It seems that every time you turn on a talk show or news program, an economist is making dire predictions because Americans aren’t saving enough. No one plans to live out their golden years as a Wal-Mart greeter, but with a large portion of the American workforce living from paycheck to paycheck, that might be the sad reality. The truth is that pretty much everyone — no matter how low-paying your job — can put money aside for a rainy day. Have you ever heard one of these excuses coming out of your own mouth? If so, take the time to really think about your money habits and budget. Your future self will thank you.
1. I don’t make enough money to save. Nonsense! No matter how small your paycheck, you can always find a little wiggle room. Even putting away as little as $10 per paycheck will get you started — and will you really miss it? Set up an automatic transfer and you’ll never even know that money is gone.
2. I want to enjoy my money now, while I’m young and can really appreciate it. The individuals who say this are such optimists. They assume that they will continue to enjoy good health and job security, among other things, throughout their lives. While I would never look to frighten anyone away from having an enjoyable life, I also know that the new car, plasma TV, Caribbean vacation, and huge mansion are all going to be cold comfort if or when the money runs out. Plan for the worst, hope for the best and put some money away. You can still enjoy life without spending every cent.
3. I need to pay off my debt before I can start saving. This is an understandable response, particularly for black-and-white thinkers who do best with one goal at a time. But just like having a baby, there is never a perfect time to start saving. You deserve to have a savings cushion whether or not you are completely debt-free. So funnel a little money toward savings while you continue to knock out that debt.
4. I don’t need to save money because I’ll inherit. Okay, not everyone will be in the enviable position of this excuse, but even those future heirs and heiresses really should make sure they create their own savings cushion because relying on others has a nasty habit of biting you.
5. Why save when the interest you earn is so low? It’s true that interest-bearing savings accounts have depressingly low rates, but what kind of return on investment will you get by buying something with that money? Just because savings plans aren’t ideal doesn’t give you a license to spend your entire paycheck.
6. I contribute to my 401K, so I don’t need to save. While it’s wonderful that you are putting money aside for retirement, you still need to have savings that you can access before you get your AARP card. Otherwise, you’ll be forced to pay taxes on withdraws plus a penalty to access your funds early.
7. I don’t save because I hate thinking about this stuff. Everyone has “grownup” stuff they would rather ignore or forget about, and finances are a biggie. But as easy as it may be to stick your head in the sand rather than actually work on your financial plans, it will only make things worse in the future. Do some research, read a book, meet with a financial planner — whatever you have to do to make taking control more palatable.
8. I’m too young to worry about it. There is no age minimum for savings. And when you think you’re too young to save, you’re probably enjoying the most disposable income you’ll ever have, as you don’t yet have a family, a mortgage, and other bills to take care of. Pay yourself first!
9. Why do I need to save when I have a credit card for emergencies? I do use my credit card for emergencies, but I also pay it off every month, so I never have to wonder if I’m too close to the limit to put the tow-truck charge on it, or how I’ll pay for it once the emergency is over. Yes, credit is a great tool, but having money to pay it off is much more secure.
10. I can’t take it with me when I go, so why save? While this is true, it ignores the fact that you can make your life a great deal more comfortable if you leave yourself a cushion of savings. And wouldn’t you like to leave a little something for your loved ones?
You really want to plan for the future and rely on yourself. Otherwise, you will end up living in poverty and become one of those people the economists are talking about. So go get yourself an online savings account and start saving. Build up an emergency fund, start investing, and prosper instead.
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{ read the comments below or add one }
Great list. I’ve found also few other tricks that worked for me:
– Saving life insurance
– automated saving (e.g. % of each transaction is automatically transferred to a separate savings account)
– digital inheritance to protect my assets and ensure my loved ones will know how to find and locate them, if anything is to happen to me.
For nearly a year, I’ve had a 10th of my paycheck deposited directly into a savings account. But it was linked to my everyday checking account and debit card, so I always took that money out of savings. I had a personal banker — at another bank — create a savings account that I can’t see. I’m too lazy to figure out where the money is, so it stays put. It’s a shame that I have to play Jedi mind tricks on myself, but it works.
