This One Simple Move Made It Easier to Save Money

Could it work for you too?  

I have always wanted to prioritize saving money but I wasn't always very good at it. One problem I had was that my budget was not really working for me when I first started earning money and trying to save.

After reading a lot of financial advice, I tried to allocate every single dollar of my income when making my budget. This meant I specified how much to save, how much to spend on groceries, how much to spend on various forms of entertainment, and where exactly all of my money would go every single month.

The problem was, I was rarely able to stick to this budget and I ended up shortchanging my savings every month as a result. Fortunately, I was able to tweak my process and a change to my budgeting method ended up making it much easier for me to stick to my plan and transfer enough into my savings and brokerage accounts each month.

Here's the change I made. 

A budget switch made all the difference for me

The big change that I made was to switch my approach from a budget that gives every dollar a job to a more relaxed budgeting approach. I began using a 50/30/20 budget which keeps spending on needs at 50% of my income; devotes 20% to savings; and allows me to spend the remaining 30%.

Once I set this plan up and made some changes to my fixed costs to keep them below 50%, I automated my savings so I was contributing a total of 20% each month to different accounts including an emergency fund; retirement savings; and savings accounts for big purchases. The 20% I committed to save came out of my accounts on payday every single month. 

This left me with 30% of my money to spend, and I was able to use it however I wanted without guilt. And it made it much easier to save since I wasn't trying to obsessively watch my spending on everything in order to make sure I had money left over to put into my savings and investment accounts. 

Why did this change help me save more?

In my case, trying to live on a detailed budget was so constricting that I found myself splurging unnecessarily because I felt like I couldn't enjoy my money the way I wanted to. It also created problems if, for example, I went over on my grocery budget. I didn't feel like I could take funds from any other category that I'd assigned them to, so any splurges ended up coming out of my savings.

Ironically, relaxing about where my money was going made it easier to save because I could just move things around as needed and I didn't feel limited by my new spending cap. I simply knew I could do what I wanted with any cash left in my checking account once funds transferred automatically to bill paying and saving, and I made decisions accordingly by keeping tabs on what was left in my account balance.

Now, this approach won't necessarily work for everyone. Some people do better with a detailed budget. But the key is to make sure you're finding an approach that works for you to allocate your dollars. If you can do that, it will be much easier to save the amount you need and to achieve your financial goals.