4 Most Common Savings Mistakes (and How to Avoid Them)
We don’t need to tell you how important saving is—you already know that. You might have even started the year with strong saving goals, only to feel frustrated when your savings didn’t grow as expected. The truth is, there are small habits that can undermine our savings without us even realizing it.
George Clason in The Richest Man in Babylon calls these “little holes that stop your purse from fattening up.” The good news? Once you understand these common mistakes, you can avoid them and build better financial habits. In this post, we’ll explore four common savings mistakes and provide practical tips on how to steer clear of them. Let's get started.
1. Not Having a Clear Savings Goal
Imagine going out with a friend on a road trip and you ask him where you're going and he responds: "I don't know. I guess we'll know when we get there." You end up driving in circles and waste time without making meaningful progress. You can't even try that expensive joke (not with the price of fuel). Yet we do the same thing with our savings. We start our savings journey with any goal in mind; it's no surprise we lose motivation and end up spending that money on unplanned expenses.
Without a clear goal, it’s hard to track your progress or feel a sense of achievement—both of which are crucial for staying motivated.
How to Avoid This Mistake
Start by defining what you’re saving for. It could be an emergency fund, a new gadget, a vacation, or a long-term goal like a home or retirement. Be specific. Instead of saying, “I’m saving for a vacation,” try, “I’m saving ₦50,000 for a trip to the beach in January.” When your goal is specific, it becomes tangible and more achievable.
Once you have your goal, break it down into manageable steps. Let’s say you want to save ₦50,000 in 2 months. That means you’d need to set aside ₦25,000 each month. If ₦25,000 a month feels too steep, consider extending your timeline or adjusting your monthly expenses.
2. Underestimating Expenses
It’s easy to think you have a handle on where your money goes each month, but if you don’t account for every expense—big and small—your budget can quickly fall apart. Little surprise costs, like an unexpected birthday gift or a last-minute trip to the pharmacy, add over time, and before you know it, you're dipping your hand into your savings plan.
How to Avoid This Mistake
Start by tracking every single expense for at least one month. Use an app, a spreadsheet, or even a simple notebook. Record everything—from your rent to your morning snack. Once you see where your money goes, you’ll likely spot patterns you didn’t expect.
After analyzing your spending, categorize your expenses into “fixed” and “variable” costs. Fixed expenses are things you can’t change, like rent or car payments. Variable expenses are items you have more control over, like dining out or entertainment. This breakdown helps you plan better and allocate realistic amounts for each category, leaving room to save without feeling like you’re missing out.
3. Relying on Leftover Money to Save
This is another big mistake people make. While this sounds reasonable to take care of your bills before you save, it often doesn’t work in practice. Life happens—emergencies come up, bills are higher than expected, or you just have more social plans than usual—and before you know it, there’s little or nothing left to put into savings.
How to Avoid This Mistake
The best way to ensure you save consistently is to adopt a “pay yourself first” strategy. This means setting aside a portion of your income for savings as soon as you receive it—before you spend on anything else. Even if you start small, make this a non-negotiable part of your budget.
Automating your savings can make this process even easier. This way, you don’t have to think about it, and you’ll be less tempted to spend the money on something else.
4. Not Reviewing and Adjusting Your Savings Plan
Life circumstances change, and sticking to an outdated plan can hinder your progress. Regularly reviewing and adjusting your savings plan ensures that you’re making the most of your current financial situation and adapting to any shifts in your income or expenses.
How to Avoid This Mistake
Have a financial date with yourself every month, where you review where you are in your finances. Assess whether your savings goals are still relevant and achievable. If you’ve received a pay increase, consider allocating more towards savings. On the other hand, if unexpected expenses have emerged, adjusting your savings target temporarily can prevent financial strain. The key is to stay proactive.
While it’s easy to get caught up in day-to-day expenses or habits that undermine your progress, taking proactive steps to build smarter saving habits is key. The good news is that recognizing these pitfalls is the first step to overcoming them. When you identify where things may be going off track, you can take intentional action to course-correct.
Start by committing to consistent saving, no matter how small the amount, and make sure that your goals are clear and realistic.