June 14, 2024
6 Signs That Your Saving Strategy Isn't Working

Saving money is important — perhaps more so now than ever before with the high cost of living throughout the country. Whether you want to buy a house in the future, pay off your debts, build an emergency fund or prepare for retirement, you’re going to need a substantial chunk of cash.

But not all saving methods are created equal. Here are some signs that yours might not be working as well as it should and what you can do instead.

You’re Not Saving Consistently

“If your strategy sounds good on paper but is impossible to follow, it’s probably not realistic,” said Melanie Musson, a finance expert with Clearsurance.com. In that case, you’ll need to review your budget and make a different plan that is more feasible. You can always make adjustments later as your financial situation improves or changes.

But how do you make a realistic saving strategy that matches your budget? Start by cutting out the things you don’t absolutely need. Just be realistic about it, as not every expense can be eliminated.

“For example, you can’t just cut what you’re paying for housing,” Musson said. “If you need to cut your housing payment, you need a [better] strategy, whether moving or refinancing.”

You’re Not Motivated To Keep Saving

Sometimes, the reason your saving strategy isn’t working comes down to a lack of motivation. This often happens when you don’t have a clear budget or realistic plan or you feel like you’re doing without to the point where your quality of life diminishes.

“Balance is a critical component of a satisfied life, and if you turn too much toward savings, you’ll be off balance,” Musson explained. “However, if you eliminate trying to save, you’ll stress about financial possibilities that could devastate you, also making you off balance.”

One way to resolve this is to find ways to motivate yourself.

“You need to motivate yourself to spend and save according to your plan,” Musson said. “Put incentives in place and make sure you don’t eliminate all discretionary spending.” That way, you can still enjoy yourself while cutting back on unnecessary expenses and saving money.

You Keep Falling Behind on Your Savings Goals

Having short- and long-term goals is key to a successful saving strategy. If you don’t have goals, or if you keep falling short, you might need a change.

“I see savings goals fail for a variety of reasons — mostly behavioral. Often, the habits and mindsets that savers have around money are the biggest things holding them back,” said Charlie Pastor, CFP(R), a financial expert at Motley Fool’s The Ascent. “Most savers are aware that they are falling short of their savings goals. They may feel like they are on a treadmill of earning and spending, or as if they are just making it to the end of the month spending-wise.

“There are usually also quantitative signs that savers just aren’t getting the traction they need to build wealth,” he explained. “Sometimes, this looks like a zero balance in their savings account every month; other times, it looks like putting all of their funds in one place without assigning certain dollars to different expenses or goals.”

So what can you do to change things around?

Pastor suggested opening multiple accounts, each one earmarked for a specific goal or expense, and allocating funds to those accounts according to need or priority. “For example, a saver might open three accounts, one that covers fixed expenses, such as rent and utilities, another that is meant to grow and fund a specific financial goal, and a third account to use for ‘fun’ expenses,” he said.

Depending on your employer, you might be able to split your paycheck to go directly into each of these accounts. This makes it easier to save consistently since everything is more or less automatic.

Opening multiple accounts won’t work for everyone, however. It’s also possible to go overboard and end up with more accounts than you can comfortably manage. But by setting some ground rules, automating your contributions and experimenting with a few options, you can find a strategy that works for you.

You Rely On Credit To Get By

If you find yourself turning to credit cards to cover your daily expenses because you’re always just a little short, it’s time for a change.

“Having high credit card balances is another red flag,” said Joe Chappius, a financial planning expert with TaxClimate.com. “High balances can indicate that you’re relying too much on credit to make ends meet, which can lead to a cycle of debt due to high interest rates.”

Track your spending and switch to cash or debit cards only for your purchases. This can help prevent unnecessary spending and keep you from accruing more debt as you slowly build your savings.

You Don’t Have an Emergency Fund

An emergency fund is a separate savings account that’s dedicated toward any unexpected or unplanned expenses. This could be things like medical bills, a flat tire on your car, a broken down kitchen appliance or a layoff at work.

Many financial experts suggest having at least three to six months’ worth of expenses set aside in an account — just in case. If you keep trying to save up for an emergency fund but you find yourself constantly dipping into it, your current strategy isn’t working.

“If you don’t have [an emergency fund], this should be factored into your budgeting and savings plans so you can build one up as quickly as possible,” said Todd Stearn, founder and CEO of The Money Manual. “Setting and following a good budget is the key to saving. It can be an easy thing to put off, but budgeting apps like Rocket Money, Copilot and YNAB have made it easy.”

You Struggle To Make Ends Meet

If you’re struggling with the bills, it’s going to be much harder to save.

“If you’re consistently finding it hard to cover your regular bills, it’s a sign that your expenses are outpacing your income. You’re likely living above your means, resulting in poor savings,” Chappius said. “Revisit and reassess your expenses and savings plan. Drop those strategies that aren’t working and create a new plan.”

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