One of the most common new year’s resolutions is to save some money. Then people often forget THAT resolution but wish they didn’t in case of emergency.
Two Easy Money Saving Habits
Finally, we published our first video in our YouTube Channel! Hope this will be one of many, while I am still figuring out the process and what not. Yes, I realize I made some of technical mistakes, but I am roiling with it – it will get better with time, I’m sure. However, I wanted to take a moment to give some context on why I chose to start our video content with this particular topic.
Many of us make “New Year resolutions” – and one of the most common is trying to save a bit of money. Spoiler alert, a lot of times this seems like an unsurmountable task, and ends up in discouragement, and worse keeping us away from achieving this goal. Granted this system will not make you rich, but it is intended to give you some ‘structure’ in a manner that is attainable. Does that mean that you need to hit the amount of you set as your goal the first time around?
Well, not exactly… it is more about creating a habit than achieving the goal – at least the first time around. It is also about be able to give yourself some “liquidity” and start a “rainy day fund” – in a manner you can access these savings if you need it, but at the same time it is a monetary instrument which is absent enough for you not to be tempted to be using it unwisely. That way if you do need to use this money, even if you’re yet to complete the challenge, at least you’ll have something accrued and perhaps help you navigate (even in part) an immediate hurdle.
Controlling Spending
The pandemic has made it harder for a great majority of the world to cover even some of their basic expenses. Job loss, loss of unemployment insurance, families deciding between paying for their dwellings or feeding their loved ones. Keeping any level of savings is very hard under these circumstances, and those who have been afflicted by this will very much understand the difference between “need to buy” and “want to buy” – those two options can be very different situations based on the circumstances.
The good thing is that most of us who are living in a free society are still to be able to accrue some savings… however minor these savings will be at first — trust me, they will grow. This is not the same (necessarily) as investing. That’s a different topic we can discuss some other time. This means just putting a little bit of money away – whenever we have a chance to do so.
It starts by ensuring our basic necessities are met. A roof over our heads, food in our bellies, and the means to keep those sustainable. That could include additional expenses, such as transportation. If you have been lucky enough to be able to keep those two adequate and sustainable, then you can move to the next step. Budgeting your income for savings. Did you know that most people spent money in non-essential stuff?
Let me illustrate with this real-life example. I had a co-worker years ago who was very much in debt – an amount that seemed insurmountable for him. Actually, his entire debt was only ~$5,000 dollars. I know it might look low for some people, but he did not have mortgage, was driving an old car and was living in a dorm-style place which was also paid by the employer. So that helped him enormously. Our manager at the time was saying that my co-worker would need to sell his car in order to get back on his feet… I disagreed, he was driving a POS (piece of $#!^) vehicle (which was surprisingly reliable, and the maximum he could have gotten was maybe $300 for this dilapidated car at the time, leaving a $4,700 debt remaining, and an aggravating situation – because that course of action would also result in the lack of self-transportation. Fortunately, my co-worker trusted me enough to help him budgeting and improve his finances.
To make this long story short, we discovered that it was not that he was not making enough (even though he was not receiving a stellar salary). We were able to confirm that he was squandering most of his hard-earned money in stupid stuff without realizing it. Mostly snacks, with his cash going low, then he used his two credit cards to make some purchases… however, because he was still very young with not much credit history, each credit card had very low available balance, and a considerably high interest rate. For anyone who is unfamiliar with this process… if you have a low spending balance credit card, then it does not take too much spending for this card to get close to the maximum spending limit, and that interest grows based on how much you’ve spent. In his case, the interest alone has already high enough to almost maximize his cards.
As we checked his debt-to-income ratio, we came up with this plan. I did warn him that for a couple of months it was going to suck – and he’ll have to be pretty frugal, but then soon enough things will get better. He got this skeptical look, so I continued… and said, “let’s see where your money is going.” I told him, “I’ve seen you enjoying a sandwich as a snack every day you’re in the office.” Ok, so we work five days a week, and that sandwich happens to cost $5.oo – that means that in a week he has eaten $25.oo worth of these sandwiches. We got paid twice per month, so by mid-month he spent $50.oo and by the end of the month that is $100.oo. That means $1,200.oo in a year in that sandwich habit alone.
