If you're like most people, managing your finances isn't the most exciting task on your to-do list. Money is reportedly the No. 1 source of stress among Americans, according to a survey from Northwestern Mutual, outweighing both work and personal relationships. Furthermore, 87% of survey participants said nothing makes them feel happier than when their finances are in order.
It can be stressful enough just trying to pay all the bills and make ends meet, so sometimes it's even more challenging to find room in your budget to save for other goals, such as retirement. But new research shows that you might be able to save more money with help from a surprising source.
How your friends can help you save more
Your friends are always there for you when you need a sympathetic ear or a helping hand, and it turns out they can help improve your financial situation, too.
Those with a peer group to hold them accountable are able to save roughly twice as much as those who try to reach their financial goals alone, a recent study by the Columbia Business School found. In the study, participants would either attend a weekly meeting with their peers to discuss their financial goals and what they were doing to achieve them, or they would be paired with a "savings buddy" and would regularly text and share progress, or they would work toward their goals alone.
The results showed that those who met with their peers in person saved twice as much as those who went at it alone, and they also reported feeling much less worried about their finances. Researchers also found that those with a savings buddy who simply texted about their progress saved almost as much as those who went to in-person meetings -- and they still saved significantly more than those who did it alone.
In other words, working toward your goals with help from your peers can significantly increase your chances of saving more than if you were to keep your goals to yourself. Your friends can motivate you to stay on track, but they'll also hold you accountable when you inevitably slip up on occasion. And while in-person meetings have proved to be the most effective to encourage one another, texting about your progress can still help you save more than trying to accomplish your goals alone.
Finding extra cash to boost your savings
Forming a group of friends to encourage and motivate one another to save is important, but it's only half the battle; you also need some money to actually save.
The first step is to start tracking your expenses to see exactly how much you spend each month, as well as what you're spending it on. If you feel like you have no room in your budget to save, in reality you might simply be overspending on nonessentials without realizing it. Case in point: Nearly 60% of Americans say they're living paycheck to paycheck, a survey from Charles Schwab found, yet the average U.S. household spends close to $500 per month on unnecessary expenses. Unless you're closely tracking where all your money goes, it can be tough to tell whether you're spending on the right things.
Once you have an idea of how much you're spending each month, try to trim your costs as much as you comfortably can. You don't have to slash your budget with a machete; sometimes just small cuts are more effective long term.
Sticking to a budget is similar to dieting: If you eliminate every unhealthy food you love, chances are it won't be long before you cave and go back to your comfort foods. But if you allow yourself to splurge every so often while eating healthy the rest of the time, you're more likely to succeed. Think of budgeting the same way. If you live for your morning coffee, you don't have to give it up completely. But if you're currently buying it every day, see if you can cut back to just two or three times per week to save some money.
This is where encouragement from friends can help you save more. Once you have some financial goals in mind -- like cutting back on morning coffee to just twice per week, or maybe just saving a certain amount of money each month -- tell your friends about them. Ask them to check in on your progress every so often to see whether you're going to reach your goals, and if you're not, they may be able to motivate you to get back on track. When you're saving on your own, it can be tempting to quit or make excuses for why you can't save. But when you have people holding you accountable, you're more likely to stick to your goals.
Saving for the future isn't easy, but sometimes your friends can make it a little easier. By having people who will motivate you and encourage you when you fall off track, you'll give yourself the best chance for financial success.