Whether you’re dreaming of a vacation or planning for your long term financial future, savings are crucial. Unfortunately, many people have trouble saving money and are left wondering “Why can’t I save money?” If this sounds like you, you’re not alone, as research shows that less than 40% of adults in America have sufficient savings to cover even a $1,000 emergency.
So, here we’ll delve a little deeper into this topic to help you to get your financial goals back on track.
Understanding “Why Can’t I Save Money”
Although the principle of saving money is quite simple, many people struggle. However, it is important to understand that there could be a number of reasons why you can’t save money. There may be a number of factors that are impeding your savings efforts. So, be sure to read through this article in full, so you can understand where you are going wrong and what you can do to get back on track.
You’re Not Following a Budget
A budget is key to money management and saving money, but you need to do more than have a rough idea of how much you earn and spend. An effective budget will provide a realistic insight into where you spend money and where you can make adjustments.
One of the most common mistakes many people make with their budget is to be unnecessarily harsh. They may fail to allow for spending money on entertainment, new clothes, eating out and other non-necessities to create room for savings. While these expenses are not strictly essential, it can be disheartening to not spend money to be able to go out, enjoy a birthday celebration or even buy a new item of clothing. So, after a month or two, you may find that savings allocation starts to disappear, and with it, your savings progress.
It is a much better idea to create a realistic budget, making provision for some non-essentials, so you can maintain your budget for the long term. Additionally, don’t simply write down your budget and keep it in a drawer. Have it handy or use a budgeting app so you can update your spending to ensure that you stay on budget every month.
Your Earnings are Insufficient
Even if you are sufficiently disciplined with your budget, you may simply not have enough money coming in each month to save. This is a position that many people find themselves in and it can be difficult to resolve.
In the current economy, being able to request a raise from your employer is not likely to be successful. Additionally, if your employer is providing an annual pay increase, no doubt it will be swallowed up by the increasing cost of living.
For this reason, you may need to consider a side hustle to earn extra money. Fortunately, there are numerous opportunities to earn more money in your spare time. From food delivery services to freelancing, there are gigs to suit all skill sets and interests.
A side hustle can top up your earnings to create sufficient income to be able to save more money. Just remember that if you are an independent contractor, you will be responsible for your own taxes. So, you’ll need to also put aside money to avoid a nasty surprise come tax season.
Your Expenses are Too High
We’ve discussed having a budget, and while this can be effective, you may also find that your expenses are simply too high to allow regular savings. This is particularly pertinent for people who have seen an increase in housing costs or loan payments due to the increasing interest rates. In this case, you will need to carefully assess your expenses and spending habits to see if and where any cuts can be made.
To address this, you will need to think in terms of essential spending and non essential expenses. Essential spending refers to the costs that have to be paid for your basic necessities. Think rent or mortgage, utilities, and servicing debt. Food and transport may also be considered essential spending, but these have more flexibility to make savings. For your basic necessities, you may be able to shop around to get better rates or deals, but you will more likely need to concentrate on your non-essential spending.
For example, if you typically spend $1,000 on groceries each month, you should consider strategies to reduce this expense. This could include things such as batch cooking, switching to budget grocery stores and relying less on pre-packed, and expensive convenience foods.
You should also look at your non-essential spending to see if there are areas where you can eliminate these costs. As an example, do you need to have three different streaming subscriptions? Are you paying for a gym membership and you rarely go? Do you pick up a fancy coffee every morning on your way to work?
Your priorities are unique, but if you can take a critical eye on your living expenses, you may be able to find areas where you can save extra money. This will free up funds that can be directed into your savings.
You Have Lots of Debt
For many people, debt is simply an everyday occurrence. Few of us have the resources to purchase a home or even a car outright without needing some form of finance. However, statistics show that debt in America is on the rise. In fact, in 2023, the total credit card debt for Americans surpassed $986 billion across approximately 570 million credit card accounts. This means that the average American credit card holder is carrying almost $2,000 on each account.
Unfortunately, when you have lots of debt, it can be incredibly difficult to save money. After all, even if you find the best savings account, the rate offered is likely to be far, far lower than what you’re paying to carry your outstanding debt.
