On this site we talk about increasing our income through investment, but to invest, we must first put money aside! As we have seen in previous articles, some people manage to save more than $1000 each month with an ordinary salary, while others end up regularly in the red at the end of the month with the same level of Income. In this article, I will detail the methods and give you a plan in 8 steps explaining how to put money aside easily.
How to put money aside easily?
Let’s see quickly why in my opinion many people can’t manage to save in long terms.
Putting money aside is a bit like making a diet: it is an effort that lasts in time, which does not bring immediate satisfaction, which may seem forbidding, and for which it is necessary to make calculations.
Human brain always seeks immediate satisfaction and short-term pleasures, which is by nature poorly equipped. What prevents you from saving as much as you would like is your brain before everything else. Fortunately you can reprogram it by changing some of your deep beliefs, which will make the task of putting money aside easier.
For this reason, the first of the 8 steps of the plan that I will propose below will be to change your beliefs towards savings and what it will allow you to accomplish. Do not neglect this step because having the right beliefs will allow you to accomplish your goals and persevere where others may be discouraged.
I would also recommend that you have a specific goal. Not to save just to save but to know why you do it. Paying for your children’s future studies, earning your financial independence, buying the house of your dreams, this can be what you want as long as it’s your heart.
Once you have defined your goal, here is the plan to reach it!
How to put money aside in 8 steps
I. Putting more money aside change your beliefs
It is a central concept and yet very few people talk about it. Why few people manage to put money aside every month? Because they see it as boring, because they focus on things they have to give up everyday instead of focusing on long-term profits, and because they think it will take years before their efforts produce concrete results, and that discourages them. They see things at the wrong angle.
Here is the answer I get regularly when I talk about savings with my friends: “Put 100 dollars aside every month to be rich in 40 years when I’d be old or dead? What an interest! “. We have an extremely harmful belief in our ability to save (and false). On this blog you will find many articles coming to break this belief. Getting rich with your savings does not take 40 years if you do things wisely.
If I told you that your savings ability can allow you to reduce your active working time to 10 years instead of 40? If I told you that you can recover 30 years of life time just by making a little effort today. And I’m not even talking about depriving you of everything, but just spending your money smarter. To create new habits. To take control of your finances.
People who succeed in saving keep their long-term goal in mind, they are able to make sacrifices today because they have absolute certainty that it will bring them a better life tomorrow.
If you see every dollar as a small employee who can work for you, you will be less inclined to let them leave your bank account. If you realize that a material property will only give you a minor and ephemeral satisfaction, you will easily renounce it. If you realize that many needs have been created by the company and are extremely dispensable to your real well being, you will spend less naturally. Saving more, it starts above all in the head.
To start, break your old beliefs: it will not take 40 years to enrich you, it will not cost you a lot of effort, it will bring you with certainty the best tomorrows, it will allow you to recover time and freedom, it will make you feel more serene and safer, and it makes you more independent, freer at all levels of your life.
Now let’s move on to the next point which is more down to earth.
II. Make your calculations
Which divide those who get there and those who don’t get it in a lot of areas, it’s just 10 minutes in front of a sheet of paper or an Excel spreadsheet to make some additions. Most people hate calculations. Want to lose weight? Very simple. Calculate all your daily calories ingested and decrease them gradually. That simple. Tested and approved by myself. Except that no one or almost does it: too restrictive, no time, no envy, natural aversion to mathematics, in short there is always a good reason.
Once again change your beliefs: Doing your calculations allows you to have a plan, is not very time consuming and ensures you success in the long run. From my point of view, it seems to me to be a good plan. Let’s get back to the finances.
All those who have managed to put money aside in the long term keep accounts of their monthly expenses: rent, food, insurance, etc., etc. If you do not have the numbers, you will not know or share your money. Once the calculations are done, you will see some of your daily expenses accumulate in a way that you could not have imagined if you had not taken the time to do this exercise. The 20 dollars spent to eat out lunch at work are transformed into 400 dollars of monthly expenditure, the daily coffees at 2 dollars quickly turn into 100 dollars of monthly expenditure etc.
Once you have made your assessment, you will have a clearer view of your main spending positions. Once that is done, you can proceed to the next step.
III. Focus on expense that counts
Do you think making a nice gift to your girlfriend or mother once in a year will ruin your annual savings plan? Of course not. Because these are exceptional expenses. And what counts above all is the recurring expenses.
