Life in the DMV is expensive. According to marketwatch.com May 15, 2016 post by Catey Hill, life in the DMV is THE MOST expensive place to raise a family in America. Building and maintaining a systematic savings plan in this environment can be challenging for families.
When dealing with money, it is helpful to examine and understand the two sides of the money discussion: the economic side and the psychological/behavioral side. We’re going to delve into both as we work together on building a savings plan.
- Recapture Dollars Being Wasted – On a Twitter feed I read that 12-15% of all food is wasted. I’ve been guilty of this ridiculous practice. Sticking to a weekly meal plan helps avoid this from happening. Using the wasted food statistic from above, a family of four that spends $1,000/month between grocery and eating out can recapture $100/month. If this sounds at all like you, I challenge you to set-up an autodraft to your savings account right now for 10% of your current food budget and resolve to stop throwing your money into the trash.
- Benchmarking and Tracking – A favorite maxim of Corporate America managers is ‘what gets measured gets done’. It is true in the workplace and it is true at home. If you aren’t already doing this, then start by going back across 90-days of spending data and build a baseline for each spending category. Create a monthly spreadsheet of all your expenses and your paychecks at the beginning of each month. Do you have a projected surplus? If not, now is a good time to figure out how you’re going to pay your bills. Decide in advance how much of that monthly surplus you intend to shift into savings and over the course of the month (earlier is better) move dollars into cash. By the first Saturday of the month, I move these dollars out of the checking account and into savings. Since I started this practice a number of years ago, I’ve been surprised by how much I was able to save when I challenged myself. Set a goal of $100/month ($25 per week) and add it to the autodraft from #1 above.
- Subscriptions: The Gym, Cable TV, Etc. – Subscription services that we all have and do not use. I think I love the thought of having a membership to the gym. I say that because once I sign-up for the gym, I don’t go. Most months, the gym visits my checking account more often than I visit the gym. Same with subscription based services like Netflix, Amazon Prime and all the others. I’m not saying you should cancel if you can afford them and you are actually using them. But, recognize we’re in this day and age of Internet based subscription services that coax you into a 30-day free trial, knowing that you’ll never remember to cancel it. There is likely to be one or more subscription services that you can axe. For this category, I’m going to suggest you find $50/month to recapture and add to the monthly autodraft.
- Stupid Stuff that WE ALL Buy – Check out the picture below. Yes, I bought that. It is a nostalgia play that was at Target and sitting right by the checkout. You all are my therapy group. My name is John Crane and because I loved Galaga, Ms. PacMan and Pole Position as a kid, I totally got snared hook, line and sinker into buying this thing. Worse, it is battery operated and I cannot tell you how many times I’ve forgotten to turn it off and wasted the batteries. Two strategies for dealing with impulse buys. One, if you are going to shop for anything, before you enter the store (read AMAZON, Target, Costco, Walmart), you only allow yourself to enter the store with a preselected list of things to purchase and you only buy those things. Second, if you happen to come across something that you believe that you absolutely need, write it down and resolve to get it on your next trip to the store. Go home, think it over, sometimes that extra step will save you from yourself. For impulse buys, I’m going to add another $100/month to the autodraft.
From the above four, I’ve given you suggestions on how to increase your savings and put some targeted dollar amounts for each category. In total, my suggested savings across all categories is $350/month.
Move past the voice in your head that is telling you it won't work or that it is just too hard. Adopt a new behavior to replace the current behavior that is being inefficient with your money.
Getting started is the hardest part.
Call your bank RIGHT NOW and set-up an autodraft to a savings account of $350/month and then go back and implement the practices outlined in 1-4 above to fund the $350/month. Then, every six-months repeat the process and keep inching up that savings amount. Just by being more intentional, I’ve seen clients go from saving absolutely nothing to saving over 10% of their gross income in less than 24-months.
You can do it too.
Do it. Now.
If you have ideas or practices that have worked for you, please share them in the comments below.
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