Everyone wishes to save money, but few have the clear idea what are they saving for.
The key to reaching a saving objective and saving even more money is knowing precisely why you are doing that.
Imagine two people with similar lifestyle and incomes decided to “save more money.” One skips a Starbucks late every now and then, while the other opens an online savings account for a dream Paris vacation. Who do you think will be the most successful saver? Day after day, both make small sacrifices to reach their goals, such as packing a lunch instead of hitting the fast food chains. For one of them, the sacrifice will be worth it when she’s admiring Paris from the Eifel tower. For the other one, who doesn’t have a purpose for the savings, the payoff is ambiguous and the sacrifice becomes difficult.
The motive to save
Obviously, it is hard to save unless there is a reason. Saving with a purpose puts all of your decisions into focus, which helps you to ignore the small obstacles on the way to the big dream.
How do you focus your savings’ efforts? Start with a worthy trade-off, open a specific account, and don’t become a Scrooge.
Define a worthy trade-off
The successful goal usually is smart-specific, measurable, attainable, realistic, and timely. When you define a purpose according to this method, you make your plans more real, and you have a reason to sacrifice the things that are less important to you than your goal.
If you decide to pass up an AED500 pair of jeans at the Dubai Mall, because you are trying to save money for a dream holiday, your thought process gets reframed: saving on the buy gets you closer to your Paris dream. Help yourself further and design visual reminders to improve your chances of achieving your goals. You can choose themed screen saver for your laptop, stick a photo on the refrigerator, subscribe to a travel magazine or buy/download books.
Open a dedicated savings account
After you know why you are saving, you need a dedicated savings account. Some banks will allow you to create sub-accounts, which you can label with your saving purpose, as for example for “Education Fund”.
Next you will use the “measurable” and “timely” parts of your goal to automate the process. Let’s say you need to save AED10,000 in order to take your vacation one year henceforward. This means you have to to save AED830 per month. Once you know how much you need to save, set up an automatic transfer from your checking account to your savings account of AED800 each month. Doing this will allow you to reach your saving goals with a little extra effort on your part. Pay attention of your savings and statements upfront and the money left in your account is yours to spend.
Savers don’t have to be misers
Many well-meaning experts advise making coffee at home and taking a home-made lunch to work every day. Such little things can add up, but if these suggestions just don’t work for you, you are unlikely to make them a habit. What is more likely is that you will just get discouraged and give up. Instead, change your habits one step at a time. Try taking your lunch to work one or two days a week, and scale up from there.
Evaluate what matters most: your goal or the immediate purchase in question. The answer doesn’t always have to be your goal. Don’t trim so much that you don’t have room in your budget for entertainment and recreation. Not only, it will make life a drag, it is just not sustainable.
