Everyone needs to save. In fact, you should be setting aside cash for retirement and other financial goals. Whether you want to buy a house, go on vacation without going into debt, or make some other big purchase, saving is the smartest way to do it.
Unfortunately, while most of us know this, we also have lots of excuses for why we don't do it. The problem is, the longer you make excuses, the more compound interest you miss out on and the harder it becomes to save enough to accomplish anything important.
If you find yourself justifying why you're not saving more of your money, check out these three common excuses below. If they're the reasons you use, you'll find some tips to help you get more money in the bank.
1. You don't have enough money
Sometimes, your income really doesn't stretch far enough to meet your essential needs and still let you save money. If so, the only option you'll have is to increase the income available to you. You could do this by:
- Asking for a raise. Come prepared with evidence, such as proof of recent successes and market salary data, to show you deserve a higher salary.
- Looking for a better job. If your company won't pay what you're worth or your job is a dead-end with little potential to increase your income, switching to a new position may be best.
- Working a side gig. There are ample opportunities to earn extra in the gig economy. Think about what you're interested in and what your skills are in order to find a niche for yourself.
- Improving your skills. If you can't justify a raise or find a side gig, you may need to take some courses or talk with your company about training programs you could take advantage of so you could earn a higher salary.
2. You have too many expenses
For many people who claim to have too little money, the problem isn't really one of income but rather excess expenses. If you're spending too much of what you earn, you won't be able to save any of it.
To determine if too much spending is your problem, track what you spend for about 30 days. Once you see where your money goes, look for cuts to make to discretionary expenses such as dining out or entertainment.
If you find you're overspending, living on a budget would enable you to save more. Set spending limits on different types of purchases and, once you hit those limits, stop spending. If you have difficulty keeping track, try an envelope-based budgeting system: Put the money you've allocated to each purchase category in an envelope and spend only the cash available.
3. You don't know how to get started
Figuring out how to save and invest doesn't have to be complicated, although it can seem that way. The simplest way to start saving is to open a high-yield savings account and deposit money into it. This approach makes sense for an emergency fund or for money you'll need soon, such as for a vacation you plan this year.
For longer-term saving, especially for retirement saving accounts, you'll want to invest with a broker so you can buy stocks. If you have a workplace 401(k), signing up to make contributions is usually easy -- just request the paperwork from HR. If you don't have a 401(k) or want to invest outside your workplace plan, you can open either a retirement account or standard brokerage account with an online broker. It takes just a few minutes and you can set up an automated transfer of funds so you get on a regular saving schedule.
Once you've put your money into a brokerage account, you can buy low-fee exchange-traded funds (ETFs) that give you exposure to a broad range of different kinds of assets so you can easily diversify your portfolio even if you don't know how to pick individual stocks. Our model portfolios can give you some ideas of what you can invest in.
Overcoming these excuses is essential
While you can probably come up with lots of reasons not to save, none are good enough to justify not putting away some cash for the future. If you don't save, accomplishing financial goals will be next to impossible and you'll set yourself up for a hard time later. Now is the time to find a way to overcome the obstacles holding you back.