Why You Should Save $5 a Day Instead of $150 a Month
When making financial plans, we tend to project our monthly goals, showing numbers that we try to hit with our monthly paycheck. But did you know that trying to meet your savings goals daily could be a better strategy?
A study led by the University of Shlomo Benartzi and Hal Hershfield and University of London’s Stephen Shu found that people are four times more likely to prefer to start saving daily versus monthly. In the study, daily deposits were $5 daily, while monthly deposits framed $150 monthly.
This is due to the bulk amount of $150 being viewed as a painful, large sum that seems impossible to achieve considering all the other expenses on a person’s monthly list. A $5 daily “loss” seems more affordable as the value is not too high.
If you find this daily savings goal to be much more manageable rather than allocating a larger sum of money per month, try these tips in order for your finances to reach a tiptop shape.
Try Giving Up Your “Little Luxuries”
Every day, most if not all of us enjoy life’s little luxuries such as our morning coffee from a cafe or a ready-made to-go sandwich. But picture this: you get to save a few dollars for your daily savings by giving up going to the cafe and start brewing your own coffee or making your own sandwich at home.
Manage Your Spending Habits With an App
Knowing your spending activity is very essential. To help you conveniently track how you spend your money, try mobile applications such as Acorns, Digit or Albert. These are also the apps that were used by participants of the research aforementioned.
Acorns summarize your purchases and help you invest the remaining savings. Digit and Albert both do the work for you. Both apps analyze your spending habits and automatically puts the remaining money into a savings account.
Set Up Automatic Transfers
Putting your savings on autopilot will help you prevent getting off track. You can automate your savings by scheduling automatic transfers regularly. Gather all the daily $5 savings you got for the week, and transfer it to your savings account. Make sure to set up a consistent schedule for reminders to avoid neglect.
This daily savings method is truly a life hack that you need to consider. By saving up $5 daily, you get to buy the things you need or have your emergency fund secured. If you follow the above-cited tips, your savings fraction from your monthly budget will no longer become a heavy burden.
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