Posted by Natasha Fee on July 23, 2024
More than 1 in 5 Americans have no emergency savings. For those that have managed to save, over half are not comfortable with their level of savings and nearly two-third would be worried about paying just one month’s worth of bills if they were to be laid off tomorrow. Even more astonishing is that 1 in 3 Americans have more credit card debt than savings (Bankrate, 2024).
These numbers can partially be explained by recent increases in inflation, minimum wage that has not kept up with inflation, as well as childcare expenses that can eat away at a family’s budget. However, for many Americans who earn a livable wage, their financial struggles may be because they haven’t yet developed good money habits or discarded negative ones. Creating subconscious positive financial habits can be the difference between accumulating debt versus staying debt-free, and it can be the difference between going under when facing an unexpected expense versus staying afloat. The good news is that creating positive money habits can be easier than you might think.
As James Clear writes in his book Atomic Habits, “Success is not a goal to reach or a finish line to cross. It is a system to improve, an endless process to refine.” Clear describes several ways to improve the likelihood of having a habit “stick” and each one can easily be applied help you save more, get out of debt, and reach your financial goals:
Make it difficult. One tip often shared to those trying to cut back on spending is to freeze their credit card in a block of ice. It sounds silly (and is a bit comical), but smashing a block of ice in your living room just so you can buy a clothing item or a new gadget would probably make you think twice before whipping out the hammer and creating a big, cold mess. And this is the key. Make it harder to spend your money, and you’ll end up spending less. Leave your cards at home and just bring $5 cash with you when you go for a walk. Delete your saved passwords from your online shopping sites. Better yet, change the passwords first and make them impossible to guess. Going to the trouble of clicking “forgot password” next time you want to shop might just be the hindrance you need to stop the impulsive purchase.
Create consequence contracts. You may need to employ a friend or family member for this one. The goal here is to provide yourself with an unwanted consequence if you overspend. For example, determine you can spend $20 at happy hour. If you spend even one cent more, you have to weed the plants along the front walkway first thing the next morning. You may not be strong-willed enough to hold yourself to this, but your partner would probably love to hold you accountable. After all, it’s a win-win for them. Either less money is spent or the walkway is weeded. With a contract like that in place, you’re much more likely to stick to your goals.
Make it automatic. I’m sure by now you’ve heard that a great strategy for saving money is to not have access to it in the first place. If you’re on a salary and/or receive your paycheck as a direct deposit, you can elect to have a certain amount automatically rolled into a savings or retirement account which means you won’t ever get your hands on it to spend in the first place. While most of us have heard this advice, many people have not yet put it into action. Perhaps they think it’s too difficult of a process (it’s not – it’s a simple, short form!), or perhaps they think they can save on their own. But that’s harder than it sounds when unexpected expenses pop up. Making it automatic can go beyond just rolling a portion of your paycheck into your savings account. Make it automatic that every time you get a bonus, half goes toward retirement. Make it automatic that every time you go out for drinks, eat beforehand so you’re not tempted to impulsively splurge on food. Look up peak energy use time in your area (and thus the most expensive time), and make it automatic to do laundry before or after peak times. Pretty soon you’ll find that there are so many habits that you can automate that will eventually lead to a better financial position for you and your family.
Disclaimer: This post is for informational purposes only and is not to be considered investment, tax, or financial advice. Cornerstone does not and cannot guarantee the accuracy or applicability of any information presented in this post regarding your individual circumstances. Please review your personal situation with your tax and/or financial advisor.
