Everyone knows how important it is to save money but many people find they have more trouble with dipping into what they have saved over actually setting it aside in the first place.
Even the most savvy money managers will tell you that saving money isn’t easy, particularly in a tough economy like this one.
They also agree, however, that the one thing that is harder than finding a way to save money is preventing yourself from going into your savings account when you want or need a little more and the available amount in personal savings accounts has been in steady decline.
Kelley Long, a Chicago CPA and personal finance coach suggests
opening a money market account at a bank where you have no other accounts. A small credit union is even better, so you can perhaps earn a better rate.
She continues to recommend that if you want to save money you do not get an ATM card and refrain from getting internet access to your account. This way you will have your money in a savings account that you cannot access without actually going into the bank. That is often enough to prevent impulse spenders and anxious savers from having convenient access to cash that needs to stay in their savings account.
Stacy Francis, president of Francis Financial Inc in New York supports this practice:
Online savings have high interest rates and are out of sight, out of mind. For some, the ability to only do online transfers is a good idea because you are not tempting yourself to spend the money.
According to Carrie Rattle, a principal advisor with Behaviroal Cents LLC, a New York organization that was formed to help women become better money managers, there are many psychological factors that influence the ability to refrain from dipping into savings, especially for women. As a matter of fact, this is the main strategy behind their company’s philosophy of examining and employing behavior psychology in order to counsel more appropriately.
For example, she reports that self-esteem and the power struggle are a major component of this behavior. She says she
knew one woman who would buy the same item in three colors, then hang them in her closet with the price tags still on. She’d never even wear them.
This is, apparently some kind of personal reward system that has nothing to do with the necessity for a new wardrobe. Rattle advises, then, “to counteract this type of behavior, the spender needs to be aware of her impulse and, instead, go to the gym or meet a friend.” These psychological behaviors are rewarding but do not require you to go into your savings account, and are the same for men who might daydream about the latest iPhone or luxury car.
Mickey Mikeworth, co-founder and financial adviser for Minneapolis-based independent research and financial education firm Rich Chicks states that regularly pulling money out of savings is a sign of a bigger cash flow problem. The easiest way to fix this is to look more closely at bills and income and determine when things are due and which income source will pay for it. You can always call your creditor and ask them to change your payment date, for example, especially for things like auto insurance or a car payment.
Another thing you can do is to find a category of spending where you can cut spending by at least 2 percent at a time. Mikeworth says
If you can cut a category of spending by 2 percent, it is worth doing. Look at percentages of spending first and not dollar amounts. A small change alone does not change a budget, but 10 (small changes) will make any budget feel like it just had a windfall.