The Psychology of Saving

by Marie on September 5, 2012 · 9 comments

Saving is hard, especially when you don’t have much discretionary income. Saving over years and years is harder still. People do get saver’s fatigue. How can you psych yourself up to continue to save? What steps can you take to make it easier to save than not?

Here are a few tips that I have used over the many, many years that we have been saving. In fact we have saved so many years that it is now an ingrained habit that we consciously have to overcome in order to spend!

Make saving a need instead of a want.

Sit down and list all of the reasons you need to save. Start trying to condition yourself to view saving as a way of life and not a short term ‘diet’. Think about how a relatively small and short period of time of saving will allow you the life you want in the future.

Tie the need to save to your self worth.

Be proud of your ability to be financially stable and not reliant on the government, charity, family or friends to make your way. Knowing that saving is one of the steps to being financially self-reliant makes it psychologically easier to save.  If being a financially responsible adult is part of what you are, part of how you feel good about yourself, then you will save.

Create a sense of scarcity.

Trick your mind into having enough left over to save. Don’t make the mistake of spending allocated money.

Subtract bills out of accounts before paying to see what you will have left, don’t forget to include allocations to meet those periodic bills (like insurance or Christmas gifting).

Subtract a little extra out for savings before you buy that extra bag of candy at the grocery.

When we were dirt poor and living paycheck to paycheck back in the late 1970′s, I used to pencil the expected bills into the check register and subtract out those amounts up front, when the paycheck was deposited. That way, we didn’t feel that we had all that money free to use. This helped me psychologically realize that, no, we couldn’t afford that steak from the grocery store – get the hamburger and make it stretch instead.

In other words, make a budget!

Take yourself out of the equation.

Automate savings.

Once you get to the point where your have enough to meet current bills, consider automating a very small deposit to your account. Even a dollar a week over time is better than nothing. This is the tried and true, pay yourself first mentality.

Pay yourself. First.

This works great even after you get basic savings going! I used payroll deduct into a mutual fund and was able to build that mutual fund account to over $100K over a few years (of course the share price rose too – helping me out).

Make that savings account off limits!

Once your money is in a high interest savings account, train yourself to ignore it for any other purpose. It is a source of last resort for spending!

What if the refrigerator breaks down you ask? Shouldn’t I use my savings to get a nice new one? Nope. Look for other alternatives. Alternatives would be to fix the old one (at least temporarily). Set up a special fund for a new refrigerator or find a free or inexpensive used one.

Reward yourself for success without expanding your standard of living.

You’ve done well at work and received a raise.

You should celebrate your success, but celebrate in a way that doesn’t increase week over week spending – don’t expand your lifestyle.

It is psychologically important to celebrate success. So instead of adding a recurring  bill to your lifestyle, celebrate by taking the family on a picnic on a nice summer day and toast yourself with a bottle of local wine.

Check progress frequently.

It’s been shown that frequent feedback is a key to weight loss (people who weigh in every day tend to lose more weight). The same is true of saving.  If you check your progress, you stay on track.

Track your savings account at least monthly so you can get satisfaction from watching it grow. Figure out your net worth at least yearly as well. Success breeds success. Knowing that your program is working will give you incentive to continue (and maybe even add to) your savings program.

I still do this, at least once a month.

Imagine future pleasure.

Project what your savings can become in the future. For instance, saving your $1 a week for a year will get you $52 ahead, in 10 years you would have $520 you don’t have now. Of course, you are probably saving more than $1 a week (or will be), so your totals will be much more.

Think about all the different things that money can get you. As long as you have the money you can spend it many ways in your head!  Once it is spent, it is gone.

Reward your small savings goals.

If you manage to save that $1 a week for 4 weeks in a row, grab your spouse, turn on the music and have a dance!

Make the saving lifestyle exciting.

Saving (lets face it) is boring. Life needs change, excitement and activity.

Make saving a game or a competition to keep it interesting.  Challenge your spouse or your friend to a meet a savings goal by a certain date, for instance.

I used to get really tired of our little house, but didn’t want to use savings to change it. Instead of re-decorating, I would re-arrange the furniture.

I used to long for fun activities, but didn’t want to spend savings on them. Instead of going to the movies and spending a bunch, I’d grab the kids and go to the public beach for the day with a friend.

Be OK with taking care of your own situation first.

Many times life will present opportunities to you to help others with their problems. When those others are family or close friends it is tempting to share everything you have to help their situation. In fact, in some families and cultures there are strong expectations that you will do so.

In my opinion (and practice), it is often better to care for yourself and your immediate family before attempting to solve other people’s problems.

Here is an example from my life. In the late 1980′s I had just started a new job and was trying to learn the ropes and prove myself as a valued employee. My grandfather found that he had terminal colon cancer (at 95 years of age). He was located several hours drive from my home. I felt strong familial expectations to take time off from work to stay with him in the hospital and then help after his death with settling the estate. However, because I was new to the job, I didn’t feel it would be prudent to take a lot of time off . Consequently, I tried to balance visits to him on the weekends with meeting new employee expectations at work instead of taking a leave of absence at the new job.

I know this seems hard hearted and anti-family to some, but for us, taking care of the job so it could supply money to send our kids to college was more of a priority than being one more person at a death bed. Do I wish I could have done both? Heck yes, but I didn’t feel I could, so I chose to take care of our own situation first.

You may be doing the same thing by putting aside money for retirement BEFORE saving for your kids college. You may be doing the same thing by helping your grandparent find social aide rather than trying to pay for their Alzheimer’s nursing home yourself.

Who will take care of you and yours if you don’t put yourself first?

How do you convince yourself to save?  What tips and tricks can you share?

{ 8 comments… read them below or add one }

1 TB at BlueCollarWorkman September 5, 2012 at 9:55 am

Mkaing the savings accoutn off limits has been key for my wife and me. We “pay” our savings account like we do the rest of our bills and we almost pretend that it’s not even our money. We see the savings accoutn grow, but keep a sort of detachment from it — it’s not for us. And that off-limit mentality has worked wonders!

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2 Marie at FamilyMoneyValues September 7, 2012 at 8:28 pm

That is great! If you aren’t already (and I bet you do), add in tracking your networth now that your savings are on track.

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3 krantcents September 5, 2012 at 7:06 pm

I make savings a priority by setting up a payroll deduction and live on what’s left.

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4 Marie at FamilyMoneyValues September 7, 2012 at 8:30 pm

It does work for sure. I used the same philosophy when we switched from saving to investing… payroll transfer to savings, then an automated transfer to buy stocks or bonds from a financial institution.

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5 @canmort September 6, 2012 at 1:22 am

I do keep my savings off-limit but I also do not look at it a all. My policy is no checking at all (may be once every month) This way I never feel the need to spend any part of it.

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6 Marie at FamilyMoneyValues September 11, 2012 at 3:26 pm

If it helps you keep the savings, that is the way to go. For me, I like to know what I have – even though I won’t be spending it.

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7 Newlyweds on a Budget September 10, 2012 at 12:05 pm

I like that my company lets me direct deposit money into both my checking and savings account, because then it’s like I don’t see that extra money and it goes straight into savings. Plus if I know we’re going to be short on cash (for example, when my husband was only working part time) I can go in and edit it so it’s super simple to change back and forth.

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8 Marie at FamilyMoneyValues September 11, 2012 at 3:27 pm

Sounds like your company has a good system. Just make sure you keep tabs on what is going where!!

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