When drawing a budget or any financial strategy, goals are often set in terms of monthly values. You allocate a portion of your paycheck to savings, but at times, it can feel like a stretch. However, if you take that amount and divided it by the number of days in the month, you would get a much smaller number.
According to a study conducted by Shlomo Benartzi and Hal Hershfield from UCLA’s Anderson School of Management, along with London’s Stephen Shu, people are four times more likely to prefer saving daily versus monthly.
The study asked subjects to save either $150 for a month or $5 a day. They found that people tend to think of the whole number as “large” – which it is, but not so daunting when broken down per day. People tend to think that setting aside such a large portion of their income would make them unable to cover their other monthly expenses, but a daily $5 “loss” didn’t seem too intimidating.
This is why trying to meet a daily savings goal instead of a monthly goal could be a better strategy. If you find that this savings strategy might suit you better than allocating a larger sum of money per month, here are some other tips that may help you manage your finances much better:
1. Give Up the “Little Luxuries”
You and I may not be able to afford the big luxuries of life – yet – but we do enjoy the “little luxuries” of life every day like getting your morning cuppa from a coffee shop, getting a pre-made sandwich for breakfast, taking the cab to work, etc. These may seem like purchases that don’t make a difference to your budget, but they end up taking up most of your disposable income. When you think about it, you can save a lot of money by making your coffee and breakfast at home or taking the bus instead of a taxi – maybe even more than $5 a day!
2. Track Your Spending with an App
Keeping track of your expenses is one of the most important aspects of money management. You only realize just how much money you spend unnecessarily when you are making a note of every single one of them.
Luckily for us, modern technology has made it so easy with the help of mobile apps like Acorns, Digit, or Albert. These were the apps used by the participants of the study as well. Acorn gathers all of your purchases and helps you invest the savings that remain. Digit and Albert perform similar functions, but they also analyze spending habits and automatically allocate the remaining money into a savings account.
3. Make Savings Automatic
If you make saving money something you do without having to think about it, you can ensure that you do not slip up or even forget about it. There are many ways to automate the process of setting aside a portion of your income every month into a savings account. You can do this with a standing order at the bank or even through the apps we mentioned previously.
Gather all the $5 you saved throughout the week and put it into your savings account when it comes to an end. Set regular reminders so you don’t end up forgetting about it.
The idea of saving $5 daily is genius! Most of us do not consider that to be a big amount, so it shouldn’t interfere with our daily lives. This way, you can either buy things that you’ve always wanted or make sure your emergency “rainy day” fund is secure. Follow the tips we spoke about to make saving money easy!
