So you haven’t yet saved a dime towards your retirement…and you have been working now for years and years. You don’t know how you’re going to pay your taxes because you haven’t been keeping up with—what are those things called—quarterly payments? You certainly don’t have a rainy day emergency fund; why should you? And college, well, the kids will just have to open a lemonade stand, and charge $100 a glass to get their tuition and books paid for. What should I do about it? It’s their education, right?! If you are awful at saving money, please step right this way because you are going straight to financial hell and the elevator is waiting for you.
Disciplining Yourself to Save Is Hard
If it seems hard to save money it seems that way for one huge reason: it is! That’s especially when it feels like you’re just barely scraping by yourself, so what the F? Do you expect to save on top of that little piece of reality? Well, yeah, come to think of it I do and it’s not just an idea here I am touting. It’s kind of, sort of, really, really a necessity. So,
Why are you so awful at saving money?
You simply can avoid trying to save money forever and throw you financial future and responsibilities all to the wind and kiss them goodbye, if that’s what you want. You know you should be saving and you know it’s going to catch up with you eventually if you don’t (if it hasn’t already).
Not saving is the prime reason you feel pretty bad, totally irresponsible, extremely guilty, and like a failure as a human being when you look in the mirror each morning. Think for a minute: do you wake up at 3 am in a cold sweat crying like a baby two or three times a week because of it?
You’re Not Alone
If you’re awful at saving money, you’re certainly not alone. According to Bankrate’s March Financial Security Index survey, one in five working Americans aren’t saving any money at all, and nearly half of them are saving no more than 10% of their annual incomes. Millennials and Gen Xers particularly fall into these categories, as do households earning less than $30,000 per year.
Captain Obvious Says…
If you aren’t saving any of your money, there are reasons and you are going to have to face up to them. Assuming you are not living in a cardboard box and/or are earning some money, some way, somehow, then saving has to be a part of your routine just like showering and brushing your teeth. That goes for all of us and unless your name is Bill Gates, you will at some point need some back up cash to get through an emergency. Now that I think about it, even Bill has to save, too.
To help you understand why you can’t seem to put any of your pay aside, here are some of the reasons you might just be so inept at saving. If you can understand where you’ve gone wrong, it will help you finally turn things around. Here are some major missteps of the savings-challenged.
1. You keep on upgrading your lifestyle
This is how people get into the dangerous cycle of unnecessarily living paycheck to paycheck. What happens is you justify each purchase by telling yourself you still have or will have (optimist are you?) money “left over”, even when you don’t! As you earn more, you always use that new money and spend it!
2. You’re too nice (or gullible…same thing!)
Do you freely lend money to anyone who asks? If you’re the family ATM, this behavior needs to stop. It will be difficult to save money if you don’t keep some of it to actually save in your bank account. Work to get over your fear of being seen as the bad guy, and practice saying “no” every now and then. Don’t agree to lend money if it would put your financial future at risk.
3. You have a lot of bad habits
This applies not only to your professional life, but your personal life. The ability to save money doesn’t just happen overnight. It’s a habit that must be developed over time. Until you learn how to consistently save money each pay day, you’ll continue to struggle. That’s why automating savings are such a great way to save. Out of sight, out of spend!
4. You procrastinate
There’s a reason why “paying yourself first” is the golden rule of personal finance. It’s because if people don’t set aside money right away, most won’t do it at all. The general idea is this: Take a certain percentage of your paycheck, and allocate it to savings. And the remainder is what you’ll be left with to use for bills and other expenses.
5. You have no motivation
If life has been going smoothly, you probably don’t think much about saving cash. Or if life hasn’t gone smoothly, you have been ignoring it with delusional thoughts. Either way, you lose. Life is unpredictable. A major emergency could knock you right off your feet. All it takes is an unexpected illness, a divorce, or a sudden death to change your financial circumstances overnight. If you can’t seem to get motivated, think about what your life would be like without any extra cash cushion.
6. You have no support system
If you spend time around people who aren’t good at money management, their bad habits could eventually rub off onto you. Then, you’re in for a lot more conflict down the road. Make an effort to keep company with friends and family members who respect money. Also, consider appointing someone to become an accountability partner. This way, when you’re tempted to overspend, you can give them a quick call.
So here’s the easy way to save, nothing new here. No radical lifesaving brain surgery, but I am obligated to tell you anyway. Jot these down or have them tattooed on your forearm please.
Step One: Open a separate savings account for every single one of your goals. For example, at my business bank, I’ve got a business savings account, and a business tax savings account. At my personal bank, I’ve got a retirement savings/investing, a rainy day emergency fund savings, and a “guilt-free bonus fun-fun” savings account. That’s to use for something entirely indulgent, once a year! With online banking, it’s a cinch to open any new savings accounts, and monitor them all in the same place. Oh and you can also find several that will pay you a bonus if you do it so, yeah, free money!
Step Two: Now, set up an automatic transfer from your earnings to contribute a little in each account on a weekly basis. No matter how small, contribute something. You can and will amp that up as your finances improve over time.
By setting up an automatic debit, it’ll, ahem, happen automatically, and therefore, you can’t sabotage your own efforts by conveniently “forgetting” to transfer the money!
You won’t have that moment where you don’t want to transfer the money or rationalize that you will “make it up next month”. But, there is a trick to all of this: Calculate how much you can save each month for each goal, and then divide by four, and set it up so those smaller chunks automatically come out of your main checking account weekly, instead of monthly. This way, you don’t have to “feel” the worry about large amounts of cash coming out all at one time and it won’t feel like such a hard hit. You’ll barely notice it. Next thing you know, you’ll actually be saving and you can feel like a responsible adult who’s taking care of business.
If when you were born, you were given a letter that warned you about “future you” and potential money problems, you wouldn’t have to be told about it when you are an adult. Seriously, why does anyone need to warn you at this point in life? You already know that you must either do one of two things to improve your finances and they are simply put: “earn more and spend less!” Now add a third, save!
Take a good hard look at every single thing you spend your money on. How much of it is really necessary? There are a lot of things we spend money on that we think are needs, but are really just conveniences or wants. They may make things easier, or improve our quality of life, but the reality is that if we can’t afford them, we need to figure out ways to either pay less for them or eliminate them from our budgets altogether.
Are you awful at saving money? When was the last time you broke out in a cold sweat because of money worries? Was it today? If so, what are you going to do about it right now?