Finance

To Build The Best Savings Plan, Look To The Present

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Just hearing the word "budget" might be enough to make you squirm. You probably start thinking of anything else you could do besides write down your expenses (clean the house, mow the lawn—did someone say happy hour?). But marketing researchers think they've unlocked the secret to a pain-free budget that's destined to stick. The trick? It's all about the present.

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Future vs. Present

In a 2014 study, participants were introduced to two different saving styles. The first group was told to save with the traditional, "linear" approach—that is, budgeting based on what you think you'll need in the future. In this philosophy, "the individual's focus is on the forward flow of time and on an improvement from the current state," according to the study authors. In other words, you're working towards a whole new you.

The second group was told to think cyclically—as Science of Us explains, this savings style bridges the gap between your present and future self. How? The future is hypothetical, but the present is actionable. If you do something now, like save money, you're more likely to do the same thing next month. Current actions predict future actions.

So, who won? The second group—by a long shot. The subjects who budgeted cyclically saved 78 percent more than the future-oriented linear group. The research is clear: your focus should be on the process and not the end goal. A small shift in strategy could be huge for your bank account.

Shift Your Mindset, Save More Money

So how can you use a cyclical strategy with your own budget? Consider the instructions the researchers gave their volunteers:

"Make your savings task a routinized one: just focus on saving the amount that you want to save now, not next month, not next year. Think about whether you saved enough money during your last paycheck cycle. If you saved as much as you wanted, continue with your persistence. If you did not save enough, make it up this time, with the current paycheck cycle [...] We want you to focus on your personal savings in the present, and that is all. What's more, at the end of the day, you will be able to look back and see how much personal savings you have achieved."

Instead of thinking of saving money as a means to an end—"if I put away money from this paycheck, I'll have a better cushion for when I go on vacation in a few months"—think of it as a regular habit, like flossing your teeth or paying your bills. If you floss today, you'll probably floss every day, and you'll probably be better off at your next dentist's visit. If you save this month, you'll probably save every month, and your bank account will thank you down the line.

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