National Save for Retirement Week is here. Are you prepared to retire? If not, you’re not alone. According to the Aegon Retirement Readiness Survey, only 18 percent of people are “very confident” that their retirement savings will be adequate, while just 5 percent feel “extremely confident.” But don’t despair — it’s never too soon to start saving.
In honor of National Save for Retirement Week, I’m sharing my experience with an extreme savings experiment that’s designed to amp up your saving skills. Think you’re up for the challenge? Read on.
Extreme savings experiment
At the beginning of last year, with postholiday spending fatigue and ever-present student loans, I decided it was time to adjust my spending habits dramatically: I cut nearly all my discretionary spending for an entire month. (Discretionary income is the amount of money remaining after you pay for basic needs like food and shelter.)
Sounds barbarian, right? It doesn’t have to be.
6 tips to cease spending
If you’re up to the challenge and hungry for some sweet savings, just make sure you’re really committed and determined before even attempting. This is not for the weak-willed. Here are a few things to consider.
1. Set the “rules” upfront
During your experiment, you can set the standard for what to buy and what not to buy. Think about where you spend your money. Maybe you can change your cell phone carrier, cut out your magazine subscriptions, or cancel Hulu or Netflix (gasp). You can really tailor the experience to whatever you’re comfortable with. For example, after 2 weeks, I gave in and allowed transportation fares on the weekends, especially if I was attending a free event. For me, it was about saving money within reason.
2. Pay attention to how you define needs vs. wants
During your savings period, pay attention to what you want to buy (and realize what you’re surviving without). What’s difficult for you to do without? After the experiment, try to modify your habits in order to save. For example, if a significant amount of your money goes toward restaurant tabs, find ways to cook dinner at home more often, utilize coupons, and so on.
3. Dig deep into your finances
Improving your personal financial health is the whole point of this exercise. While you’re at home not spending money, take the time to scrutinize your account activity and ask:
- Where can I save more?
Explore ways to avoid or reduce exorbitantly high bills. Sometimes, calling utility companies and asking if there are any promotions can help reduce static monthly bills. And as for your car insurance, make sure you’re only paying what’s right for you. At Esurance, policyholders could qualify for one of our many car insurance discounts.
- Am I paying for the things I’m using?
Take inventory of everything you purchased within the last month and list what could be cut. For example, consider whether you really need that monthly gym subscription — if you’re not going, you shouldn’t be spending money on it.
4. Know it can affect your relationships
From happy hours with coworkers to trying new restaurants with my husband, I never realized how much spending was tied to my relationships. Make sure to tell your friends and family about your goal. You’ll need to be confident in explaining why you’re opting out. Otherwise, your friends will think something is up when you decline every social invitation. Plus, if they know what you’re trying to achieve, they should support you. It can be a tricky thing to explain to those not in the same financial boat. And while it’s never fun to be judged, drowning in debt or living paycheck to paycheck is significantly less fun.
5. Use your own resources
Instead of buying new clothes, dig through your closet for clothes you haven’t worn lately. Check out books from the library instead of buying them. Dust off that bike and enjoy the free air and exercise. Organize everything you own and sell the stuff you don’t need. There’s probably more at your disposal than you think.
6. Get creative to stay social
You can consider this experiment an opportunity to try new things. A little research on free local events can help keep your social life somewhat alive. Your friends might even appreciate the chance to save money too. Buddy up for additional support during the experiment. My sister tried it with me so we could commiserate and hang together. (Thanks, Sis!)
A few ideas:
- Work on that “someday” project. Novel, blog, painting, invention. Use supplies you have at home.
- Volunteering is always free (and sometimes comes with a T-shirt. Bonus!).
- Host a potluck dinner where everyone brings one dish and a drink of their choice.
- Challenge yourself to use up every possible pantry item before going grocery shopping.
- You can also try alternative gift-giving as well. For your friend’s birthday, give her 3 free babysitting sessions instead of a store-bought gift.
Though I didn’t follow all the rules very strictly during my one-month experiment, I did end up with an extra $1,000 to take to the bank. I might just make this an annual tradition to get my finances in check.