You've Been Saving Money All Wrong. Here's Why

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If your savings account is not as big as you'd like it to be, it turns out that you're not alone. Americans are notoriously bad at saving for retirement — and one in three have nothing saved for retirement at all.

While Social Security may still factor into your savings, it's not enough to cover the cost of retirement, let alone the other expenses you're trying to save for before even reaching retirement.

But don't let the statistics get you down. There are some easy ways to change your savings habits. You'll be surprised by how quickly little tweaks can make a big difference in your accounts.

1. Wrong: An All or Nothing Attitude to Saving

When you come up with a savings plan, you may be tempted to cut out all of your discretionary expenditures. On paper, this looks reasonable enough. You can eliminate all of your nonessential costs and put that money right into your savings account. Perfect, right? However, an all or nothing approach is going to set you up for failure down the road.

Just as with dieting, if the adjustments you make are not sustainable, you're not going to make real change in the long run. Instead, you're likely to get frustrated and give up altogether. When you deny yourself any and all expenses, whether it's getting a coffee at your favorite cafe or going out for drinks with friends, you're likely to feel deprived. Plus, this mentality doesn't allow for you to slip up or make exceptions.

Right: Be Reasonable

It's better to consistently save a dollar every day and be successful at it than to aim to save $100 a week, realize that's impossible, and then give up. Set a goal that is realistic and stick to it. Write down your plan and check in consistently to see how you are doing.

The name of the game is moderation. Your savings isn't all or nothing. Don't get discouraged if you slip up. If you spend more on Wednesday, spend less on Thursday, but keep it realistic. Take another look at your budget and see if you can make up for the slip somewhere else.

2. Wrong: Cutting Out Activities or Socializing

You may think an easy way to save money is by cutting out activities entirely. Since there can be a hefty price tag that comes along with social activities, like going out for drinks or other entertainment, you may conclude that cutting out socializing completely is another way to save. However, these strategies are going to leave you feeling isolated and lacking the supportive environment you need to achieve your savings goals.

See also: 73 Easy Ways to Save Money Today

Right: Find Inexpensive Ways to Keep in Touch

Instead of cutting out social activities entirely, why not find free or inexpensive alternatives?

Rather than meeting friends at a pricey restaurant, invite them over for a home-cooked meal or a pot luck. Plan a game or movie night, or look up free events in your town to attend together.

Exercise is also a great, inexpensive way to spend time with friends. Organize a game of Frisbee or flag football, or go for a run with friends. Do it often enough, and you could save on an expensive gym membership, too.

In fact, your friends can be great allies in your fitness and savings endeavors. You don't have to choose between your relationships and your budget. Let your friends and family know what your goals are and ask them to help you stay on track. That way they can be a support system, instead of a roadblock.

3. Wrong: Focusing All of Your Attention on Cutting Costs

It seems foolproof to focus on decreasing your expenses so that you can save more money. But rather than putting all your energy into cutting your expenses to the bone, spend some of that energy earning extra income.

If you're spending too much time calculating your budget, you'll end up feeling too limited. Your mindset will always be "I don't have enough."

The budget mindset is restrictive — and taxing on your stores of energy. Maintaining discipline is hard. Instead, use that energy to help you earn more money to put toward your savings goals.

Right: Work More, Spend Less

Taking on a second job can make a huge difference to your savings account, mostly because you're earning more — and, hopefully, saving more.

Plus, since you're spending more time at work, you'll have less time to spend on frivolous things — or to worry about sticking to your budget.

See also: 100+ Ways to Make More Money This Year

4. Wrong: You Never Carry Cash, So You Don't Spend It

You may be under the impression that if you don't have cash with you, you will automatically spend less money. However, if you're mindlessly putting little expenditures on your credit or debit card, you're actually much less likely to be keeping track of how you are spending money.

Cash can be your best friend when you're trying to save money, especially for those of us who are a bit less disciplined and aware of our spending habits.

Right: Use Cash and Cards Wisely

Allocate yourself a daily budget and leave home with that amount of cash in your wallet. This makes money feel real in a way that mindlessly swiping your card can't. It can help you to stay accountable to yourself. Once you run out of cash for the day, you are done spending.

Of course, using a credit card does still hold advantages for people with more self control. You may want to consider applying for the best rewards credit card for your lifestyle, and then strategically using that card so you can earn points or miles on your purchases. Plus, you'll have a digital record of your expenses to look back on at the end of the month and see how you did. You can set up email or phone alerts, too, to help remind you of just how much you're spending on a daily basis.

5. Wrong: Ignoring Budgeting or Not Making a Budget at All

Unfortunately, saving doesn't just happen without making a real, concerted effort. It is crucial to your success that you have a concrete plan in place to make sure you're spending where you need to and saving where you can. (See also: Build Your First Budget in 5 Easy Steps)

Right: Make a Comprehensive Budget

Make a clear and realistic plan. Write it down and revise it every month or so to check if you're staying on track. After paying your expenses for the month, put the rest of your money into savings. It may be a small amount at first, but you can increase it later, once your new habits have settled in.

Even if you're just saving a little bit, if you're committed to putting it away every month, it will add up — and faster than you expect.

6. Wrong: Setting up a Traditional Savings Account at Your Local Bank

Traditional savings accounts do not offer the interest rates they used to. If you're keeping all of your money in a regular savings account, you're basically giving away money that you could be earning in interest.

Right: Open an Online Account

By moving your savings to an online account, you can earn 1%–2%. That's not much, but it's more than a traditional bank and enough to add a few additional dollars a year to your savings, depending on how much money you have in your account. Other options, like CDs, pay a bit more interest, but don't offer easy access to your funds.

Decide how much you want to put into your savings account, and set up an automatic transfer so you're committed to saving that money every month.

Saving money doesn't have to be a drudge, and the good news is that a few small changes can make a big difference. You may even find that you are quickly becoming the exception to the discouraging savings trends nationwide.

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