It's not your fault the human brain wasn't created to be the perfect money-saving machine.
Saving is difficult. There are so many things to buy. So many reasons you feel like you just don't have enough money to save. But unless you’re a big shot money manager or your father is Johann Rupert or you never want to retire or buy a house, you’re going to have to figure out how to do it anyway. Some people think you can wait until you're older, if that's you then you do not understand the concept of compounding or that saving a little bit now is smarter than saving a lot later. That is why it is important to teach our kids about saving or investing from a young age. This is a critical life skill which will set them apart later in life.
Here are 5 tricks to beat this heck:
1. External Roles are useful
Some of us (maybe most) suffer from self-control issues. We love instant gratification which results in us not thinking about long term planning. The best way to deal with this is to use an external role.
Buying your favourite pair of shoes feels more thrilling than putting the equivalent amount into your retirement account. If you give yourself a choice to save money, then 9/10 times you'll decide not to.
Here is the solution: Make it so you have to decide not to save money. For example: when your employer takes a portion of your salary to pay towards your retirement. Your employer, in this case, is an external role. You never see the money, so you never have to think about spending it.
Also, the people who want to spend your money know the power of external roles e.g online subscription services, cellphone providers, etc they all depend on pulling money out of your account while you are not paying attention.
2 . The Power of Automatic Deposits
Don't just rely on your employer, you too can become your own external role. Set it up so that the bank or investment service of your choice (Obviously SV Capital) receives a sum of money weekly or monthly. Watching the money in your investment account get bigger feels good and it will make you want to save more.
You need to pick an amount that is realistic and do-able. If you having to cheat and take money out it defeats the purpose of positive reinforcement.
3 . Cash Money
Make spending money a painful process, trust me this will help. When paying for items use cash instead of your card. This will force you to count every cent before you hand it over. Once you see all the money you are spending it will help you think about if what you are paying for is worth it.
You know why casinos use poker chips and fancy restaurants say a R 600 bottle of wine costs “Six Hundred”? To make you forget you're spending money. So remind yourself and make it painful.
4 . Set aside the cents
When paying in cash and you get change in the form of notes and coins, take the coins and put them in your version of a piggy bank. When your piggy bank is full take the funds to the bank to deposit and watch your balance grows. This obviously won't be enough to buy you that dream car but it adds up.
5 . Games are not just for kids
Gaming is important for learning and enforcing certain behaviours. Most of you play games when you go on your team building retreats because it is a fun way to learn. The point of the game is to use rewards to drive your behaviour instead of fear.
An easy way to do this is to set a certain amount that you would like to save or invest per quarter. Once you have reached this number reward yourself by going to that restaurant you have been eyeing.
Just make sure the game is winnable and not out of reach and be tough on yourself. If you don't reach the goal then you don't get the treat.
Lastly, make sure that you understand the products you use to save or invest.
SV Capital provides affordable investments that make sense.