Saving money isn’t easy, but it’s an essential aspect of wealth building. Even when you do start saving, it can be challenging to keep that money in your savings account. You wouldn’t be the first person who looked at their savings account and thought, what’s the point? Well, the point is that life is full of unexpected expenses. And even if you manage to avoid those, you’re probably going to want a lump sum to put a down payment on a new car, or more significantly, on a new house.
By understanding our personality types, we can figure out the best ways for us to save. If saving doesn’t come instinctively, think about what does come naturally to you, and you can apply it to your saving strategy.
For some people, the motivation to save simply isn’t there. But you know you need to save money consistently to build wealth. For people with competitive personality types that may find it challenging to save money each month, try turning saving into a competition.
The competition could be between one good friend, a group of friends or even with your family. If you attach a prize at the end of the year, like dinner at a nice restaurant, you may find yourself much more motivated to save, just so that you can say you’ve won the competition. Forming good habits in life often comes down to turning the mundane into a game. When you can find the fun in something, it becomes much easier to do.
The Lazy Saver
There’s nothing wrong with being the lazy saver. Most people find it hard to save regularly, especially in their younger earning years. But waiting too long to save can cost you exponentially once it’s time to retire.
Luckily, for the lazy saver, there is an abundance of options available to save money without even thinking about it. The easiest is if you work for a company that provides a 401(k). By deferring part of your paycheck to your 401(k), you are investing a decent amount every month, and you don’t even have to think about it.
It gets even better when the company you work for will match your contribution. Many companies will match up to a certain amount, for example, up to 5 percent. In this case, you should always be putting away 5 percent of your paycheck into your 401(k) because effectively you’re saving and investing 10 percent with the company match.
Another easy way to save money is to set up a recurring transfer from your checking account to a savings account. The amount could be as little as $25 a month or $500 a month. With the transfer being automated, you never have to think about it, and the money is set aside. This savings strategy will work best with a high-yield savings account.
Another path to lazing savings is an app such as Acorns. On Acorns, your payments are rounded up, and the change is then invested. You can choose as many credit cards or bank accounts as you’d like to be part of the round-up. Then, you can select how aggressive you want your investments to be.
The Risk Taker
Acorns also works for the thrill-seekers out there. If you want to take a risk, with the chance of earning more money, you can set your Acorns investments to be “Aggressive.” But the risk-taker must take caution in their personality type.
The point of saving money is to provide financial security and peace of mind, not to cause stress from risky investments. If you want to invest your money aggressively, there’s nothing wrong with that, but you must stay balanced.
For every dollar you put into an aggressive investment, try putting two dollars in a certificate of deposit account. A CD is a safe and effective way to save money. And by limiting when you can access your money, it’s a safeguard against those that may want to take an early withdrawal.
Opposite of the risk-taker, a conservative saver may believe they have great money habits by not spending frivolously and dutifully keeping a large amount of money in a savings account. While the conservative personality type is well-prepared for the future and unexpected emergencies, they may be costing themselves money in the long run.
If you keep your money stowed in a savings account offering 0.01-percent APY (annual percentage yield), then you could be costing yourself hundreds of dollars a year. If that money was instead stored in a high-yield savings account offering 2 percent APY, that’s $200 you missed out on if you have $10,000 in your savings account.
The conservative saver also may be avoiding the stock market, which will also cost you in the long run. For every downturn the stock market has had, it has always recovered. If you’re good at not touching your money, you should have a large chunk of it stored in a well-balanced portfolio of stocks.
The Goal Setter
The goal setter has the best personality type to get in the habit of saving consistently. If you’re a goal setter, you are already planning and thinking about the future. You can create a long-term savings goal for the year, and then create short term savings goals for every month. If you increase your savings goal each month, you’ll likely be able to increase your savings goal every year.
But if your personality is that of a goal setter, be cautious not to set a single goal for your savings. Some people have one-track minds when it comes to saving and will put away money for the sole purpose of going on a vacation at the end of the year. While there’s nothing wrong with saving for a vacation, it shouldn’t be the only thing you’re saving for. If this is your personality type, try creating “sinking funds,” which can help you save for multiple items at once.