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Save First

I have told you how credit cards and contactless make you spend more compared to cash. How you can inhibit spending. How some people spend too much. But most people know they spend (too) much. They can see their negative bank balance. They know money is not easy come but definitely easy go. What really is on everyone’s mind is making sure money doesn’t go, but stays. It’s the ultimate question: how do I save?!

Saving money is difficult. It just is. There is no quick fix solution or scheme for it. To increase savings you either spend less or earn more. And they might both be equally difficult. In this article I am going to focus on the former: spending less. But maybe spending less is not the best way to put it. Let’s call it spending differently.

I have already explained mental accounting: the division of income into categories. I know you do this. You just have to admit that you do this. As soon as your monthly income appears on your bank balance, it disappears due to the many jars it needs to be syphoned into. Rent, groceries, Netflix, gym membership(?), you name it. All of a sudden less than half is left. Now what?

You continue your life. You go to work, you go out. You shop for groceries, maybe buy some clothes, finally cancel that gym membership you’re not actually using. It’s the day before you receive your income. You started out living lush: Having coffee out every morning, lunches and dinners with friends. You did buy yourself those shoes you’d been eyeing for a while. But this high-life was not meant to be. You have barely made it to the end of the month with the money you received 29 days ago. The past days you’ve been living on water and noodles. I barely dare to ask, but you haven’t saved anything at all, have you?

This is life as it stands. People think they’ll save what they have left at the end of the month. But is there ever really anything left?

First of all, you didn’t do too bad. The first thing you did, if you are as I have described so far, was paying of your obligations. You paid down rent and set aside money for groceries, and possibly several insurances and other mandatory “jars.” You won’t be kicked out or starve. Good job.

But after that we went downhill. What was left was spend without much thought. And you and I both know that the money you spend on shoes, cannot be put into a savings account. Neither can the money you spent on your third lunch out this week.

As I said before, you need to spend “differently.” Add a mandatory jar to the system: Rent, groceries, insurance and savings. No debate. As soon as your income is deposited it needs to be syphoned into savings as well. You can decide yourself how much you want to save. I would recommend using a savings calculator app if there is a specific goal you are saving for. The app can tell you how much you need to save each month, keep track of your actual progress and “reward” you for continuing to meet your goal(s). These apps tend to be based on a game-like design, so rewards tend to be stickers, nice messages or access to higher level games.

Now ultimately, you will spend less, assuming your income hasn’t changed. You have syphoned more money away from “jar-free” expenditure and locked it away into a jar. As a result, you have less money to spend left for the rest of the month. This very likely means that you are going to have to give up something. But this might not be as difficult as it seems. A lot of people look at their bank balance to determine whether they can go out to dinner a third time this week. Given that your bank balance is now lower, it is very likely this third dinner out won’t happen.

Other things to save money on are take-away coffee, you can easily make that yourself and you know that; subscriptions and memberships you barely/don’t use at all. Try cancelling something for a month or two. See if you actually miss it. If you do, take it back and cut out something else. If you don’t miss it, good on you. You just saved money.

Now you have got savings. Congrats! Make sure they stay there. Preferably on a different bank account, or underneath your mattress if you’re old school. Whatever “hiding place” you choose, leave it alone. You are not supposed to touch these savings. They are their own jar. You wouldn’t take money away from your rent jar would you?!

Banks actually do offer something to help you keep your savings in your savings account. They are accounts that will pay you higher interest fees when you don’t touch the account. They tend to be called “bonus savers” or something rather similar. The name should be intuitive enough. Now don’t think this bonus is big. It is a low number in itself, it’ll be a miracle if with the bonus included the interest percentage on your savings account will exceed 2%. But it is a start. And a motivator at that.

My ultimate advice is that to save, saving needs to be a priority and not an afterthought. There won’t be any money left at the end of the month. We look at what we currently have, and use this as a starting point for our decisions. If we see that we have quite a bit left, we live lush. We spend more. Because spending €400 of a €4000 bank balance is only 10%. We only start living a bit more cautiously when our bank balance is becoming too low for comfort, and 10% of our bank balance is suddenly not €400, but €20.

So do yourself a favour: lower your bank balance yourself. Put money away. Out of sight out of mind and do leave it alone. It might be a slight adjustment now, but you will be so grateful for it later.

Save first!


Behavioural Science

Personal Finance



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