We all know we should save money. We all know we should live within our means.
Probably, for most of us, we’re also aware that we should be reasonably content with our existence, belongings and lifestyle. Yet many of us find ourselves looking at credit card bills we can’t pay, things we shouldn’t have bought and savings accounts made up of zeroes and not in a good way.
Why the disconnect? And how can we change the story? Perhaps you need to consider whether you can automate your money saving attitude. Perhaps you could even make saving money second nature, in turn saving money without ever really thinking about it?
Here is how you could try and making saving money second nature.
Firstly, you must realise how the brain handles frugality
While it’s still not completely understood, there’s a lot of hope for habits and thought patterns being offered in the world of neuroscience, especially with the concept of neuroplasticity. Basically, the suggestion is that the brain is a living thing. It can rewire, change, adapt and modify.
Research suggests that meditation, for instance, can change the levels of brain activity with regards to anger, fear and depression.
So what could this mean for our money saving goals?
- Bad habits can be replaced with good ones
- The more time and effort invested in good habits, the easier and more automatic they become
- Our response patterns can be changed, and for the better, by experience
So assuming that we can replace bad habits with good ones and eventually automate the good money saving habits into our routines, what else do you need to know in order to save more money?
The three step formula to help you save money
One treatment of bad habits, known as ‘Habit Reversal Training’ suggests there are three stages in a habit or automatic behaviour that help us understand the concept of ‘second nature’.
Let’s look at the three stages, with regards to retail therapy as that is primarily the easiest way to not save money these days.
- Cue: The trigger. You could be feeling anxious or out of control, maybe you’ve got an event coming up and you’re feeling nervous, perhaps you’re bored.
- Routine: You pop into your favourite store. You check out eBay, or order a couple of things on Amazon.
- Reward: You feel gratified, or you have something new to own. This is the brain learning the pattern for the future.
Once you’re aware of the cues, start replacing the routine. Would things be different if you went for a run every time you felt anxious or bored? Or meditated? Or walked around the block instead of checking out Etsy?
The remarkable thing is, once you’ve replaced the routine, the cue and reward remain the same and your brain can learn a new pattern.
So how can I make saving money second nature?
This means that we can make saving money an automatic process, making it the knee-jerk response to external situations.
Let’s look at a couple of scenarios to prove the point.
- Cue: You get a raise
- New Habit: You invest the raise straight into savings or debt repayment
- Reward: You never miss the money, and know you’ve taken a step to growing your wealth.
This equates to a very positive outcome, one in which you not only save money but build a positive future platform for your money.
- Cue: You get paid
- New Habit: Your automatic deductions move some money into savings and debt repayment
- Reward: You’re left with an accurate idea of how much money you have to cover your utilities, groceries and entertainment and can be comfortable that money is being saved.
This equates to a savings account that rapidly grows, on autopilot, ready for your future needs (or as we call it, a Cash Stash).
- Cue: You see a cheap product on the counter as you’re paying for an item
- New Habit: You consider the retail objective of that item’s placement and what better uses your money could be put to.
- Reward: Your budget balances, you’ve got less stuff to cram into a drawer and you lose the urge to impulse buy
The output of this is you begin to declutter your house and in turn simplify your life and your finances.
Based on the above examples, how should you start to make saving second nature?
If you want to make saving money second nature, then it’s important to start. Now. Not tomorrow. Not when you’ve got a bit more spare cash.
Here are some ideas to get you started with second nature savings:
- Use the cue, routine, reward methodology to identify where you spend money often.
- Write down the above methodology for 5x things you do but shouldn’t that costs you money.
- Using the same methodology, analyse your saving habits. Find ways to improve.
- Start an automated direct debit 2 days after pay day to remove a set percentage of your pay into your high interest account.
- If you have a mortgage, opt for higher auto payments that you won’t notice – like an extra $9.50 per fortnight or something small.
- Round off your everyday bank balances and put the left over money onto debt.
- Every time you get a lump sum of money, divide it into separate chunks and use the money to pay down multiple debts while adding a little to your savings also.
- If you get a pay rise, immediately use 50% of the extra money you receive to repay debts or start a cash stash.
- Have your bills all come out of a separate ‘bills accounts’ in your online banking – this way you can monitor the exact totals of outgoings you pay in a month (it also saves you time paying bills manually).
- Pay in cash, not on card. It makes you cognoscente of money and helps you make saving money become second nature as you have to actually part with the cash.
- Direct debits mean automated bill payments, means more time for you and no late fees.
- Ask if your employer can automatically pay you into multiple accounts. Often you can designate 2 separate accounts and the amounts you wish to be paid.
The more time and energy we invest in good behaviours, the more natural they become. Use your brain’s natural adaptability to start saving money as second nature.
If you have a minute, share with us some of the ways you make saving money second nature for yourself.