It's pretty easy to save money over a short period - just make a savings deposit and feel good about yourself, right? The real challenge comes over the long haul - how can you make yourself do it consistently and also not be tempted to spend the money? Here are nine tricks I use to make it happen.
Use automatic savings plans The biggest trick of all is to make savings automatic. I have a number of automatic savings plans that withdraw from my primary checking account on a weekly basis and put funds elsewhere for various priorities. For starters, try building up an emergency fund by opening a savings account, then setting up an automatic withdrawal from your checking account into this savings account, a small amount each week that you can choose to increase later.
Use automatic investment plans Similar to the idea of an automatic savings plan, I basically just withdraw an amount from my checking account each week to help
build my portfolio. Again, the same logic: if I make it automatic, it takes no special effort from me and I nearly forget about it.
Have an emergency fund Everyone is going to eventually have some sort of disaster strike their life: car trouble, a washer that suddenly dies, and so on. Having an emergency fund in a fairly easy to access place makes it so that the emergency doesn't drown you. A friend of mine keeps her emergency fund literally in a glass piggy bank in which she shoves $20 bills regularly. If something bad happens, she smashes the bank and gets the cash to take care of the problem.
Get rid of your high interest debts before jumping in too deep Aside from having an emergency fund (which is itself a mechanism to avoid high interest debt), you're much better off devoting money to getting rid of high interest debt than for saving for the future. High interest debt will be an albatross around your neck for as long as it exists - focus on getting rid of that before saving up big wads of cash for the future.
Start small, then slowly ratchet up the automated savings At first, I couldn't believe that I would ever survive by having this money disappear automatically - it seemed like I was barely making ends meet as it was. So I started off very small, and I realized that by having less money to work with, I simply learned how to make it work and it quickly seemed "normal." Since then, I've slowly ratcheted up the savings until I'm now putting away close to half of my salary in a given month. The amazing part is that I still don't really miss it.
Make it somewhat difficult to access the money Put the money into a savings account that you can't easily access: no ATM card and no local branches are good things because then you won't easily spend the money. Investment accounts are also good because you get walloped with a tax bill if you get greedy in the short term.
Make the investments easy If you're not investing because you're stressed out over the number of options, just go with something basic and easy. Get a very basic index fund that's easy to track. My recommendation is the Vanguard 500 - you can know how it's doing every day by simply watching the S&P 500, it's diversified, and you're barely paying any fees at all by investing in it.
Know your goals Set clear intermediate and long term personal finance goals so that you know what you're working for.
Try different things to see what works for you As one of my oldest friends once said, "Frugality is a four letter word." Many people want to live the "good life" and in their minds frugal living is incompatible with that. I couldn't disagree more - trying new things is always fun, and frugal and free things are just a part of that. If I find something I really enjoy that happens to be inexpensive, why not incorporate it as part of my routine? The end result of doing this regularly is that your life just becomes less expensive, but no less enjoyable (in fact, for me it's more enjoyable because the stress of paying bills and paying off debts is largely gone).