Why you can’t save money (and what you can do about it)

You know you should exercise, eat more vegetables, and avoid the office candy jar. You mean to stop procrastinating - at some point. Starting tomorrow, you’ll try to get more sleep. And be more productive. And spend more time with your family. And carve out more time for yourself...

Oh. And save money. You know you’re supposed to be saving money, right? The problem is, while survey after survey catches us saying that saving is a priority, a 2012 report by CIBC found that 45 percent of us have no emergency savings, and only about half of people under of the age of 35 have any savings in an RRSP, according to a survey released by BMO in August.

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The bottom line: When life gets overwhelming, we tend to let a lot of things slide.

What’s a girl to do? It turns out that getting on a savings plan involves a combination of strategy, money smarts and psychology. We talked to John Tracy, senior vice president at TD Canada Trust, and Dr. J. Bruce Morton, a psychology professor at Western University, to find out what may be holding you back.

What you can do to start saving now

1) Stop being overwhelmed

Some days, life gets so hectic it’s hard to imagine finding time for anything beyond the barest essentials. But just as you need to carve out a tiny space in all of life’s chaos for your sanity, you also need just a teeny-tiny space to think about your financial security.

“People need to recover from being overwhelmed,” Tracy said. “They need to say, ‘how can I make progress,’ not ‘how can I solve all my savings problems today.’”

So do yourself a favour: Stop worrying about how you’re going to save for that down payment and start putting something – anything – aside, starting now.

[More: What’s your excuse for not saving?]

2) Understand that every decision is a trade-off

For most people, making a decision involves diving into a mess of mental shortcuts, and often emerging with a choice that’s less than well-reasoned. Yes, your retirement is more important than that bundle of clothes you’re carrying to the dressing room. The problem is, our brains love instant rewards; tucking that cash into a savings account just doesn’t deliver the same rush.

“Saving hinges on the fundamental trade-off in human decision-making between enjoying the immediate benefits of having money in your hand, against what’s perhaps a larger – but temporally displaced – future benefit,” Morton said. “The decision of whether or not to spend your income now rather than investing it for later hinges on that fundamental trade-off in our minds.”

What to do? Morton recommends deliberately recognizing each purchase for the trade-off that it is, where everything you buy today represents a lost opportunity to save for something bigger down the road.

[More: 5 things you’re guilty of that make you spend more]

3) Know yourself

Some people can stretch their money to unbelievable lengths, while others struggle to make it last to their next paycheck. The difference, according to Morton, often lies in personality. To find savings in your budget, first you need to understand how your brain works and find savings strategies that complement you.

“People who are impulsive in nature will accept small, immediate rewards in favor of larger future rewards, whereas individuals who are more self regulated are more able to wait,” he said.

If you have trouble saving and don’t like to think about it, Tracy recommends an automatic withdrawal plan. If you’re motivated by a goal, make one, and then visit your bank to find out what it will take to get you there. And if you struggle with overspending, seek out a strategy that’ll help keep it in check, whether that means steering clear of sales or keeping your credit card on ice.

4) Understand the forces at work

A recent survey by TD Canada Trust examined how Millennials, Generation Xers and Baby Boomers feel about saving for retirement. It found that while the Boomers were most likely to report feeling they were managing their money well, Millennials and Gen Xers tended to feel overwhelmed and be more caught up with immediate priorities, which prevented them from saving.

Morton says that difference in perspective may be a result of the very different economic and social pressures these groups have faced. Unlike the Boomers, who are more likely to have landed in a stable job and stayed there for years, the difficult job market Millenials were dealt has forced them to focus on the here and now. The problem is that this life experience may make it harder for them to imagine their future senior selves even when economic times improve.

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The key, says Morton, is to be aware of the pressures that influence how we think about money and become aware of how they affect our spending and saving habits. Only then can we begin to make better, more rational, choices.

5) Suck it up and do something

Okay, so here’s one more thing you know you need to do: Make a plan. Tracy says knowing what kind of financial future you want is essential to ensuring that you get there. And while finding the time and motivation to come up with a plan can be a challenge, this is one time where you just have to, well, suck it up.

“Developing and following a plan is a scary thought for most people because they don’t have one - and quite frankly, they don’t really want to do what the plan tells them to do,” Tracy said. “But if you know your cash flow, it’ll be easier to make decisions about how to pay off debt and save for the future. The absence of a plan is what keeps people in this limbo state where they’re living paycheck to paycheck.”

The future is closer than you think

Maybe you don’t need to solve all your financial problems today, but you do need to start thinking about them - now. It’s easy to get caught up in the day-to-day, but saving is one thing you can only put off for so long. Indeed, the future will be here before you know it.

GoldenGirlFinance.com is a free personal finance and education site for women.

Nothing contained herein is intended to provide personalized financial, legal or tax advice. Before implementing any financial strategy, you should obtain information and advice from your financial, legal and/or tax advisers who are fully aware of your individual circumstances.

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