Saving Money — Psychological Hurdles and Solutions…

Although the ideas behind personal finance are easy, actually putting them into practice is incredibly hard. That’s why many people live paycheck to paycheck. Very few manage to accumulate enough wealth to be able to make their dreams happen.

The concepts are easy. The hardest point is “Putting Ideas into Practice”.

Why is it hard?

Why do so many people dream about and plan for financial success, but very few will make it happen?

Reason 1 ## stems from our scarcity of attention, We are more likely to prioritize our immediate needs (say, a new iPhone) over our future important needs. This is similar to why we procrastinate in general. According to cognitive psychologists, we see our future selves as strangers. The people who we will inevitably be in a few months (or decades) are unknown to us, so we do not always make good choices for our futures.

Reason 2 ## is that we tend to forget what it felt like during conditions of scarcity. So, maybe you used to survive on a smaller salary, but now that you are getting paid more, you are likely to also increase your spending along with it to buy more (or better) things.

As the world is moving towards a cashless society, technology has also made it easier and quicker for people to spend more money. Paying for services or items is quick and easy today.

Reason 3 ## On the top of all this, there is peer pressure via Facebook, twitter and other social media. “Pictures of family, and friends posting their newest purchases, their most recent vacation” is a tremendously difficult hurdle to overcome.

Here are Some strategies that can help you, move beyond this trap.

Strategy #1: Divide and Rule…

After 2008 financial crisis followed by recession, everyone had a wakeup call regarding their financial goals. Review your priority list again and again, group your priorities into Important, less important and not important.

Which activities, responsibilities, decisions and stuff can you let go of or pass on to someone else, to free up more time to manage your money on a regular basis?

Strategy #2: Pick one and start saving…

Don’t try to reinvent, Many money management systems already exist. Choose one and start. After all these years of financial companies and refining their products, to best suit their customer needs most systems will work just fine. Worrying about the efficient or easiest system or the least expensive one in the beginning is more about procrastination. Pick one, start saving then optimize your system on the go.

Strategy #3: Book Keeping — Electronic or Manual …

If you are more comfortable with the traditional pen and paper, envelope system start there. There are lots and lots of personal finance books on this topic. To simplify your decision, go with a simple MS — excel workbooks. Find a workbook that helps you manage your periodic expenses, monthly bills and track where the daily money is going. Don’t dig deep into penny level expenses,Overall expenditure is sufficient.

The main point here is to get started and take the time to keep motivated and stay with it.

Strategy #4: Make your family aware…

Make your family aware of your financial situation and future goals. Have a monthly or bimonthly family meetings with your children, spouse and other concerned people. Get inputs on ways to save money in the household or on ways to increase income. Take some time to discuss financial decisions ahead of time, rather than impulsively in a store.

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Personal Finance Articles

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Vijay Kumar Polimeru

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Personal Finance Articles

I will write more about Personal Finance Here

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