategies

    “Save each month” is one of the most common New Year’s resolutions. Therefore, we are giving the topic the necessary attention. Let’s look at some simple strategies that will help you save money on a regular basis, while also supporting you in keeping your budget in control. And we add a day-by-day guide to help you put these strategies into practice.

    Strategy #1: Save your change

    This is a super simple strategy. All you need to do is put a jar somewhere in a visible place at home. Then every day, just put any small change that will otherwise get lost in your pockets, on your nightstand, or between the cushions of your couch. Do you know that every year more than $60 million in coins get lost in the US alone? And some research shows that on average, people possess ~$28 in small change. Imagine if you could pile up those little coins and eventually end up with some easy-to-do saving!

    Sounds like a super elementary idea, doesn’t it? But let’s do a small calculation. Let’s imagine that you empty your pockets at the end of each day, and you find out that you have on average 1,50 EUR. That’s not much, right? You can’t buy something big with it, and that’s why we usually tend to be less careful with our small change than with banknotes or cards. But then, if you put those 1,50 EUR in the jar, at the end of the first month you’ll have 45 EUR, and at the end of the year – 547,50 EUR. That can actually buy you 2-3 good pairs of shoes, or contribute to your holiday plans. So with this simple technique (that many of us used as kids, by the way, but forgot when we grew up), we can literally “save” some of the money that will otherwise be wasted away.

    Strategy #2: Set a saving goal

    Goals are a good way to focus on something that is important for us. They drive execution, and provide motivation to build supporting habits in any area of life and work. Hence, if we are committed to improving our saving habits, setting a goal might be a good way to go.

    Everyone who has ever set themselves a goal, knows that it’s important to define realistic targets. A goal that is too far-fetched will be counter productive. It’s good to be ambitious and strive for the best you can achieve, but sometimes stretching yourself too much might ruin your motivation to pursue your goal at all. So, it might be a good idea to start smaller and adjust to a more ambitious goal as you progress.

    How do you define your starting point? 

    Well, a common rule of thumb that you can try is the 80/20 rule – limit your spending to 80% of your income and save the rest 20%. If you can achieve that, you are on a good track with savings.

    First things first though. How do you know if you can actually achieve 20% in savings? Well, we come to another important concept in personal finance – budgeting and cost control. If you are already accustomed to any kind of budgeting (setting a spending limit or tracking costs on a regular basis), then you already have an overview of what you get and what you spend, perhaps including some insights on the spending categories. If this is the case, you can start by: 1) reviewing your expenses from the last 3 months; 2) checking what you can try to reduce (hint: unused subscriptions are a good starting point); 3) set a goal to save the money that you expect to have left after your expenses.

    If you are not budgeting, you might want to give it a try

    It sounds boring and tedious to track your expenses on a daily basis, but you can always apply some hacks (take a look at our blog post for some ideas). Keep in mind that putting some effort into manual cost tracking will help you develop deeper awareness of what you spend on, and build discipline around your financial habits. So it’s not just a personal finance thing but also a personality building exercise. Once you get an overview of what you are spending, you can proceed with setting a saving target that you consider realistic as a start.

    And of course, if budgeting is a no-go for you, you can always start with an amount that you think is doable to spend for the month, and set it aside the moment you receive your paycheck. Then try to keep within the rest of the money for the month and, if needed, adjust next month.  Not a very data driven approach, but eventually might work for you if nothing else does 🙂

    So, to wrap it up – with this strategy, you define a realistic goal to keep some of your income unspent in your bank account at the end of the month (thus saving), and you monitor how you are doing on a regular basis (recommended: at least once per week to adjust your spending if needed).

    If you are struggling to start, check out the free step-by-step saving plan that we created. It will guide you through the first steps you can take, and will help you build stable financial habits.

    When your money is flying away...

    Strategy #3: Pay yourself first and use buckets for different spendings

    This is a well-known strategy, but it still works like a charm. So, how does it work? Whenever you get your paycheck, transfer a set percentage to your savings account before you get to spend it. This will help you create an emergency fund, or even save enough to do something you’ve been dreaming about.

    Again, as with setting a goal, it’s important to have a basic idea of how much you need on a monthly basis to cover your costs of living. This will help you set a realistic saving amount that you can safely transfer, so that you don’t have to touch your savings to cover up some costs.

    Setting aside an amount upfront works really well, as it helps you be more conscious of your spending and avoid unnecessary costs. It is also a great way to start budgeting with budget limits – once you remove the amount you want to spend, you can divide the remaining money in the spending categories that you have, and then keep track of your spending per category.

    You can actually combine all three strategies

    Оr choose to start small with one of them and enhance as you go. Whichever strategy you choose, make sure to always consider saving as a regular part of your budget. Once you make saving a habit, it will become effortless and it will be easier to keep your budget under control, while also having the peace of mind that you’re putting something aside for the future.

    We have prepared a short day-by-day worklist to guide you through your first steps in establishing your saving habits. You can use ViziWealth as a supporting tool, and here is how it works. Each step takes on average 10-15 min. You can choose to set aside 1h on one day of the week to go through all weekly steps or use less time on a daily basis.

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