Why cannot we set aside some of our savings as intended? What makes us unable to resist new spending? Why is saving so hard and spending so easy?
All beginnings are hard
Saving, like any other form of desirable human behavior, requires a lot of effort, time, and self-control. Unfortunately, having a savings plan and actually saving are not the same thing. Very often, our intention to save and spend less does not lead to the creation of a savings fund. This pattern of behavior is not unique to savings – it shows up in various areas of our lives and often occurs just when our goal requires us to give up what brings us satisfaction, happiness, or well-being in a given moment.
We promise to save for retirement, but spend the money on a vacation; plan to spend less money, but buy a jacket on sale; we promise to exercise regularly, and then cancel to watch our favorite show. Besides, everyone knows the diet always starts the next Monday or after another cake and another “goodbye sandwich.” Why cannot we set aside some of our savings like we set out to do? Can we not resist new spending? Is saving so hard and spending so easy?
How difficult can it be
How difficult it is to save is also confirmed by the frequent comparison of saving with following a diet. Such a comparison is not really surprising, for in both cases it is a mathematical problem requiring the renunciation of a certain kind of satisfaction.
To achieve the desired weight, the difference between caloric intake and consumption must be negative. On the other hand, the difference between household income and expenditure must be positive to achieve the desired level of savings.
Many people realize that eating junk food and sitting in front of the TV all the time will result in weight gain, just as many realize that if they spend more than they have, they will incur debt. But as someone who has tried to lose weight or save money would say, it’s one thing to know math, and quite another to make a series of not-so-fun choices that allow you to achieve the results you want – like choosing an apple instead of a chocolate cake, or paying the electric bill instead of buying new shoes.
Achieving the goals
In both losing weight and saving money, the secret to success usually lies in introducing discipline and self-control. Encouraging disciplined behavior and resisting the many temptations from our environment are universal goals for almost everyone. The repeated inability to achieve these goals is the cause of much of our unhappiness, over-indebtedness, poverty, and failures in life in general.
Lack of self-control and discipline (we cannot restrain ourselves when we see a product we like), overestimating ourselves, the tendency to procrastinate, conflicting goals (we have a savings plan, but we abandoned it because of a great discount we stumbled upon), and inadequate mental accounting (we put money into different mental categories depending on subjective criteria, such as the origin of the money or its purpose) are some of the most common reasons for failed behavior and irrational and impulsive decisions that are inconsistent with increasing our financial well-being.
Prioritize, set financial goals, and create a detailed plan for financial activities. The first step in taking control of our finances and “putting savings theory into practice” is to create the conditions under which our intentions will lead to the desired behavior. In the context of personal finance and saving, this means setting priorities, establishing financial goals, and developing a detailed plan for our financial activities, i.e., creating a personal budget.
A problem that often occurs is that many people set goals that are too general and not specific at all, such as “I will start saving more“, “I will spend less“, so it is much harder to achieve such goals. To increase the likelihood that the intention will be put into action, it is important to set the goal in the right way.
S.M.A.R.T. Method
The S.M.A.R.T. Method. The acronym refers to the wise setting of goals and consists of the English words: Specific – Measurable – Achievable – Relevant – Timed, terms that refer to the characteristics that each goal should contain. The result of the application of this method should be the establishment of objectives.
For example, next year I will set aside $20 from my salary each month by taking out a voluntary pension insurance policy to pay $240 per year towards my pension. With this goal, we quantified how much we want to save ($20 per month), in what period and with what dynamics we want to save (every month for the next year), how we will save (by setting aside $20 per month and paying into a voluntary pension insurance), for what purpose we are saving (I am saving for a period when we will be very vulnerable financially, which is a very important reason) and whether our goal is achievable (the rest of my salary is enough for all my monthly expenses).
Personal budget
The technique of smart goal setting is followed by the creation of a personal budget. The personal budget is a monthly plan of income and 
expenses that gives us insight into the actual state of our financial capabilities and consumption habits. Creating a budget is extremely important as it allows us to review all categories of expenses and provides us with information on costs we can “cut” to create a surplus of money that we can later divert to the savings fund.
A particularly important moment for building a savings fund, especially if we tend to be irrational and impulsive, is to turn saving into an automated action – so that we transfer the responsibility for savings to someone else. The best way to transfer responsibility is to set up a standing order or one of the innovative savings methods, such as automatic savings activated under specially agreed conditions, e.g. savings activated by paying with a debit card at POS machines, etc.
Final thoughts
Antoine de Saint-Exupéry said that a goal without a plan remains only a wish. That’s why it’s important to remember that a detailed plan is half the battle to success. Studies observing people who wanted to lose weight have shown that those who knew exactly where, what and when to eat and when and how much to exercise over the next week lost twice as many pounds as those who wanted to lose weight but had not made a detailed plan for their activities. So, you do not just want to cut back, you want to create a plan and cut back!
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