If you’re living paycheck to paycheck, the thought of saving might seem laughable. How are you supposed to start a retirement fund when the mere act of checking your bank statement gives you heart palpitations? Believe it or not, you can do it.
Here are a few ways you can start saving slowly, even if you’re at a place where it seems impossible. Some of them are simple, and some of them require a little discipline. Take it slowly, set realistic goals and work your way up. And remember, it’s never too late to start.
This is the simplest way to start saving, because you don’t have to do a thing once the transfer is set up. Every bank allows you to automatically transfer funds from checking to savings each month. Open a savings account if you don’t have one and choose an amount that works for your budget — $25 a month if funds are tight, $100 or more if you have a little financial wiggle room. The best part about it is that once it’s set up, you can forget about it and you’ll feel a little better that you have something put away.
Make it a goal to increase the amount over time. If you’re eventually able to transfer $500 a month, you’ll have $6,000 by the end of the year, and $30,000 after five years. Not bad.
Balance Your Budget
If your answer to saving is, “There’s no way,” sit down and make a detailed budget. Break it into categories like: groceries, restaurants, clothes, bills, fitness, or car/transportation. The percentage of your income that goes into each category depends on your paycheck and lifestyle, but you can use the 50/20/30 rule if you’re stumped: No more than 50 percent to essentials (rent, bills), no more than 20 percent for debt, retirement, or savings, and no more than 30 percent goes to the fun stuff: gym or dinners out.
If you have a hard time sticking to budgets, take out cash from the ATM and put it into envelopes marked for each category, instead of winging it with debit and credit cards and telling yourself you’ll do the math later. If your restaurant envelope is empty by June 10 – no more eating out until July.
Seeing your spending habits on paper (or in an envelope) has a way of kicking you into gear (or freaking you out, if you’re living beyond your means). It will help you figure out whether or not there are things you can cut out, like $50 bar tabs, $100 dinners, or $250 haircuts. Haircuts are important, but there’s definitely someone in your town who can do it just as good, for cheap.
Now that you’ve started saving, it’s time to put that extra money away. But maybe it wasn’t that easy. Maybe there are things you just really don’t want to cut out. Things you’re clinging to, even though you don’t really need them to survive. If that’s the case, you can make some trades. For example, if you’re forking over $80 or $200 a month (at least) for yoga or Pilates or kickboxing, invest in some $9 yoga and Pilates DVDs and do them at home. You can put that extra money into savings and still get your workout fix. Another easy one is expensive dinners. If you’re going out for $50 or $100 dinners two or three nights a week, trade in a few of those dinners every month and cook for your friends. It’s just as fun and way cheaper. When you’re starting slowly, every little bit counts.
Stay Focused On a Goal
It might seem tough, but if you sit down and set out some five or ten-year goals for yourself, it will make it much easier to make them a reality. If you’re just starting to save, a simple rule of thumb is to put 10 percent of your income toward retirement. So if you’re making $60,000 a year, you should put away $6,000. If loans and debt make that number impossible at first, scale it down to five or even three percent and work your way up each year.
If you have no idea what the future holds, focus your goals on the basics: retirement, housing, and paying off debt. In fact, if debt is what’s holding you back, then focus on that first. Give yourself a 10-year deadline to become debt free, whether that means putting aside five or 10 percent of your income, depending on your situation. Setting a goal will make saving slowly much less intimidating.
Give Yourself a Hand
Acorns helps you put away your “spare change” from everyday purchases and takes all the intimidating details out of investing and is intended for saving slowly and incrementally. With Digit, it’s about setting aside small amounts of money over time, track your spending and set aside small amounts for you. If putting away $500 a month seems as realistic as moving to the moon, this is an app for you.
If you’re having trouble getting started, take it one day at a time. Or think of it this way: If you put away $6,000 a year – that’s little under $17 a day– for 10 years, you’ll have $60,000 set aside.
And imagining $60,000 in your savings account can be a pretty good motivator.
Dina Gachman is the author of Brokenomics: 50 Ways to Live the Dream on a Dime.