I woke up on New Year’s Day knowing I wanted to take steps to save more money and save better in 2021. But how to do it? I decided to break down my plan into four basic steps.
Identify New Risks And Save Accordingly
I have a savings plan that includes an emergency fund, savings for travel and “pay yourself first” purchases, and retirement.
That’s an over-simplified version but those are my three major areas. In my emergency fund, I’ve tried to save enough money to cover the unexpected–a flat tire, a trip to the dentist I didn’t anticipate, a laptop that suddenly fails, etc. But in 2021, I have to contend with new risks–the loss of steady income, the potential for payments to be delayed or not forthcoming depending on circumstances, etc.
I’m adjusting my saving habits to meet these new potential pitfalls in 2021. I am trying to reduce my splurge spending (easier to do when coffee shops and bars aren’t doing indoor service!) and put that money aside for the rainy days that could be ahead. I am also shifting a modest amount of money out of that travel and fun fund for the same reason.
Reducing My Consumption
My vices include going to the movies, splurging on delivery food from sushi bars and Indian restaurants, and I do love a good craft beer. With coronavirus closures and other issues, it was easy to give up the movie theater visits–they simply aren’t open.
But reducing my consumption in food areas was challenging, which is why I started learning how to make my favorite Indian, Thai, and Japanese dishes at home. I dedicated myself to reducing my food waste and have really maximized my grocery dollars. I have been putting a bit of extra money into my emergency fund thanks to this, and I still don’t feel like I am missing out on much.
Thinking Like A Business Owner
I have tried to approach my finances like a small business, and that means finding ways to cut corners on routine expenses such as paper, bathroom supplies and cleaning materials, etc. When I started comparing prices like I was running a business, the first thing I was confronted with was the savings of buying in bulk rather than buying one-here and one-there.
For example, take the same brand of toilet paper you usually purchase and do the math on how much you save if you buy the giant pack of that compared to the four-roll container. That sort of savings approach is what you need to be successful in triaging your savings more like a business.
Save Money By Not Giving Up
One big mistake I made in my earlier savings efforts? Not viewing the inevitable financial setback as something that WILL happen. If you assume the worst WILL occur at some point, getting back on your feet financially afterward is a lot easier because you expected it–it didn’t come as a total shock/surprise.
Accept that the setbacks are a part of life and just get back on the horse, so to speak, with your savings. That was the number one mistake I made in earlier years. I had a much harder time getting back on track because the financial emergency seemed really big, unexpected, and unsurmountable. But these emergencies pass eventually and if you go in with that mindset, recovery is a lot easier to start.
Joe Wallace specializes in personal finance, military affairs, and consumer protection topics. Since 1995, his work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and collects unusual vinyl records, which gives him an excuse to write the vinyl blog Turntabling.net.