One of the reasons people find saving money difficult is because of the way they view and organise their finances.
The difficulty with saving money
Typically, you receive your paycheque and then various monthly expenses eat away at it – insurance, loan repayments, childcare costs, etc. Once they’re all dealt with, we live off whatever is left over for the month. The next month we get paid again and the cycle continues. Our money is like a pool that’s constantly being drained and refilled – and saving money isn’t a priority.
So, what happens when one of your regular expenses changes? What if you get a discount on your car insurance, or your child starts school so you no longer have to fork out for childcare? Say you finally finish paying back a loan that was draining $200 a month from your ‘pool’ of money, what do you do now that extra cash is freed up? The answer, for most of us, is ‘nothing’. That extra $200 just ends up being used for groceries, petrol, clothes, and other living expenses, and by the end of the month it’s been drained away. You can’t really say where it went, but you know it’s not there anymore.
Proactive money management through repooling
This is where your attitude needs to change if you want to start saving money. If you do end up with some extra money in that pool each month, channel it into savings or investments rather than just letting it get used up on everyday things. You managed to live without it before, so you won’t notice if it’s simply being directed elsewhere.
The same applies if you get a pay rise: do something productive with that increase rather than letting it be absorbed into your daily living costs.
The beauty of this ‘repooling’ strategy is that you’re not required to tighten your belt in order to save; you just redirect any extra money that comes your way.
Even if you can’t face repooling ALL of the extra money you get from your raise or from reductions in other costs, at least commit to putting half aside in savings or investments. That little amount each month will really stack up over time, and you’ll find yourself growing your wealth with hardly any effort.
- The ‘repooling’ savings strategy makes use of any extra money added to your ‘pool’ of cash each month
- If you find your monthly expenses reduced because you no longer have to make regular payments towards something, put the money you would have spent on that thing into savings or investments instead
- The same goes if you get a pay rise: put the extra money straight into savings
- You shouldn’t notice any difference in the way you live because you’re not changing your monthly budget, you’re just repooling your money