I fall into the same camp. If I can easily get at money, that can be a problem. Obviously I do try and be reasonable, but it’s better or the account if I cannot readily access it. For me, the best thing is for me to have to either make an actual phone call or visit a branch, and for there to be a notice period required. If I’m doing that, then it’s a genuine need! Otherwise, not so much…
I am also looking to save money. My question is
Isn’t paying debt first much better than saving? You pay a greater interest for debt as compared to the savings. If your savings are 8%, the debt is probably 15% interest.
What makes saving at the smaller rate better than paying off one’s debt?
@Dr. Athira, that’s a great question. I’m one of those people who is so uncomfortable with debt that I would be likely to pay off debt before padding my savings. The problem with that plan is that you could be right back where you started if some kind of catastrophe hits just after you’ve paid off the debt and you have no savings whatsoever. In a perfect world, it does make more sense to pay off your debt before contributing to savings, but in this imperfect world of disasters, you really need to protect yourself with a cushion of savings. It’s paying yourself first before you pay your creditors–even though mathematically, it would make more sense the other way around.
#1 isn’t true. If you’re not making ends meet, you don’t have enough to save. Period.
I believe the idea is cutting costs elsewhere, and as ben frankling would say, ” A Penny saved is a penny earned”
I read somewhere that you are better off than half the world if you have a jar with some change in it…. I know that is a big way I save.
My Dad and I took an Alaska Cruise (at my expense) after his doctor told him not to put off anything for the future because his heart condition was not getting any better. It was something he had wanted to do all his life, but because he had five children to rear and we never had much money, he had not been able to do it. On our cruise we met many widows who said “I am taking this cruise on The Old Man’s insurance — we had always planned to do it after he retired.” This is Exhibit “A” to “Don’t Put Off Until Tomorrow…” i.e THERE MAY NOT BE A TOMORROW. I did a great deal of travelling in the 1980s, to places which now are far too dangerous, dilapidated or beyond my current state of health. I have retired on SSI and a small amount of savings, and I am very happy to have a huge backlog of memories instead of a bank account for my sisters to squabble over. (Because I am unmarried and childless, they all think I should leave them my “fortune” which I spent, being of sound mind, while I was young.) Saving money for other people to fight over rather than enjoying life while you have it? Not for me, thanks.
Personally I like to keep things simple. Pay yourself first, Pay others second. That way you will save and also live within your means.
If you pay other first and pay yourself second – chances are that you will never pay yourself, and instead just spend the money more stuff that you don’t need.
Alan
Number 10 (not being able to take it with me) can sometimes be an excuse for me, even though I’m still so young to worry about that 🙂
I always wonder if I’m over saving, but what helps me overcome that excuse is the fact that the sooner I accumulate the wealth, the less I actually have to save because of the “time and compound interest factor”, which means I should save as much as possible, as soon as possible.
For now, at least that works.
Good list. I’m happy that I do not fall into these categories. From when I started my first part-time job, I saved a portion of every paycheck that I have ever earned. It helped that the first job was a summer job and I needed to save to make it through the rest of the year. At age 15, that was pretty easy. Today is a little different, but my wife and I do save a portion of our income.
These are some good guidelines to follow.
I am personally a fan of the auto deductions for saving. Even if your work doesn’t have a way to deposit into multiple accounts automatically, you can use this method. Your brokerage accounts (Sharebuilder, E-Trade, ect) allow you to set up reoccurring deposits from your bank account.
Every two weeks on payday my account is automatically taking out a small portion. I haven’t even noticed in my day to day life, but it does add up to a size-able sum over a couple months.
I HIGHLY recommend setting up something to place money where you won’t be tempted to spend it.
Todd
Compounding Interest over the years… I believe that is the reason that some people split the debt/savings payments…. Theoretically, if one puts into longterm savings, over the years, the compound interest at a lesser rate will more than make up for for short term pay off of the higher interest rate on the debt. However, that doesn’t take into effect inflation…. but the theory still hold on long term compounded interest and interest on interest over the years….
Top excuse would actually be: One has a lack of self-discipline 🙂
Agree that the auto-savings is the best way – you never miss it because you never actually have it 🙂 Auto deduction from your checking to your savings if your company payroll can’t do it for you . No excuses.
Good list. Saving seems to be like writing: it’s the first step (word) that is the most difficult. Cultivating the long view helps in a society where financial decisions seem to run pay check to pay check.