Most of us know that saving money is, ultimately, a good thing. When the economy began to tank, we heard much about our low (and sometimes negative) savings rate. Even with all of the discussions and warnings about saving money, it can be extremely difficult to put it into practice.

Well, here are four easy techniques you can implement, that will help you to save a lot more money without even realizing it!

Pay Yourself First – Automatically

Most people have heard the mantra, “pay yourself first”; however, many people still neglect to do so. With each paycheck that comes, they continue spending as before and promise to start saving next week.

In order to make this mantra a reality for you, start saving automatically. You can do this in two ways. First, you can set up a portion of your paycheck to be directly deposited (You do have direct deposit, don’t you?) into your savings account. Even most online banks allow for this.

Secondly, you can have all of your pay deposited into your checking account, and just set up a recurring transfer between your checking and savings accounts. Either way, your goal is to not even see that money – lest you become tempted to spend it!

Actually, I would suggest a third way of doing this. Have your paycheck deposited into your savings account, and only transfer money out that youhave to spend! That way you are much less tempted to spend any surplus that you may have, since it will mean depleting your savings account in order to do so.

This can be a great way to automatically build up an emergency fund, or save up for an expected purchase!

Save Your Savings

If you are anything like me, once you decide to make a purchase, you look for deals, rebates, and coupons in order to spend less money! Well, the next time you spend less than you originally budgeted for an item, save the difference.

Since you already planned to spend the full amount, you won’t even miss that money. However, that extra cash can do a lot for you if you stash it in your savings account.

Consider the Opportunity Cost

Opportunity Cost simply means the value of your next best alternative. This is different than considering the price of something. Let’s look at a very simplified example.

Say you only have enough money to either get a slice of pizza, or an ice cream cone. If you decide to get the pizza (the obvious choice here ;-)), then your opportunity cost is not the money you spent on the pizza, but it is the loss of the satisfaction that you would have received from the ice cream.

Most of the time that we have to make a decision about saving money, it is usually in opposition to spending. So, when you choose to spend $150 on cable TV, then your opportunity cost is the benefit that you would have received from saving $150 extra each month!

So in the example above, choosing cable TV over savings for 5 years costs you nearly $10,000!!! That is if you save $150 a month for 5 years and earn 2% interest each year.

Thinking in this way makes it more difficult to pass on saving money, since it causes you to focus on the value of what you are foregoing. So the question is not just, “Is cable worth $150/month?”, but instead you must consider, “Is cable worth me depleting my savings account by $10,000 5 years from now?”!

Save What You Don’t Spend

This is sort of a combination of the two previous points. When you consider making a purchase – even something small such as dining out – you also have the option to change your mind.

This happens to my wife and me all the time. I may decide that it’s time to replace my MP3 player, and spend $50 on a new one. Then I think about my wonderful phone that can play MP3’s (and even stream Pandora) and change my mind. Sometimes she will want to buy a new comforter set, but decides to wait instead.

In these cases, we will take the money that we were going to spend and either put it in our savings account, or sign onto our bank’s website and set up a payment to a creditor! The idea here is that if we somehow were able to find extra money for these unplanned purchases, then we can find that same money for savings or debt repayment!

Reader Questions

How do you “trick yourself” into saving money? Would you be willing to deposit your entire check into savings and only remove what’s needed?

photo by Nieve44/La Luz