How to Find a Surplus Without Making More Money

I’m going to make an obvious statement. You’ve heard it before. In fact, you’ve heard it so much that you’re going to have to fight against the natural response to stop reading and go back to whatever you were doing before you started reading this blog. I’m trying to warn you ahead of time so that you’ll do the opposite of what you want to do and benefit from what I’m about to share with you. Ready? Here it goes!

You Need to save more.

I know you already know this! But stay with me because I want to do more than tell you to save. Everyone knows they should save, so I’m not here to convince you of something you already know. I’m here to show you how to identify the surplus in your own finances, allowing you to save more for your future.

We hear about saving a lot. Unfortunately, the message is not connecting with us because we’re not very good at saving. The national savings rate as of April 2018 is at 2.8 percent, down from 5.5 percent in May 2017. This trend is disturbing because it indicates that a majority of Americans aren’t saving and are likely to face difficult times when they reach retirement age.

How much should you save?

Financial professionals suggest saving 15% of your income toward long-term savings. However, that may not be enough unless you start saving early. The longer you wait to save, the more you’ll need to set aside to help get you to the finish line.  

If you started late or haven’t started yet, the best way to ensure you have enough saved is to start increasing your savings rate as you age, especially as you enter your later years, when the kids have moved out and it’s just you and your spouse. Think 30% to 40% toward saving in the last 10 years before you retire, and you’ll be closer to reaching your goal.

Impossible, you say? I disagree. It may take some time, but it can be done. You can adjust your lifestyle and reduce your spending to get to the point where you can save what’s necessary to prepare for the future. Below, I’ve outlined 3 things you can do to find the surplus you need to save more now.

3 Ways To Find a Surplus

1. Track and record what you spend

Tracking and recording your spending makes you more aware of your financial habits, which in turn influences your spending and leads to a surplus you didn’t think you had.

The biggest revelation I had when I started tracking all my spending was how much I was overspending in certain areas. I was sure I knew exactly what I was spending. I believed the real problem was not making enough money, not overspending. But I was wrong. 

The simple act of daily recording what I spent was enough to open my eyes and to help me cut out a lot of the waste that was so prevalent in my spending.  Not relying on my memory but on accurate information made all the difference. Another important difference was categorizing my expenses. 

Being aware of how much I was spending on food, entertainment, and other expenses helped me realize where I was overspending and gave me the ability to rein in those areas to a more reasonable level. Try tracking and recording your spending, and I’ll bet you’ll be surprised at the surplus you’ll find.  

2. Spend on purpose

Spending is often emotional. In our abundant society we can easily provide for our needs, therefore, much of our surplus is spent on the things we want or desire.  The trouble is, we always want more.

To safeguard against emotional spending and not give in to instant gratification, you need to plan ahead. That’s why having a plan for your finances is so important.  

A budget allows you to set limits on your spending based on your available resources and your financial goals. It’s making informed decisions ahead of time that line up with your goals and keep you from making purely emotional decisions. It’s spending on purpose so you can control your wants and desires, avoid overspending, and allocate the surplus to saving.

3. Evaluate your spending regularly 

Managing money successfully requires a hands-on approach. When meeting with clients, I emphasize the importance of regularly comparing actual spending to planned spending. 

If married, I ask them to come together at least once a week to talk through the budget and answer the following questions. Did we stick to our budget? What went right? Want went wrong? And what can we improve on?

By regularly comparing your spending to your budget, you’ll be better acquainted with the budget numbers. Knowing the numbers will help you make more informed financial decisions and stay on track with your budget. Making better financial decisions will result in reducing unnecessary spending, allowing for increased savings.

Conclusion

Saving more is possible. But to do so, you need to find the surplus to save and the good news is it’s already in your possession, you just need to find it.

Become more aware of your spending by tracking and recording your expenses, allowing you to avoid unnecessary waste. Manage your money through a written plan to ensure your spending is on purpose. Evaluate your spending regularly to ensure you’re making the most of your money and saving as much as possible.