We think the way to build wealth is to earn first, spend what we “need” to, and then save what's left. In a world where wages have been stagnant in real terms since the '70s and conspicuous consumption is the norm, that generally means saving nothing at all.
In fact, for most of us limiting ourselves to just spending everything we make would be progress. Many Americans spend what we make plus what we have access to with credit. There's always more to want, despite the fact that science proves past a certain point increasing spending and stuff doesn't bring lasting happiness. It just keeps you on the hedonic treadmill and in your cubicle.
I would propose the way a lot of people are attempting to save is exactly backwards. If you save the “extra” money, only the natural savers will have anything to show for their labor. I view natural savers as interesting little aliens, and I'd love to find some research as to why they do what they do. But it's not the way I'm wired. I like travel and experiences and yes, stuff, to a degree. I'm not a natural saver.
So what's the best way to save if it doesn't come easily to you? Take your savings right off the top.
For those of you who have access to a work retirement plan, this is exactly what those plans do. Remember these plans were designed by wealthy people to help people who think the way they do get wealthy. This is also why they are so awful for most of us, as we were never taught to think that way. Much easier to ignore the problems of funds and investing and living within your means and just go to Target. We need some new throw pillows anyway.
If you can fight your spendy nature, though, take advantage of that work retirement plan. At bare minimum do what you need to do to get the free match. It's literally like money laying on the floor of your office that you aren't bothering to bend over and pick up. PICK UP THE FREE MONEY, SARAH. IT'S FREE.
Once you've recovered from that adjustment to your paycheck, the next step is to do the same thing with your take home pay. You need to skim some off the top and hide it from yourself. Check with HR while you are setting yourself up for the payroll deductions for your retirement plan and see if they can split your check between a savings account and a checking account. If not, once the money hits your account do a transfer – preferably automatic.
How to start? Paula Pant recommends starting with 1%, and I think that's great advice. Instead of earn – spend = save, for natural spenders the formula needs to be earn – save = spend. It's the only way you'll have money set aside for emergencies and the only way you'll be able to build wealth.
By the way, having money set aside for emergencies is the only way you'll get out of credit card debt. Also keep in mind that the next recession is right around the corner. So no matter how tight things are now, it's likely to get tighter at some point in the future. If that happens, you will look back on the spending you are doing now and wonder where it all went and why you didn't set any of it aside. Future you needs current you more than Target needs you. So set aside some of your money right off the top. Future you says thanks!
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