The first of the year brings many New Year’s res­o­lu­tions, and they often involve mon­ey.  Being a bet­ter saver is a com­mon goal.  This month to give your sav­ings plan a boost, I have 2 sim­ple ideas for you:

  • The 5% chal­lenge
  • Change your fre­quen­cy


 The 5% chal­lenge

Start by going back through your spend­ing for the last 6 months.  Cat­e­go­rize your spend­ing and sep­a­rate dis­cre­tionary* and non-dis­cre­tionary spend­ing.  Look­ing at your list of dis­cre­tionary expens­es, start with the largest amount and ask, can I spend 5% less?  For exam­ple, if you spend an aver­age of $400 per month on gro­ceries, could you shop a lit­tle smarter (using coupons, sales, switch­ing brands) and spend only $380 per month? Over the course of a year, $20 a month adds up to $240 a year. The 5% Chal­lenge is a good way to begin sav­ing because it doesn’t feel like a huge sac­ri­fice.  It is just a lit­tle tweak in your spend­ing habits so it is easy to be suc­cess­ful.

*“Dis­cre­tionary spend­ing” is defined as reg­u­lar spend­ing that is not a required pay­ment.  Exam­ples include gro­ceries, per­son­al care and cloth­ing.  Exam­ples of non-dis­cre­tionary spend­ing would be your mort­gage or rent, insur­ance, util­i­ties, etc.


Change your fre­quen­cy

Anoth­er sim­ple way to reduce spend­ing so you can save more mon­ey is to spend on a reg­u­lar item with less fre­quen­cy.  Go back to your cat­e­go­rized spend­ing list.  What is your most fre­quent expense? It doesn’t have to be a large expense, just some­thing you do reg­u­lar­ly and repeat­ed­ly. Exam­ples include eat­ing out, beau­ty care, or cof­fee.  Are you will­ing to reduce the fre­quen­cy in order to become a suc­cess­ful saver? For exam­ple, say you get your hair cut every 4 weeks, or 13 times a year. Could you go every 5 weeks instead? If you pay $50 for a cut, you save $150 a year. Could you go to every 6 weeks? Now you are at 8 (or 9) cuts a year, sav­ing $250 a year.

If you get cof­fee every day at $3 a pop, are you will­ing to make cof­fee at home 1 day a week in order to save $2.50 a week? That adds up to $130 per year!

If you spend $30 a pop get­ting your nails done every oth­er week, are you will­ing to do your nails your­self every oth­er time? Instead of a man­i­cure 13 times a year, you get them done 6 (or 7) times a year. This saves $210 a year.

Repeat the exer­cise, rotat­ing between your largest dis­cre­tionary expense and your most fre­quent spend­ing items until you get to your $1000 tar­get. Write down your com­mit­ment. Put it on your cal­en­dar.  Tell your friends.  Ask you friends to join you in the chal­lenge.  Habits are hard to break and it is best to give your­self lots of sup­port. 

Every time you engage in your sav­ings habit, put the mon­ey  into your sav­ings account right away. Oth­er­wise you might feel inclined to spend it on some­thing else! You will be reward­ed as you see your account grow through­out the year.  Cel­e­brate!  With­out blow­ing your bud­get!