So, if you do want to save more money and get your financial goals on track, you will need to address your debt. It is a good idea to have some funds available, which we’ll discuss in more detail below. But, you need to focus on paying down your outstanding debt. You can use the budgeting strategies and income building we discussed above, but rather than trying to put your money into savings, make additional payments on your debt.
There are several different approaches to paying down debt, but it is important that the additional funds you have should be over and above the minimum payment you’re already making. It is also a good idea to incorporate not using your credit cards into your budget, so your debt does not continue to increase.
You Don’t Have an Emergency Fund
We just touched on this, but having some funds stashed away for an unexpected expense is vital if you want to keep your savings on track. As the name suggests, an emergency fund is designed to cover an emergency expense that you hadn’t planned for. All too often, savings plans are derailed by such an expense.
For example, if you’re diligently saving $200 a month and after six months you have $1,200, which is great. However, if you then have a car repair issue and need to pay a $1,000 bill, your savings are practically wiped out. This can be incredibly disheartening and it can also cause problems if you’re saving into a type of account that does not provide instant access. So, now not only do you need to pay the $1,000 bill, but you may get hit with a penalty for accessing your funds!
Ideally, your emergency fund would provide three to six months of your typical monthly expenses. This would provide you with the cash to cover your bills if something happened to your regular monthly paycheck. However, this can be a real stretch for many people, so you may need to aim for a more modest emergency fund. In the above scenario, having $1,000 in an emergency fund would cover that bill without impacting your savings account.
Savings are Not a Priority
This reason why you may be asking “Why can’t I save money” is a little more complicated, as it comes down to your behavior rather than your financial circumstances. Making a commitment to saving can be difficult and if you don’t make it a priority, it is very easy for it to be put on the back burner and forgotten about.
If you find yourself with plans to save an amount this month and then it’s a friend’s birthday and there is a night out planned, then you want to try out that new restaurant, and you just have to have that new gadget when it’s launched, you’re unlikely to meet your savings goal, as these other things are a bigger priority.
On the other hand, you may not be prioritizing savings because you think that you need to wait until you are making more money or you get that promotion.
In either scenario, you’re not giving savings a priority and are not forming the savings habit. However, saving something each month, even if it is only a small amount, will help you to get into the habit of saving. Even small amounts can add up over time and build into a decent fund.
Whatever the reason for not prioritizing savings, you need to start treating your savings amount as a must-pay expense on your budget. Include an amount in your budget and be sure to move that money into a separate bank account each time you get paid. This will mean that if something you don’t want to miss comes up, there is less temptation to spend your savings money.
Your Money is Not Properly Organized
Finally, the reason why you can’t save money could be something as simple as you have not properly organized your funds. At a bare minimum, you should have three bank accounts; a checking account for your day-to-day expenses, a savings account for short-term savings, and a less flexible account for your long-term savings.
If you’re trying to manage your savings with just one checking account, you are likely to struggle to distinguish between the funds you have earmarked for savings and what you have available to spend.
In fact, if you’re trying to save for multiple different savings goals, it is a good idea to have more than one savings account. For example, you may have an account for your vacation fund, another to buy a new car, plus one containing your emergency fund.
If you don’t like the idea of managing multiple savings accounts, there are some financial institutions that offer a savings account with different pods, wallets or pots for your various savings goals. So, while you only need to look after one account, your money is allocated to its respective savings purpose.
Many people have concerns about having multiple accounts due to account maintenance fees, but there are many financial institutions that don’t impose a monthly charge. So, look for accounts with no monthly fees or choose a bank that incentivizes having multiple accounts linked to your checking account.
So, if you are trying to manage your money with only one account, you are sure to find it far easier to save once you open up a separate dedicated savings account or two.
Trying to put money aside for a savings goal can be tough, particularly if you don’t have a great deal of disposable income. However, if you’re asking yourself “Why can’t I save money,” you need to seriously assess the reason or reasons why you are having difficulties.
While it can be daunting, making some simple changes to your financial habits could revolutionize your money management, making it easier to start saving for your short term goals and long term financial future. Just remember that saving is a habit and even if you can only put a little away each month, you can develop good practices and work towards getting your money back on track.