My three saving hacks
Within a time span of three minutes, I forget my goals. No matter if it is sports, diet or even shopping limits, I very quickly get distracted. This is why I love systems that keep me on track towards a goal. I will show you my three favorite saving hacks to give you an idea of automated systems and rules to stay on track.
1. Automated saving
So that I don’t have to check my savings account every day and to ensure that I am within my budget, I set up an automated transfer from my checkings accounts to my savings account. At the beginning of every month I transfer around 20% of my net income to my savings account. This helps me not to take into consideration my savings when planning my budget. I only use my checkings account to pay for bills. For example if I need to buy a new couch, I check my checking account to determine whether I am able to buy it this month or potentially next month. I NEVER use my savings account for this purpose. The capital that is in my savings account is to reach big goals such as retirement or buying real estate. As a result, medium sized purchases and expenses are paid from my checkings account. For me, accessing the savings account is really difficult. It feels like I already made the effort to save the money, hence I cannot use it.
2. Salary increases and bonuses
With every salary increase (in my case, more or less every two years), I increased my savings amount. Instead of buying new items and having a more expensive lifestyle, I used a monthly increase of e.g. EUR 500 in two ways: EUR 250 towards increasing my monthly savings, and EUR 250 to invest in a lifestyle-related item, such as tennis lessons or a gym membership. This way I was able to benefit from the salary increase but also augment my savings amount.
I do the same with bonuses. I usually indulge - e.g. go to a particularly nice restaurant. The remainder is transferred into my savings account. This way, I prevent myself from buying expensive items such as the overly expensive purse I always secretly wanted.
3. Fixed amounts
My first two tips were about more effectively using your income. This last tip is about how not to overspend. As a student I used fixed amounts for certain items e.g. shoes, bags or pants. For example I defined a budget of not spending more than EUR 100 per bag. This way, even if I saw a bag which costs more, I did not feel compelled to buy it - it was not within the budget I had set! I usually use online shopping: I already filter by price, hence I do not even see the more expensive bags. I also implement this approach with respect to flights, hotels etc. For me breaking down the price to an item or to weekly spendings helps me. This way, I don’t even have to ask myself whether I can afford it or not. Working with yearly or even monthly spending blocks is not granular enough. Working with fixed amounts is advantageous: I have a clear rule I follow. I feel less tempted to spend more than I actually want.
Written by Clara Creitz
Finelles Founder. Coach and Consultant (UBS, Towers Watson).