How Micro-Saving — Even for the Mundane — Can Keep Your Finances on Track

Casey Hynes — Up Close and Personal Finance

Saving money is one of those things you know you should do — have to do, really, if you want any kind of financial peace of mind. But it isn’t always easy, and it definitely isn’t sexy. That’s why you have to find motivation any way you can, including by creating outlandishly specific savings goals.

I know the savings struggle intimately because five years ago I had no savings. I was living paycheck to paycheck and terrified of budgeting because I was sure I’d be depressed by how little money I was earning. The idea of setting aside some of that precious cash each month seemed out of the question.

Then my friends started getting engaged, and they started asking me to be in their weddings. I realized if I didn’t start saving I was going to have to go deep into credit card debt to be part of their big days. Having already pulled myself out of credit card debt a couple of times in my 20s, I was determined to avoid that fate for a third time.

Once I started budgeting (albeit loosely), I was pleasantly surprised to find not only was I earning more than I had thought, but also saving wasn’t as challenging as expected. In fact, it was kind of fun. Who knew acquainting yourself with your money, rather than cowering under blankets and praying you have enough for this month’s rent, could be so rewarding?

To ensure the cash flow necessary for my involvement in friends’ weddings, I started estimating how much I’d need for all of the associated events and attire, and then I set my savings goal a little higher. Having a buffer gave me peace of mind and allowed me to splurge a little when traveling for those wedding weekends. More importantly, having a specific purpose for that money gave saving a sense of urgency, and that kept me on track.

Human beings are notoriously bad at long-term planning. We’re wired to value short-term over long-term gains, regardless of whether the latter ultimately brings more value, according to according to Psychology Today. That can make saving money for the future challenging because we need to persuade ourselves we will be happier making that choice than if we indulge in an exciting expense today.

To be clear, saving is also incredibly difficult if you live paycheck to paycheck or are struggling with debt. Urgent priorities, such as paying rent and keeping the water on, leave little cash and less mental bandwidth left to attend to long-term planning. But if that’s not your situation, saving money is crucial to your stability and well-being.

I noticed saving for a friend’s wedding was easier than, say, saving for a down payment on a house because the need seemed more urgent and I’d get the reward sooner. My fiancé and I wanted to buy a house someday, but not before this big social event in six months. Therefore, saving for the wedding felt more tangible.

I realized I could apply this mentality to other categories. Rather than wait until another wedding, graduation or family milestone arose, I could create little funds for those types of events. I could be proactive, presumably ensuring those events would be more exciting since they wouldn’t be tinged by money stress.

That worked for a while. But the problem with those broad savings categories was they lacked the same urgency as planned events. It’s hard to convince yourself that putting $100 into an ambiguous Family Events account this month is going to make that much of a difference. Why not spend it on something I want this month instead? Isn’t it good to live in the moment?

I should note that before starting these micro-savings funds I established an emergency savings account I contribute to monthly. Emergency funds are important regardless of your line of work, but as a freelancer, I have no safety net but my savings. I prioritize that account above any events or splurge accounts.

But back to my live-in-the-moment impulse. I could see myself teetering on the edge of a slippery slope, and I knew I needed a new tactic. Since broad categories weren’t motivational enough, I started creating more specific goals, such as Brother’s Gradution or Nephew’s 1st Birthday. That was more effective because not only could I envision those events, but I also could budget more easily, and I could see more clearly how each dollar not blown on an unnecessary expense moved me toward my goal. It’s easy to resist spending $10 on lunch when I need to save $400 for a plane ticket to my brother’s graduation, and I’m tracking how quickly every $10 adds up.

That tactic has been especially effective for wedding planning. When I think about our budget as a whole, it’s a big number to wrap my mind around even though we’re being relatively conservative. But thinking about each component of that budget helps me see the value of each dollar. Now, when I want to spend $100 on concert tickets, I remind myself $100 would cover one to two reception guest meals. Or, when I want to buy myself a pink armchair from Goodwill because it’s kind of chic, I think how that $45 would go a long way toward affording the invitation suite I want.

You don’t have to go as micro, but thinking about the trade-offs and having highly specific and tangible goals have really helped me save and spend more conscientiously. It has reduced my stress about wedding costs and paying for other big events because I see how much impact I can make in my savings by resisting small in-the-moment buys.

Bethany M. Griffith, a Certified Financial Planner with Abacus Planning Group in Columbia, South Carolina, says it’s important to reinforce good decisions, especially when you’re establishing a savings mindset.

“If you’re trying to reorganize spending or adjust your budget to make savings happen, consider a ‘rewards’ system,” Griffith says. “For example, each time you bring your own lunch or make dinner at home instead of getting carryout, transfer that savings amount into your specific savings account to move you closer to your goal. The visual check-in each time you look at your accounts is a powerful driver for changing behavior.”

I know this from experience. The other day I transferred $2 into a savings account after I resisted the urge to buy gold charger plates at a yard sale that I thought would look super cute when we host Thanksgiving this year. Knowing I would have the satisfaction of seeing any amount transferred to my wedding account motivated me to back away from the chargers. It also inspired me to create a Thanksgiving savings goal, so instead of burning through money going out to eat this summer, I’ll forgo some of those dinners and save for a Thanksgiving centerpiece that will probably bring me more joy than those charger plates.

There’s another good reason to create micro-savings goals: You’re less likely to abandon the cause, even if you have a rough month.

“Having separate accounts for specific goals allows people to visualize their money and the progress they’re making towards their goals in a much more tangible way,” says David A. Robbins, a Phoenix-based CFP and Vice President of Investments at Moors & Cabot Investments. “It also sets people up to have the experience of achieving multiple little victories rather than spending considerably more time working towards a greater victory with no wins along the way.”

He gave the example of setting four $250 goals instead of one $1,000 savings goal. “If the saver trying to put away $250 for four goals got halfway there and then ran into trouble, they would still be able to see that they had succeeded twice and would be more likely to use those amounts for their original purpose,” Robbins says. “On the flip side, someone who tried to save $1,000 and stopped after they had saved $500 would be more likely to feel as though they had “failed” to meet their savings goal, and then spend their hard earned $500 on something.”

The more tangible you can make the savings process, the easier it will be to stay motivated. Small, realistic milestones allow us to experience the high of achievement, which will make saving palatable and even fun. And tying money to things you want — whether Minted wedding invitations or holiday decor — helps you see the value of each dollar saved.