5 Tricks to Train Your Brain to Save Money
5 Tricks to Train Your Brain to Save Money
By: Nicole Panzovski, Head of Education & Outreach
Savings account open. Budget created. These are the tools necessary to kick-off your personal finance journey, but if you are wondering how to bank the money, there are easy ways to trick yourself into saving.
It seems crazy, but the truth is, 79% of Americans struggle with saving money and it is not due to lack of effort. Saving money is a mental game. This is why “life inflation”, the act of increasing expenses proportionally to the increase in your income, happens so often. We are all susceptible to this because it is so dang easy to do. It is easy to logic that an increase in income = increase in life spending.
So, here are 5 tricks to play the mental game and win!
TRICK #1: Increase in income = no change in expenses
We have all been there. “I’ll buy because I just got promoted!” Promotions, new job offers, and side hustles are all amazing accomplishments that lead to an increase in annual income which means more money in our pockets. This is fantastic and should be celebrated! But once the champagne is popped, it is time to take that new, increased income and save it.
The easiest way to save your increase in income is to take that additional amount and direct deposit it per paycheck/project into your retirement fund (401K or IRA). By moving this additional income immediately, you are training your mind to save and decreasing the likelihood of life inflation. By placing your automatic savings into a tax-advantaged retirement account, temptation to pull the money for increased bills or a splurge purchase significantly decreases. And let’s not forget, compound growth of your investment!
TRICK #2: Hide a percent of your paycheck
This may seem silly, but sometimes we just need to hide things from ourselves. That bag of Hot Cheetos? Hide it. Some of your income? Hide it!
This is a simple trick to boost your savings. Take 5% of your paycheck and direct deposit it into your savings account. You won’t see the money or need to manually move income into your savings account. Eventually, you probably won’t even remember that the 5% was there. Your savings can steadily grow over time and you will be surprised to see how quickly you can reach your saving goals!
TRICK #3: Name your accounts
Take a minute to log into your bank accounts and change the name of each account to goals you are aiming for. You can name your checking account, where money comes and goes to pay for bills and expenses, Monthly Expenses. You can name your savings account, Emergency Fund or New Car or whatever goal you are saving for. The importance of this simple trick is to tell your brain that there is a purpose for every dollar you make and to build intentional action around your savings and spending.
TRICK #4: Try a cash diet
If you find that budgeting and saving are particularly hard, especially in the current environment and landscape, try a 30-day cash diet. The best way to approach this is to take your budget and make a trip to the bank to get the cash needed to cover your monthly expenses. Then break out cash for each portion of your budget in order to stay on track. If you are budgeting to zero as we outlined in our blog “How to Build a Better Budget” then your allocated savings will stay safely secure in your accounts.
TRICK #5: Keep the change
Many banking systems offer a “Keep the Change” option which takes any purchase you make and rounds up to the nearest dollar, then allocates that money to your savings. While 40 cents per purchase may not seem like a lot, every penny adds up to big savings and you don’t even need to think about it!
Summary: Challenge yourself!
The best thing to remember when trying to train your brain to save money is that saving is a mental habit, just like exercising or eating healthy. The more you challenge yourself to improve your saving mentality, the better you will get. They say that it takes 2 weeks to build a habit, so be patient.
Utilizing your bank or free tools like Grow Credit can help you improve your saving mentality. Grow Credit is a free virtual Mastercard that helps you build your credit and develop healthy personal finance habits. Everyone is on their own personal finance journey and as long as you are moving forward, you are making progress!