Saving for a huge goal – like a home deposit, or financial independence – or trying to pay off a large debt, like a mortgage or student loans – can seem impossibly enormous at times. All too often I hear people throw up their hands in defeat – ‘I’ll never pay it off anyway, so why bother?’
Quite apart from the psychological benefits of having smaller, more manageable debt even if no debt isn’t an option, there’s one very important reason – interest.
Anita Bell wrote a fantastic book called Your Mortgage: And how to pay it off in five years or less. For the new edition, she changed the title, and I think I can see why. Many people I recommended this book to were initially reluctant, believing they’d never pay their mortgage off in 5 years or less, so why try?
So maybe you can’t pay your home loan off in 5 years. But wouldn’t it be great to pay it off in 15? 25? On an average mortgage, this could save you hundreds of thousands of dollars in interest.
Even if you start out excited and motivated though, it can be difficult to keep this up.
There are a variety of tips and tricks I’ve come across over the years for maintaining my motivation when it comes to savings. I’m a very goal-oriented person, so these may work better for some people than for others, so just give the ones that appeal to you a go:
- Fundraising thermometer: This is what I use most frequently. Our first big financial goal was to pay off our mortgage in 5 years using Anita Bell’s book. I have created (in a spreadsheet, but you could do this in a word processor document, or on a piece of paper, anything you like) a kind of “thermometer” to remind us of where we are up to, and how far we have come. All you need to do is write the total loan amount at the bottom, $0 at the top, and then fill in the gaps with 5% increments. So, for example, if you have a $150,000 loan, you would use $7,500 increments. So, from the bottom, it would read “$150,000; $142,500; $135,000” etc. Each time you pay off another 5%, you can colour in or highlight that amount. (You could use this as for savings or paying off a credit card, anything).
- Advent calendar: Remember the excitement of an advent calendar at Christmas? Draw up a chart (kind of like a calendar) with $10, $100, or $1,000 increments (or any other amount that suits your goal). If you are saving up for something, for example, if you needed to save $1,000, the first box would be $100, the second $200, and so on, up to $1,000. If you are paying down a debt, for example, a $20,000 loan, the first would be $20,000, the second $19,000 and so on. Put this on your fridge and remind yourself each day of how far you have come, and what you have left to achieve. Reward yourself, like an advent calendar! (Hmm, now can I make one that has chocolates…!?)
- Create a miniature ‘vision board’: of what you would like to achieve – freedom to laze around on the beach, a great library of books to enjoy, your dream house – whatever turns you on. I have a small plastic pocket at the start of my money diary that I used for this purpose. Or, make a Pinterest board that shows all of the things or experiences you’re saving for. Pinterest can be great for curing magazine addictions!
- Make yourself accountable: Tell other people what your goal is. If they laugh, all the better – prove them wrong. But if you can, find a supportive community of other likeminded people – Simple Savings has been a fantastic source for me.
- Use tickers: If you are a member of any savings sites or comment on blogs, why not create a savings ticker that you can link to or post? Even if you just use it for yourself, this can really help to visualise your progress. If you don’t want your personal details out there, simply set the ticker to display in percentages rather than dollar figures. Tickerfactory.com has a nice range of free tickers for both savings and debt reduction which I’ve used frequently.
- Use a calendar: If you have a monthly savings goal, divide that goal by the number of days in the month, and write that figure on each day. For every day that you meet the goal, give yourself a sticker or a big tick.
- Pretty up your spending plan:We kept a photo of our house in our budget spreadsheet to remind us of why we were doing this.
- Have a once-a-month finance meeting: although we ran (and still run!) a pretty tight ship whilst paying off our mortgage, our one big treat was a once-a-month dinner out during which time we discussed (and celebrated!) our progress.
- Use apps: There are lots of mobile apps that can help you visualise your savings. This includes internet banking – I log in to my internet banking fairly frequently to keep an eye on things, and this can be quite motivational too.
- Some banks allow you to customise your card with a photo: You can use this to remind yourself of your goal each time you go for your wallet. If you’re really smart though, deposit the money you would have spent on this extravagance, and simply add a photo sticker to your card or wallet.
- If you have a mortgage, or are saving a deposit for a house: Copy your house plans (or dream home) onto graph paper. Count the number of squares, and then divide the total cost of your house by this figure. Each month, after the interest has been charged, see how many more squares of your home you have now ‘bought’. Even if at first you’re only making small victories – I remember when we owned a small patch of carpet in our living room! – it’s a great feeling to have an entire room coloured in. Every time you walk into the room, you know that you – not the bank – owns it.
- If you are saving for financial independence : I found it really useful to make a list of all of our expenses annually, and list them in order from smallest to largest. For example, my smallest annual expense is a $21 membership to Simple Savings. Once I’d saved $21 x 25 ($525), I knew I’d covered my membership expenses for life. The best bit was, this would come out of the interest on that money! If I decide to stop subscribing at any point, I can still withdraw my $525! It’s just like winning lifelong membership. Next was our phone bills, and so on. Every time you look at your ladder of expenses, think about how you will never have to pay that bill again – the interest will be doing it for you.
Of course, we don’t necessarily use all of these methods at once, but I strongly believe that celebrating achievements is more effective than feeling bad when you haven’t achieved a goal.
I’d love to hear other people’s methods of keeping on track.
How do you achieve your financial goals?