What prevents you from putting enough aside, is i.e. the rent too high that you pay every month, the phone plan too expensive to which you have subscribed, the restaurants every midday, the insurance of a car too expensive that you pay every month. This is where you have to cut first. If we take up the previous examples, reduce the restaurants at noon will instantly put $1200 per year in your pocket, reduce the amount of your monthly shopping increases your savings of the same order, negotiate only $50 on your rent will bring you $600 per year.
All great savers minimize their current expenses. How can this be done without being too difficult and not to be prevented from living? That is what we will see in the next point.
IV: If you want to put money aside easily, think win-win
One of the keys to putting money aside easily and without it costing you psychologically is to think win-win.
A simple example: every day you take a homemade food to the office instead of going to the restaurant. You have a better health, because you better control your calories and the amount of food, you have better controls on the quality of what you eat and it costs you much less each month: win-win.
Another example: I do regular bodybuilding and all my friends go to the gym. In my city, the price of the gym costs between 500 and 1000 dollars per year. Instead of registering, I once bought a professional-grade bodybuilding device for $500 that I installed in my garage. No need to go to the gym room, no need to queue to use the machines, and I turn a recurring expense into a single expense: Win-win.
Another example: Swap your car for a bike (a suggestion very dependent on the area where you live). You do sports every day, you improve your health (if you are in an area that is not too polluted) and you save money every month.
Obviously it is not always possible to find a win/win solution for absolutely everything, but it will nevertheless allow you to spend less in many areas without sacrificing your general well being.
V. Negotiate all expenses that matter
Another point on which I think it is important to insist: most people are afraid to negotiate. Because they are afraid of being seen badly, because they think they will look stingy, or because they are simply afraid to wipe a refusal.
Do not hesitate to negotiate all the important expenses. However, do not become this extremely irritating type that negotiates 50 cents on an old fork at the local attic or on the right corner. But negotiate absolutely all the expenses that matter. You’ll be surprised to see everything you can save by just asking. Most people don’t dare to ask.
You’re a tenant? Negotiate your rent with your landlord. Buying a car? Ask for a discount. Do you have a mortgage loan? Ask the banker for a lower interest rate. Buying your main residence? A 5 minute negotiation can save you $10,000 or $20,000.
Negotiating does not cost you anything and can bring you big. If that does not work, you will be entitled to a polite refusal and if the negotiation succeeds, you save money. You have absolutely nothing to lose!
VI. To spend less: automated!
There are times when you’ll be tired, and when you pass a shop, you will buy something stupid that you don’t need by impulse ( You can buy something that makes you really happy, but not something you will regret the next day!). There are times when you do your shopping with a wolf hunger, you will buy much more than necessary or you will take much more expensive products than usual (supermarkets count on it). There are times when you will not follow your investment plan for… well a whole lot of reasons.
And the solution to avoid this is to automate your expenses as much as possible. Set up fixed and automatic payments of current expenses (rents, insurances, etc…). Do your shopping with a preset list (delivered to you automatically via the Internet or on site). Put in place an automatic monthly transfer of X dollars to your investment account if you follow an investment plan. Well, you understood the principle.
VII. Cut all that is superfluous
This may seem to be common sense, but unsubscribe from everything that is not or no more directly useful to you. Too many people are letting subscriptions continue for years by habit, which are no longer used for anything.
You subscribe to paying TV channels and you do not watch TV almost any more? Cut. You have a phone plan for 40 dollars/month while a low cost operator now offers the same for 25 dollar less? Cut. You subscribed to a sports club where you went twice a year? Cut.
Try to be objective. Don’t stay subscribed simply by habit or because you don’t have the heart to stop your subscription. If there is no objective reason behind the expense and if it does not bring you any particular pleasure or does not really improve your quality of life on a daily basis, you can cut it without regrets.
VIII. Always keep your goal in mind: Why do you want to put money aside?
Whether it’s to ensure a comfortable retirement, to pay for your children’s education, or simply to become financially independent and leave a job that doesn’t suit you, always keep your final goal in mind.
If you save just to save, there is a good chance that you are not doing well to stick to your long-term plan. It is easier to be disciplined when you have a plan and a motivating goal in mind. High-level athletes endure training because they want to achieve a certain level of performance. Those who pass their diet have a certain level of weight in mind when they start. Winning entrepreneurs know where they want to be before they start their business.
Keeping your goal in mind will motivate you and remind you why you want to put aside in moments of doubt!
Once you have launched the machine it will not even cost you psychologically, because it will become a habit that will be part of you. You will then be free to invest this money wisely to accelerate your enrichment speed.