This Is Why Most People Fail When Saving Money
If you don’t save much, investing well is irrelevant
With greater or lesser success, everyone has been saved at some point in their lives. And we all know the effort involved and the perseverance required to keep finances and spending under control.
Saving is easier in theory than in practice, and it’s largely because of what they don’t say about saving.
What most people who write about personal finance don’t say about saving has a lot to do with mistakes when it comes to saving.
And it is that when it comes to money and personal finance, the setbacks and what you fail to do are as important or more important than the successes. This is what you need to know to save money every month that no one else will tell you.
Saving Money For The End Of The Month Does Not Work
87% of people would like to save more every year, but they can’t, and the reason is very simple: they are making the mistake of saving more broadly “save for last, save at the end of the month”.
It is very typical to spend your salary or income every month and one or two days before the 30th, look at the balance left in the account and save that amount. The problem is that most of the time there is little to very little left because, whether we like it or not, we end up spending what we have.
The human being is programmed to look for immediate reward and in today’s society, this happens through spending and consumption. There are many temptations not to fall into one of the traps that arise every month, and many options to entrust everything to your willpower.
The solution?
It’s easier than you think, and it has a name: pre-save.
Pre-saving consists of asking your bank to set aside a portion of your salary every first day of the month and automatically put it into a savings account. It’s about preventing the money from reaching our pocket, because once there… we know it will be very difficult not to spend it!
Hunting for Cheap Stuff Doesn’t Mean You’re Saving More
Finding an offer makes us feel good, believe that we are smarter than average, and also think that we are managing our money well and that we are good savers. Nothing is further from reality.
In any case, we can be good spenders, but not savers. At the end of the day, what we are doing is incurring an expense. That’s why this is one of the most repeated mistakes when it comes to saving, and one thing they don’t tell you because what the brands want is for you to consume.
The trap of bargains, regardless of whether it’s a discount coupon or a 3×2, is that they push us to consume, to keep spending, but they don’t help us manage our money well. They have nothing to do with financial management.
Imagine you open your email and see a 40% discount coupon from your favorite brand or the trendy restaurant in your city. Normally you wouldn’t even think of going, but with this discount, dinner will be just a little more expensive than what you would pay at the places you frequent. Where are the savings in this case?
In general terms, most offers and bargains trick your brain into setting off the alarm that you are missing a great opportunity to save, and the worst part is that our heads tend to react as they expect.
This doesn’t mean that you can’t take advantage of offers and bargains, but it does mean that they won’t help you save on their own.
To save money and really take advantage of coupons, discounts, and various bargains, you must first have a clear financial budget that marks out the limits of your spending. Otherwise, it will be easy for you to spend more than you should.
Saving Is The First Step To Building Your Financial Freedom
Saving is the foundation of financial management. Without savings, there is no financial freedom. Moreover, there is not even financial peace of mind.
Many financial freedom gurus focus on generating passive income, investing, and increasing your paycheck. And along the way, they forget the basics: saving.
Saving comes before investing because:
You need to have capital saved in order to invest.
It is what allows you to build your emergency cushion.
When you save a lot, you also tend to decrease your monthly expenses. Because you need less to live on, you build your financial freedom faster.
Without savings, there is no paradise. Thinking otherwise is one of the mistakes when it comes to saving and managing your money.
If You Don’t Save Much, Investing Well Is Irrelevant
One of the things they don’t say about saving is that it has a huge impact on other areas, such as investments. In fact, if you don’t save a high percentage of your savings, investing well may be irrelevant.
If you invest $10 a month, no matter how much you double your investment, you will only have $20. However, if you save $250 per month and your return is 10%, you will have $25.
Saving Goes Beyond Paying For Your Vacation
Saving traditionally is very similar to dieting. Most people start out eager and with a goal in mind, but lose momentum and end up giving up, often without reaching their goal.
A mistake when it comes to saving is to focus on the short term to keep the pulse of saving. Few people start saving to pay off their house without a mortgage — long-term savings — or to have more financial freedom.
On the contrary, it is easy for them to save for going on vacation, changing cell phones, and other goals they can achieve in a short period, no longer than three or four months. “For the rest, I’ll take out a loan” is usually a very common phrase and a tremendous mistake.
We act like this because the reward is usually close at hand and so it is easy to keep the saving pulse and the tension that many people need to continue with this effort.
But as with diets, in saving what also counts are habits, because it is a long-distance race. If good financial practices are not maintained, it is easy to go back to overspending. This is exactly why pre-saving works so well.
You Have To Save More Than They Say
The final mistake in saving money is thinking that you only have to start. If you want to achieve financial freedom, you will have to save more than most gurus tell you.
5% of your monthly income is good as a starting point. It is infinitely better than not saving at all. Staying there is a mistake with money you should not be paying.
To reach your goals you must go further. How much to save per month? The answer depends on your situation or lifestyle.
This article is for informational purposes only. It should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any major financial decisions.