Unfortunately, this approach rarely works and most people (including those on higher incomes) find themselves forever living pay cheque to pay cheque with no savings to fall back on.
The key to saving successfully is to get into the habit of setting aside your savings FIRST (also known as paying yourself first), and then mapping out a way to limit your spending to only the remaining amount, without dipping into the savings or the credit card.
LISTEN: Helpful tips for saving money on I Don’t Know How She Does It. (Post continues…)
I often have people tell me that they are great at paying down debt but not at saving – this is only because saving is perceived to be at our own discretion and most of us lack a system for saving, so here are some tips to get you started on the saving path:
Step 1. Set a clear saving goal
Write down how much you want to save, by when, and why this goal is important to you. What will it mean to you to achieve it? How will you feel if you don’t? It also helps to carry around reminders such as photos or inspirational quotes to keep you motivated.
Step 2. Pay yourself first
Treat your savings like a bill. Working backwards from the goal, figure out how much that means you have to save each pay and set up a direct transfer to an online saving account (or better yet, ask your employer to split your pay into two accounts). As the saying goes, out of sight, out of mind! Comparison websites such as Mozo and Finder are great resources to help you find a great deal on saving accounts.