Americans are notoriously bad at saving money, which explains why the majority live paycheck to paycheck, and why only 60% of U.S. adults have the funds to cover a $400 emergency. If your savings are in a sorry state, it’s crucial that you take steps to improve. Here are a few reasons you might be neglecting your savings — and how to address them.
1. You don’t have a budget
Many folks don’t save money because they assume that they can’t afford to. And the reason they think that way is because they have no idea where their money keeps disappearing to — all they know is that somehow, by the end of each month, there doesn’t seem to be anything left.
If that’s been happening to you, here’s an easy solution: Start following a budget. That way, you’ll see what you’re actually spending money on, and where there might be room to cut back so you can boost your savings rather than ignore them completely.
To create a budget, list your recurring monthly expenses, factor in one-time bills that pop up randomly throughout the year (think roadside assistance service, warehouse club renewals, and the like), and compare your total spending to your total earnings. If the difference is $0 — meaning, you’re spending down your entire paycheck month after month — then you’ll need to reduce your spending, and having that budget will help you pinpoint the expense categories to tackle first.
2. You’re not paying yourself first
Having a budget is all fine and good, but what happens when you’re tempted to spend $200 in a given month on leisure when you’re really only supposed to be spending half that amount? Suddenly, you might fall short on your savings goal, and the reason boils down to not prioritizing it.
A better bet? Get into the habit of paying yourself first. Doing so is a simple matter of signing up for an automatic transfer and having a portion of each paycheck land in your savings account before you get the chance to spend it. In the aforementioned scenario, you wouldn’t be able to spend an extra $100 if that money wasn’t available to you, so think of that automatic transfer as an insurance policy of sorts.
3. You’ve never experienced a financial emergency
Many people don’t save for emergencies because they’re convinced that they don’t need to. If that’s how you feel, then it’s probably because you’ve never had a catastrophic bill upend your finances — or at least not yet. But know this: No one is immune to emergencies. You could wake up one day to find water pouring down through your ceiling, or go into your driveway to start your car only to have it die on you. Similarly, you might get hurt or sick and get slapped with a series of disastrous medical bills, or get laid off at work out of the blue.
All of these scenarios could leave you on the hook for a boatload of money you just don’t have, and that’s when you’ll really run into trouble, because without savings, you’ll be forced to rack up costly debt. Rather than wait for an emergency to strike, assume that one will happen eventually, and plan for it accordingly.
If you’re lacking in savings in a really big way, step up and make some changes. Reduce your spending to free up cash to save, and consider getting a side job to help your progress along. No matter your age or income level, you should always aim to have a minimum of three months’ worth of living expenses in the bank, so if you’re nowhere close, stop making excuses and start saving more.
