Forming a habit takes time, repetition and active presence of mind to achieve.
No matter what habit you are trying to build, the only way to do it is through perseverance and consistency. Before you can start, however, you might need to take a few initial steps to give yourself the best chance of success. This is certainly the case if you are looking to build the habit of saving.
Why Should I Save?
Saving regularly is an essential habit that lays the foundation for financial security and can help create the potential for future wealth. The benefits of saving extend beyond just having extra money on hand; it brings peace of mind, freedom to pursue life goals, and a cushion to handle unexpected expenses.
If you are looking to grow your savings by turning it into a habit rather than an afterthought, you will need to have a plan and then be disciplined with it. It is also important that you don’t get caught up on how much money you are able to start with. When you are training for a marathon, you don’t start by running the entire 26.2 miles. The same can be true with savings. £5 this month is still £5 more than you might have saved last month. Do the same again next month and that is how you start a habit.
Let’s look at some practical steps that can help you through the process:
Step 1: Set a Budget
Why is it that people hear the word “budget” and immediately turn off? There seems to be this misconception that only people who are struggling financially set themselves a budget, but this isn’t the case. No matter how much money you have or earn, a budget can help you better understand and manage your spending habits. Furthermore, to know what you can save, you have to know what you earn and what you spend. A clear budget helps identify income and expenses, with the balance being money you can spend and/or save.
You can download our budget planner below to get started.
Step 2: Automate Saving
Once you have a handle on your budget and an awareness of your spending habits, setting up automatic transfers to a savings account helps to ensure consistent contributions. This automatically reinforces a disciplined approach to saving, making it a natural part of your financial routine. It also reduces the temptation to spend money that you can be saving as it removes it from your monthly spending pot.
There is no need to overthink the amount as you can always change it. Starting off with a small amount that you increase when you’re ready can be the difference between getting starting and not taking action.
Step 3: Establish Clear Goals
Saving can seem such a nebulous concept, especially if there is nothing specific you are saving for. This is why having a goal in mind is helpful. Whether it’s for emergencies, retirement, or a big purchase, aiming for something motivates consistent saving. If it is a big sum you are looking to save you can always give yourself little benchmarks for celebration, say every £50 – £100 you put away, or just enjoy the pleasure of seeing your savings pot build!
Step 4: Avoid Impulse Spending
Struggling with impulse purchasing is not uncommon and is one of the main obstacles to a healthy savings account. We are flooded with imagery and messages near constantly which encourage consumerism habits. (For more on this see our article You Are the Product: Technology and Consumerism.)
One way to counter act this is by keeping your goals in mind. Anytime you fill an Amazon basket or grab an unneeded item off a shop shelf, take a second to think about what you’re saving up for. You might not always have the presence of mind to remember to pause before you purchase, but practice makes perfect. And with any habit building, there will be winning moments and there will be non-winning moments. All you have to do it keep going.
Step 5: Increase Savings Gradually
As you begin to manage your impulse spending and understand your finances through a budget plan and consistent review, you might find that you are able to increase the amount of money you save a month. It could also be that your income has grown and instead of changing your lifestyle to match that growth, you first increase your savings. Even if this is done is small increments, over time it adds up.
There is also the added bonus of feeling more in control of your finances and your habits around your finances. So much of our interaction with money is unconscious. Going through this learning process will have a direct impact on how your mind notices and navigates your financial decisions.
Step 6: Track Your Progress
To build on the step about establishing goals, you should track your progress. This is not only relevant to what you’ve been saving each month, but tracking your monthly spending will also demonstrate how your behaviour has shifted. Sometimes the encouragement we need is the proof that our decisions are making a difference. You’ve decided to start saving and with that comes the need to spend less. If you are able to evidence that this one simple decision to tuck away a bit of money each month has meant you are being more intentional in your spending overall, you will be more encouraged to keep working at it.
Begin with the End in Mind
The second habit in Stephen Covey’s book The Seven Habits of Highly Effective People is “Begin with the end in mind.” A short summary for what this step entails is to “define clear measures of success and a plan to achieve them.” That is what you should do when it comes to savings. Decide what amount you want to get to, make a plan to reach that amount and follow through on the plan. With accountability and celebrations of success along the way, you will be able to develop a mindset for saving.
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