I continued, “Now if we are honest with each other, you don’t only eat one of those right?” He acknowledged in the affirmative, he normally ate two of those sandwiches per day as mid snack. So that’s $2,400.oo a year in a sandwich-munching habit alone. Compound that to other expenses people normally have… for example of those people who enjoy their Fancy Coffee and croissant every workday… there went your $2,4000.oo a year… and a big part of that figure is something a person could save and then buy yourself something they really want, or need, or save it for a rainy day.
This young gentleman also smoked, so that added to the expenses. After we finished the process of identifying “money wasting” habits – I helped making a plan to pay his credit cards. That’s a different rant, but in the end, he finished paying his debts, and in a matter of months he had already several thousand back in savings. Some other time we’ll talk about his and other stories about how to tackle financial difficulties.
52 Weeks Money Savings Challenge
I saw this money savings challenge a few years ago, and I’ve been using it ever since. Normally I start a new challenge as a New Year’s resolution. Then I use that money for whatever the hell I want. For instance, I like colleting musical instruments. Then this allows me to buy the instrument I want – cash. Other times I’ve used to cover an unexpected expense without taping on any checking or savings account, or worse having to ask for a small loan.
So, the concept is simple:
- There are 52 weeks in a year
- First week you save $1, second week you save $2, third week you save $3, fourth week you save $4 and so on until you reach your week fifty-two and save the corresponding $52
- At the end of the challenge, you will have $1,378.00 to use them for whatever you need or want.
Click Here to Watch the Video
The video includes two money saving challenges
Somebody recommended me that it would be better if the challenge starts in reverse. Essentially $52 on the first week, $51 on the second week, $50 on the third week, $49 on the fourth week and so forth. And that made sense to me. Essentially in those four weeks you would have either $10 saved in that first month or $202 saved by the same time… with the added benefits that you would have to put less money aside. You can either put your money aside with cash, or an electronic transfer… it just takes discipline.
The way I like to do my challenge is the “random” way — essentially, I have a little white board numbered 1 – 52. Every Friday I pick a number, and I put the corresponding dollar value away. So, for example… this year I’ve picked 50, 20, and on Friday I’ll put 5. Which means that now by week three I have saved $75.oo – and that makes it more substantial that $6 bucks saved at the same time using the original method, but not as dramatic as $123 if I tried the reverse method. The other thing I like about my method is that I can “pay myself ahead” – For example, I can put $20 and check a number of weeks, for example week 10, 5, 2, 3 or maybe weeks 1, 2, 3, and 14.
Or maybe just put the $20 in the box and give credit for a different week letting “my savings keep the change” – for example on week 17 put $20 bucks and leave the change there. I have fun with it, and it is nice to see it at the end of the challenge. Meanwhile, I don’t regularly spend in stuff that I would either end as “discharge” it in the bathroom or thrown in the garbage. We can talk about how I rather spend money in a different rant.
By the way, if you’re living in a country where you use a different currency than US Dollars, you can always use the same system. Just use numbers that make sense on your currency and cost of living. For example, if you’re in Europe you can have save 52 weeks challenge with Euros and then you’ll end up with €1,378 to use for whatever you want.
What about an easier challenge?
So, in my day job I get paid twice per month. So, I figured I should always have a bit of cash on me, just in case. So, for several years, each paycheck whenever I need to get cash, I put one $20.oo away (that’s $40 a month). If you do that for a year, that’s $500.oo that you can use for anything, or save it. For this to be effective, if I “use” any of my saved $20 dollar bills I’m putting aside, then I pay myself back those $20.oo as soon as possible. This is more about self-discipline and accountability, with the added benefit that you save a bit more money.
Yes, I am sure that for many people $500.oo is a meager amount of money. Well, not for all of us, and some people in these United States do not even have $400.00 in their bank accounts, or a $400 sudden expense could really damage their current standing. Again, these challenges are intended to encourage people to save at least a bit, and to think about their expenses before an impulse purchase. I have been guilty of spending on frivolous things during my years on this planet. Sometimes even spent money on people I don’t even like or have ever seen again. I just hope you, my dear reader, find this article and our video useful. Please share with somebody who can use this advice. HLC