Do you want to save more, but fear having “too much month at the end of your money”?
Mike and I have had multiple six-figure financial goals that we’ve accomplished in short periods (less than 3 years) each time, from paying off student loans to saving up an emergency fund and accelerating principal payments on our mortgage.
We’ve used a simple tactic to accomplish this each time: Incrementally increasing our savings rate until we reach our goal or comfortable limit.
If you don’t intentionally direct your money, you’d be surprised at how much money gets frivolously wasted on impulse purchases! And how much you won’t miss it if it weren’t in your bank account to insta-spend in the first place.
Here’s an example of what this can look like.
Scenario: Let’s say you make $6,000 monthly, paid twice per month, and currently save 5% or $300. You want to be saving $1,000 per month, but the thought of losing that much cash flow scares you. Instead of immediately jumping to saving $1,000 per month, you could incrementally increase your savings rate:
Month 1: Increase by $100 per paycheck up to $500 per month
Month 1 check-in: Didn’t really notice this change. Cool, let me increase this again next month.
Month 2: Increase by $125 per bi-monthly paycheck, up to $750 per month
Month 2 check-in: Not uncomfortable, but noticeable. I had to be more intentional with eating out. Let me get into more of a rhythm.
Month 3: No increase this month.
Month 3 check-in: I figured out that I need to limit takeout to once per week and bring snacks from home when I go out with the kids.
Month 4: Increase by $125 per paycheck, up to $1,000 per month!
Month 4 check-in: Prepared for this one by cutting some subscriptions I wasn’t using anyway.
Month 5 check-in: “Honestly, easier than I made it out to be in my head. Why didn’t I do this a long time ago?!”
For some, it might be incrementally increasing your savings by thousands, while for others, it might be increasing in $50 increments. But with each increase, you’ll be flexing the muscle of actively evaluating ‘intentional tradeoffs’ rather than passively spending money on autopilot, and one step closer towards achieving your financial goals!
Visit MakingMoneyIsSimple.com to get started on your financial transformation today!