Could You Afford to Save $5 A Day?
See how high you can get by vowing to save money each day
They say reaching your first $1,000 in savings is hard. Which is true, yes — but what’s even harder is trying to save your first $10,000. In fact, it seems near impossible some days.
Within a matter of two years, my net worth had gone from a $13,000 deficit to over $20,000 in assets.
Honestly, I don’t know how I did it. I wish I had some miracle answer for myself and for you. However, I don’t. It most likely happened because I followed the basic and simple rules of finance. Don’t overspend, track your spending, increase your income, live frugally, be responsible – you know, everything your parents tell you that you absolutely hate to hear.
Well, speaking from personal experience — it does work. That is, for me. It works for me.
What about for you?
I have a feeling this solution isn’t going to magically adjust everyone’s net worth and help them to suddenly be okay with avoiding the mall, spending less than $300 a month on groceries, and limiting their travel. I mean, I’m surprised I’ve even been capable of doing those things.
So instead, let’s try something new.
Do you think you could afford to save $5 a day for an entire year? I mean, could you set up a daily e-transfer, and just ignore your savings account as that "comparable-to-the-cost-of-a-latte" amount slips out? Would you even notice it had moved? I know, it sounds silly. Why would anyone set up an automatic payment so small?
Well, because at the end of the year you’ll have $1,825 saved without even batting an eye, that’s why.
(PS- that’s without including potential interest gained)
Instead of the added pressure of putting a lump sum amount of $150 into your savings account each payday, decreasing the amount and increasing the frequency could be the key to your financial struggle.
For example, I was finding it difficult to put money into my emergency fund, so I set up a $20 e-transfer to send that money away every Saturday night. Why Saturday? Well, that’s easy.
My girlfriends and I go out, my husband and I do dinner – so at the end of the day, what’s another $20 on top of the money I’ve already spent? I began to realize I didn’t even notice. It wasn’t as terrifying as putting $100 into that account when I already had several other payments coming out each paycheck. It was a great relief.
Why is saving money so hard?
I like to call this restraint bias. Defined as “the tendency to overestimate one's ability to show restraint in the face of temptation.”
You see, thinking that we won’t spend money that is just sitting in our bank account because we have gotten through it before, doesn’t mean we can do it consistently. I’d like to tell you that you can, but realistically, maybe you can’t. I have hardwired my brain to ignore that money, but even still I sometimes take out an extra $100 here and there.
One study showed the following:
“This biased perception of restraint had important consequences for people's self-control strategies. Inflated impulse-control beliefs led people to overexpose themselves to temptation, thereby promoting impulsivebehaviour.”
Well okay then, let’s get rid of those impulse behaviours. By automating our finances, we are straight up cutting the middleman (restraint bias) out of the equation. After all, he was just destroying our goals anyways.
Even better? By starting small with $5 daily increments, we are allowing ourselves to adjust to stronger financial habits without really having to do too much. Find that $5 is attainable? Bump it up a few dollars every couple of months. See how high you can get by vowing to save money each day.
For example, if I make around $130 a day, can I afford to give up $5 or $10 of those dollars?
Try it out.
I’ve said it before, and I’ll say it again. Finding financial practices that best work with your lifestyle takes a little bit of trial and error. You’re going to have to test the waters to see which options are best, and how you can adjust them to set yourself up for success.
Would you ever consider saving daily instead of bi-weekly or monthly? Let me know in the comments!