4 Obstacles to Saving Money and How to Overcome Them

Good habits

One of the most stressful financial situations is not having a safety net. Savings are important in both the short and long-run. In the long-term, savings represent a comfortable retirement when your ability to earn may be greatly diminished and you may have greater medical expenses and health problems. In the short-term, savings represent the ability to deal with hiccups like an unexpected car repair, higher than normal utility bill or any other money crisis that crops up.

But for many of us, no matter how much we earn, it seems impossible to save. Most of the clients and potential clients we talk to didn't have a safety net, or didn't have enough of one, and this contributed to the serious financial problems that led them to come to us about filing bankruptcy. Over the years of helping people straighten out their finances and talking to them about how they got into money trouble to begin with, we've discovered four common obstacles that prevent people from saving.
Today, we'll look at these four issues and how you can get past them...

(1) Chronic Overspending
If you're always buying the latest gadget, trading in your car every couple of years for a newer model, eating out frequently and shopping for a spendy wardrobe, you won't be able to save like you should. You can be an overspender at any income level and it's a bad habit no matter how much you earn. You are probably overspending if you run out of money by (or before) payday, can't pay off your credit cards each month (or can only afford the minimum payment), shop to make yourself feel better and frequently have buyer's remorse after you spend.
Beat this bad habit: To break the habit, you must understand it. Try an app like Spending Tracker for a month to see exactly where your money is going, then set a budget and stick to it. If your spending is driven by emotions, find another outlet like walking or jogging rather than shopping. If your spending is triggered by certain people, change the dynamic. If you think you have a spending addiction, consider getting counseling.

(2) Lack of Financial Education
Understanding finances doesn't come easily to everyone, but you need a working knowledge of money management to develop and stick to good habits. No matter how old you are, it's never too late to educate yourself about how credit cards truly work, how interest rates function, how to set budgets and why saving is a critical habit to develop now. MyMoney.gov offers free information and financial literacy tools on five important topics – earning, saving and investing, borrowing, spending and protecting your finances. The tools are free and you can take quizzes to reinforce what you've learned.
Beat this bad habit: Our public education system has failed most of us on teaching basic money management skills and colleges often perpetuate bad habits by encouraging student loans without an understanding of the ramifications of debt. It's up to you to develop money smarts. Failing to save can lead you to financial trouble now and, in the long-run, will seriously impact your quality of life leading up to and after retirement.

(3) Lack of Discipline
Building up savings is a matter of discipline much like sticking to a diet, but the results if you don't save are much worse than a muffin top or a beer gut. There's always an excuse not to save – there's always something to spend on, things you or your kids want and upgrades to your life you want to make. Not saving is the easiest thing in the world to do. Consistent savings, by contrast, is a harder habit to develop and even harder to stick to. Even those that are disciplined in other areas of their life – like those that exercise regularly and have good eating habits – can falter when it comes to their finances. We see this issue across all ages, demographics and incomes.
Beat this bad habit: Baby steps can help, as can putting savings on auto-pilot so you're forced to do better. Set up an automatic transfer to savings each time your direct deposit hits your bank account – even if it's just for a small amount like $25 a payday. Try and cut back on spending to increase the amount of your savings transfer. Anytime you have a windfall like birthday money, a work bonus, overtime pay or a tax refund, sock that away, as well. Try and reward yourself by saving, not spending.

(4) Overwhelming debt
This last is a circumstance that can take down people who have an understanding of finances and are disciplined enough to save. Major life events such as accidents, an illness, job loss or the break-up of a marriage can make it hard to pay bills and allow significant debt to accumulate. With bills piling up, not only is it hard to save, but it can usually eat through whatever savings you may have. Some people even borrow against retirement accounts or make unwise choices to deal with the debt that's accruing.
Beat this bad habit: Once debt piles up, it can be hard to vanquish, particularly if your income has also taken a hit such as with a job loss. If you can cut back on expenses to deal with your debt, that's the smart step to take. But if your debt is simply too overwhelming to pay on your income, filing bankruptcy may be your best option to get rid of many of your unsecured debts , including medical bills and credit cards. This can get you a financial fresh start so you can get back on track with savings.
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