Boosting Your Savings with the Barbell Strategy

Paul Atherton |
21-10-2021
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Image of a man putting weights onto the end of a barbell
Do you know you need to bulk up your savings account, but still having trouble? The barbell strategy might be for you.

Very few of us head to our bank account and go, oh my god, there’s more money in there than I expected. Wouldn’t that be nice?

Well, you can get that feeling.

One of the critical areas to improve is saving. Saving is, on the face of it, very simple. You spend less than you earn.

But how do you do that? What’s a good strategy?

An excellent strategy for successful saving is the barbell strategy. The barbell strategy is when, on one side, you have lots and lots of little things. And on the other side of the barbell, a few huge things.

People use this strategy in many of areas in life.

The most common use of the barbell strategy is in fitness, where you spend most of your time doing slower, less intense exercise like walking on one side, with short bursts of high-intensity activity on the other side.

How does the barbell strategy apply to savings?

So, you want to start with a couple of the big, high-intensity things—the big ends of the barbell.

You should start with restructuring or eliminating your debt.

Get rid of your debt.

If you’re trying to save money through budgeting and still carrying a lot of debt, you need to start by focusing on eliminating your debt.

If you’re not convinced you should start with debt, then I suggest you look at all your credit cards, look at your statements, and start adding up how much you’re spending on services—the interest payments, admin fees, that kind of thing, every month. You’ll quickly see a massive amount of money is going to keeping those credit cards alive.

Look at that, and wherever possible, consolidate it.

But you do need to be careful because many providers say they’re going to help you consolidate your debt, but they don’t do it in a very ethical way, and it can cost you more money in the long run.

You may have seen ads for quick personal loans. Don’t do that; it’s almost always a bad idea.

The perfect place for debt consolidation is a mortgage. If you have a mortgage, the only debt you have should be that mortgage. You shouldn’t have other forms of debt.

If you don’t have a mortgage and you have credit card debt, it’s time to start paying them down.

Start with the card that has the least amount of debt on it. Pay it down. Get rid of it. Cancel the card and cut it up. Then move onto the next smallest one.

Always start with the smallest debt; the positive psychological impact of getting rid of a credit card is fantastic. You’ll feel freer. It’s fantastic

The next big thing is to set savings goals.

Set a savings mission.

It may seem silly, but I think a lot of people overlook setting goals.

It’s vital to spend your time creating a savings mission, not just a goal, but a mission.

We spend more energy and time trying to meet our mates for a coffee. We have more time and energy for working out the logistics of meeting our friends for the weekend and no time and energy for creating a simple savings mission.

Seeing it as a mission is very important. Olympic athletes do this; they view things as missions because missions survive.

Missions are more potent than willpower, and if you’re relying on willpower alone to save, you’re going to be in trouble. But if you have a very clearly defined mission, it will survive that willpower.

Nobody wakes up every day with 100% energy and motivation to save and deal with their finances in a budget-conscious way.

You’ve got to have that mission to help you through times when saving and budgeting feel too hard or like it isn’t a high priority.

Now, what might a mission be?

It could be to save your 20% down payment for a house. Maybe it’s eliminating that credit card.

Missions are critical. Some people talk about writing your mission down and posting it up. But be a bit careful because you can still write your mission down, stick it up, and just ignore it.

So, make sure your mission is something you really want; remember it, and keep working towards it.

The next big thing is staycations.

Take a staycation.

I bet you didn’t expect to see “take a vacation” in an article on financial management.

But the truth is, we all need a vacation. Rest and relaxation are essential for your mental and physical wellbeing.

But unfortunately, vacations are expensive.

The amount of money you put down for a trip and travel is a lot. Deposits can seem reasonable, but once you’re on vacation, you always spend more than you think. That’s why tourist boards want you to go somewhere different—you’re away from home, so you’ll spend more money.

So, do a staycation.

My wife and I love vacationing, but we do staycations for ourselves. Stay in a hotel in your local city. A change of scenery does wonders.

Even spend one weekend doing something you wouldn’t usually do, like visiting the beach or going on a hike. These activities don’t cost much (or cost nothing) to do locally, and it will feel great to get away from your usual routine.

Now, you can move on to the more minor aspects of the barbell.

Lower your bad habits.

Lower your drinking and smoking (or quit when you can). These habits are physically and psychologically addictive and very expensive.

If you can cut bad habits out or at least reduce them, that will have a significant impact on your health and your wealth.

Set up automatic payments.

I’ve talked about automating payments before.

You can even use automatic payments to reach your savings mission.

Set up a separate savings account. Even use a different bank. It should be tough to get into this account. Then automate a payment into that account whenever your income gets in. You will never really see the money so that you won’t miss it.

Then set up direct debits or automatic payments through your bank account for your bills and other standard expenses. It saves you time and paperwork, and some companies will give you a discount for it.

Get discounts.

Call up all your utility providers and challenge them for a discount. Tell them you’re going to a new provider. Those statements alone should force them to find some savings for you.

Pack your lunch.

It’s impressive how much money we spend being lazy. Tally up how often you buy lunch or other meals. Work out how much that costs you over a month or a year. Imagine if you put that money into a high-interest savings account instead?

Often, packing your lunch is also better for your health. A good, healthy lunch that you’ve put some thought into can help you maintain physical fitness and give you great mental clarity for your daily life.

This discipline could be part of your mission. My mission is to pack my lunch every day. Not only could you be healthier, but you’ll save money.

Get a high-interest savings account.

Last on the small list is to look for a high interest-bearing account. Your automated savings can go in there.

Compounding interest over a long period can make you vast amounts of money for free. I’ve previously written about taking advantage of compounding interest here. So just shop around a little bit; it’s worth it.

When you use the barbell strategy for budgeting, remember…

  1. The high-intensity elements of the barbell don’t need your attention all the time—these activities can seem overwhelming, but once you’ve done them, you can sit back and concentrate on the small stuff.
  2. Eliminate or reduce debt—before you start saving, you need to reduce or eliminate your debt.
  3. Give yourself a savings mission—don’t see it as a goal; a mission will help you through lack of motivation.
  4. Reward yourself with a staycation, not a vacation—you don’t need to spend a lot of money to give yourself a weekend away from everyday life.
  5. Eliminate or reduce bad habits—get rid of any practices that harm you physically, mentally, and financially.
  6. Set up automatic payments—use direct debits and automatic payments to save and to pay bills.
  7. Ask providers for discounts—you can get savings just by asking.
  8. Get a high-interest savings account—you can boost your savings for free.

Do you want more saving and budgeting tips? Sign up for my email newsletter below.

This information has been provided as general advice. We have not considered your financial circumstances, needs or objectives. You should consider the appropriateness of the direction. You should obtain and consider the relevant Product Disclosure Statement (PDS) and seek the assistance of an authorised financial adviser before making any decision regarding any products or strategies mentioned in this communication.

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An ex-Wall Street advisor who worked with major players in the global financial industry for over 30 years, Paul’s mission is to help regular people reclaim their wealth and financial security.

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