Saving money has been and will continue to be a challenge for a lot of people, partly because they feel there’s never enough of it to go around. Yet despite the barriers, some do it, though not always for the most important purpose, which is the intent to grow wealth and become financially independent.
Instead, we’re generally focused on more immediate concerns that seem to syphon our financial resources into a big economic void, leaving us with little or nothing left for things such as wealth-building, which should be our #1 reason for saving money. Allow me to explain.
The general view about savings
Just about everything we do with money in the American culture is geared toward spending. Although some financial experts encourage the masses to save, the money is usually earmarked for something that will eventually deplete the amount, taking the saver back down to zero where he or she must repeat the process for another purchase.
Here are a few of the most common reasons for saving money:
- A college education
- Down payment on a car or a house
- An annual vacation
- Emergency reserves
By themselves, some of these practices are good. I would definitely encourage a few but not all. For instances, putting money down on a car or a house is a waste of funds. Yet, the practice is quite popular. Notice also that all these funds will get spent on something—most likely the purpose for which they are intended. At which time, the money will be gone forever.
Another misguided concept about savings is this: We tend to believe that when we buy things on sale, we’re getting ahead financially. Powerful commercial bites such as “Buy now and save,” or “This deal won’t last long” keep us shopping. The same goes for money-saving opportunities offered by red tags sales, discounted items, and so forth.
The idea is the less you pay for things, the better off you are financially. But this is true only if you BANK or SAVE the difference you gained from the original purchase. If you SPEND it on buying something else, you made no financial headway. While you gained more possessions (stuff) in the process, your pocketbook and bank accounts remain empty, leaving you nothing in terms of financial progress.
If you’re in your twenties or early thirties and want to be financially successful, you cannot buy into this temporary savings philosophy. If you do and make a habit of it, you will stay broke all your life and retire poor, which is the current state of most working and retired Americans.
Saving for financial success
The idea of wealth-building may be farfetched, particularly if you’re not used to thinking on that level and struggling to make ends meet. Initially, the concept may seem daunting, but it doesn’t have to be. At this point in the game, there is no need to think about the complicated aspects of Wall Street, stocks, bonds, mutual funds and so forth. You will eventually know these things as you strengthen your financial base, which should be your most important economic goal at this time in your life.
Assuming your goal is to become financially independent, meaning having enough money to do what you want without having to rely on a job, there are things you can do NOW to get the ball rolling in that direction.
Most immediately, you need to know that the way to the top has many paths. The most popular one is through business, which I will be addressing in future posts. The next most common one is through savings. Some of the wealthiest people in the world started with this one. Warren Buffett, for instance, started his multi-billion-dollar empire with nickels and dimes. You can read all about him in The Snowball: Warren Buffett and the Business of Life. There is no reason why you can’t do something similar.
As you start thinking about building a solid financial future, you will begin to run into roadblocks that are designed to deter your progress. The biggest one will be self (YOU): personal doubt, procrastination, self-pity, excuses, and others. You need to fight these feelings and forge your way ahead with purpose.
Furthermore, you need to embrace the following concepts to facilitate the process:
- Avoid making the mistake of thinking that you’re not making enough money to begin a wealth-building program. Statistically, we habitually waste about 10 percent of our money each month. You can capture at least some of that wasted money to start paving your way to financial freedom.
- Open a savings account…today! Start with a dollar or the minimum that your bank requires. Though the amount of money you save does make a big difference in the long run, the steady savings habit you develop along the way is more important now for your overall success. So, don’t postpone this initial step. Get it going!
- Save regularly and diligently. Consider putting 15% of your income into the savings account each month. If this percentage is too high due to other financial obligations, drop it to 10%. If that’s still too high, save 5%. And if that’s still too much, start with 1%. The point is to select a comfortable level of savings that you can maintain consistently. Frankly, the savings discipline is more important for you at this point than the amount of money you put away.
- Think big. Every dollar you save gets you a little closer to financial freedom. The more you save, the quicker you will experience the reality. Take pride in the fact that you’re doing something good for yourself—saving money, which few people are doing these days.
- This is critical. The money in your savings is not for use! It is your nest egg; your “getting-ahead money.” If you want to save for a big screen television, down payment on a car, etc., you may do so in addition to your wealth-building program. Otherwise, what would be the point of saving money if you’re periodically withdrawing from the amount to buy various things? It would be like planting a small tree and breaking the tender leaves and small branches off as soon as they appear. The tree would eventually die. The same thing would happen with your savings program. Once you begin to withdraw money from your savings, the process doesn’t stop until the account gets empty. Rebuilding it is a much harder process than you think. So, the point is to KEEP SAVING and don’t withdraw. In time, this small bundle of money will begin to build on itself, and you can use it for larger investments that can catapult you into financial freedom.
- Get into the habit of thinking long-term. If you continually worry about meeting the needs of the present by sacrificing those of the future, your financial situation will reflect the same thing. You will most likely live in a state of scrambling for money all your life, hence the paycheck to paycheck routine with most people. Forward thinking will help you overcome this problem. This includes your proactive savings program.
- Equally important is this: You need to start your wealth-building program today…not tomorrow, but TODAY. This is your first lesson in defeating procrastination. Putting off things that can and should be done today for tomorrow is a waste of your valuable life. Such a habit will add months and years to your life with little progress to show in return. This is particularly true with matters of personal finance. Work on breaking the delaying habit by taking immediate action…NOW!
- And finally, refuse to be lured into spending by infomercials that evoke feelings of empathy, guilt, and self-pity. If you allow your emotions to dictate your decision to spend, you will have great difficulty saving money. In this case, you’re not the one in control of your life; you’re being led by others.
The preceding list is short and simple but essential for your overall financial growth and stability. As indicated, the most important thing is to implement them right away. YOU have the power to make this happen. Begin your journey to financial independence today!
To learn more about the value of savings and its impact on your financial future, consider reading my new book: Pennies to Power: How to Use Your 20’s to Gain Financial Independence for Life.
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Thanks for reading.
What are your thoughts?
Do you think saving money is important? Have you had problems saving part of your income? What is the most common economic issue that keeps people from saving money?