The last margarita has been poured. The last putt on the 18th hole has fallen. The cover has gone on the pool. Yes, the ball has dropped on another summer, and those depressing blues of returning to a rote and predictable existence have crept in. What may be even more depressing is checking your bank account and realizing how much you have spent on all that summer fun. The average American household is projected to have spent $1,798 on vacation this summer, an increase of 11% from the year before. How much did you spend? How about those little day trips or weekend excursions to the shore, or the city for some outdoor culture and shopping, or a new golf course? Add in back to school shopping for the kids and countless nights out to eat and drink, and you have the makings of a fun, but pricey summer.
The end of the summer is always a good time to step back, re-evaluate and get back on track financially. One of the main issues I encounter with clients, or through any financial education I do, is that people are not saving as much as they should, at any time of year. This article is focused more on short term saving; the liquid, safety net, “there when I need it” fund, the Christmas savings fund, the “Next summer we are definitely going to Hawaii” fund, the emergency fund, so when the car breaks down you aren’t eating Ramen Noodles for three months fund. Today’s article is not delving into retirement or mid to long range savings. My goal today is to make everyone aware that we need to start saving more money. Period. Bottom line. The good news is, there is no better time than right now to start. The end of the summer provides a great opportunity to get going, and I have provided a few tips to make this transition easier.
Embrace Routine:
One thing that the end of summer signifies is the return to a life of schedules and routine. The kids are back in school. We go back to work with no vacation days in sight for a while. More weeknights are spent at home on the couch with a glass of wine and the television. It may seem mundane and robotic, but the good news is, we tend to spend less during these times. Embrace routine and try sticking to it. That spontaneous, spur of the moment trip to the amusement park won’t happen in November. Use this to your advantage, and allow yourself to put away some of those dollars that would have been spent in summer indulgence. Don’t just blow it on something else, like a new pair of shoes.
The Season for Sacrifice:
This goes hand in hand with the first tip of embracing routine. The summer is the time for letting loose and being a little more careless with your spending. If this is true for you, then the next few months have to be the time for saying “no” and making some more sacrifices financially. Do you stop and get that five dollar latte on the way to work every morning? Why spend $30 a week when you can spend half that? Maybe grab the latte on Mondays to get the week going, and Fridays as a little of end of work week treat. The other days, bring coffee from home, or spend less on a regular Dunkin Donuts coffee for $1.39. There’s nothing wrong with bringing lunch from home a few days a week either. How many nights a week do you go out to eat? Maybe this number is higher in the summer, maybe it is not. Personally, I know I go out to eat a lot more in the summer months, whether it’s part of a nice night out or just a way to break up the monotony of cooking. Either way, try reducing the number of times you go out to eat; particularly if you have kids, you could be saving a lot. Remember, it’s all about commitment to a routine. Sit down one night this week and map out a strategy. You will be surprised how many different ways you can save money in your daily life just by sacrificing something small at times. No one is saying to totally give up your lattes (they do taste pretty good); recognize though that moderation is crucial, and can make a big difference in your spending/saving habits.
Setting Weekly/Monthly Savings Goals:
This is probably the most important advice I can give. What good is cutting back on your lattes if you don’t put the money away or have a plan for it? Depending on how you get paid (weekly, bi-weekly etc), try to establish some sort of savings goal. Maybe it is 50 dollars a week, or 100 dollars a pay check, but there has to be some sort of goal to keep you focused. Once you have it down cold and repeat it, it starts to become habit. Obviously it is all relative to how much income you have coming in and what debt/bills have to go out the door, but you can easily curtail the numbers to fit your budget and lifestyle. Just think what cutting out four lattes and one “dining out” trip a week will do for your expendable money. That’s an easy 50-60 dollars a week right there, at minimum.
There is also the concept of “paying yourself first” that you can put in to place. After the mortgage/rent and bills are paid, immediately deposit your savings goal into a separate bank account. This will be done BEFORE you go grocery shopping, or take the kids to McDonald’s, or go out for drinks with the boys to watch the game. The idea here is once you have saved what you need to save, the remaining money will be used as your budget for everything else. We have a tendency to spend first, then save what is left. I recommend doing the opposite. Save first, then spend based on what is remaining.
No matter what methods or strategies you employ, saving money is one of the fundamental pieces of financial health. Future articles will focus on more long term savings strategies such as 401k, IRA, brokerage accounts and cash value insurance plans. For now, try to get into the habit of increasing your short term savings. It starts with a mindset. Saving money is a commitment and a frame of mind. Set goals, put a plan in place, and stick to it. You will be surprised what you can accomplish. Who knows, you may find yourself paying for that trip to Hawaii next summer out of your new found vacation fund, as opposed to your paycheck.
Peace and Wealth 