Morgan Garon; Personal Finance

NOTIFICATION:  “Savings Balance Dropped Below $200.” 

Your heart sinks, you get angry, maybe you want to cry.  No matter how hard you try, you can’t seem to make progress in saving money.  If you live in the U.S., you’re in good company.  Forty percent of U.S. households wouldn’t be able to cover a $400 emergency without using a credit card. And this was before the pandemic.

America, it’s time for a savings reboot.

Why is saving money so hard and how can we get better at it?

First of all, money is emotional.  Your family and circumstances shape your money story and overall attitude.   Women tend to carry extra baggage around earning, spending and saving money.  But once you unload some unhelpful common money beliefs, you’ll begin to see your savings grow more effortlessly.

Here are FIVE mental misconceptions that get in the way of savings success what you can do to overcome them. 

#1 Look But Don’t Touch!

Many of you grew up thinking that savings is untouchable.  Which makes sense; that’s why it’s called savings.  It feels satisfying when you can put an extra $200 in savings on a good month.  You get on a roll until your car breaks down or your dog needs vaccines.  This leads to a sense of failure.  After weeks, months, years of frustration it's easy to get to the point where you just say f*ck it!

Solution:  Be real with yourself.  Realize that life happens.  There are going to be curve balls that come your way. You can be ready for them when you learn the concept of having different savings for different things. It's important to know that a portion of your savings is money that is meant to be spent. 

#2 Savings is One Big Blob of Money

Thinking about savings as a catch-all bucket doesn’t work.  It puts too much pressure on the one pile of money.

Solution:  Instead, give your savings different jobs that reflect the reality of your life.  Savings will be more robust if you organize it according to short-term and long-term savings.  If you look at your financial needs over the course of a year instead of month to month or week to week, you’ll be better prepared for the unexpected. So, in addition to your checking, long-term savings and investments, I recommend setting aside an account specifically for non-monthly, “expected expenses” such as quarterly insurance premiums, summer school tuition or annual car registration. Setting up your accounts this way reflects real life. The better you get at this, the less you’ll hear the background money noise.

#3 Credit Cards Make a Good Crutch

 Many people would typically reach for a credit card to cover these unexpected expenses.  It’s easy, fast and full of the allure of cash-back rewards and point systems.  You reason that using the Amex is protecting your savings while providing some extra benefits on the side.  This is exactly what these companies want you to think.  But resorting to credit cards to pay for non-monthly expenses only adds to your savings shame-spiral.   Not only do you still have to pay for these expenses, but you may need to pay interest and penalties.

Solution:  Your rebooted savings structure is what really puts you ahead.  It allows you to get free from credit cards.  By having saved for these non-monthly expenses you are ready when they arise.  This dramatically shifts the power dynamic, putting you in charge. 

#4 100 Percent = Perfection

Perfectionism often gets in the way of progress.  Once you realize the power of a rebooted savings strategy you might expect too much too soon.  Keep the big picture in mind.  You’re shifting the way you spend and save, replacing old habits with new ones.  Saving for three months of living expenses is daunting.  It won’t happen overnight.  Pace yourself. 

Solution: Instead, start by saving $100 or $1,000.  It may not seem like much in the moment, but bit-by-bit it adds up. After a few successful deposits you'll start to gain some momentum. As you see your savings balance grow, so will your motivation to add to it. No matter where you are, or how much you can contribute, the key is to just get started!

#5 More is Always More

Finally, the temptation for that Insta-ready lifestyle can needlessly hamper your efforts to save.  Influencers and ads know exactly what you’ll want to click on for an instant fix of happiness.  Remember, their goal is to make money, not to improve your life. Stay tuned in to the actual desires that lie beneath the attraction.

Solution:  When you look at what you really want underneath the sheen of social media bait, you’ll often find you can get it with a lot less money.  For example, if your actual need is for rest, relaxation and connection, you could plan a day trip instead of a big vacation.   

If you don’t want to be triggered by your bank notifications in the future, start by ditching these five misconceptions about savings.  Updated thoughts and habits will profoundly shift the way you react to life’s financial ups and downs, putting you in charge.