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Saving Dirty Word

Why do people cringe when I tell them they need to save?  How many of us are guaranteed to win the lottery, inherit a multimillion-dollar estate, or meet a billionaire who is willing to adopt us and support us for the rest of our lives?

If you are one of those people, I think I’m your long-lost cousin.  If you are not one of those people, keep reading and save along with me.

    1. Have a Savings Goal

      To be a successful saver, you must have a savings goal.  First, decide what you are saving for.  Do you need a new car or want to buy your dream home?  Are you building a college fund for your child?  Do you want to finally be able to take a vacation?  Is your family starting an emergency fund?

      Whatever your reason for saving, think about it, commit to it, and write it down.  Have you written it down?  Good.  Now it’s time to write down how much you plan to save.

      Do you need to save $50?  A few hundred dollars?  A few thousand dollars?  Write it down.

      How often, and how much, will you save?  Depending on my savings goal, I like to save money in different places at different times.  For example, money goes into my retirement account every two weeks.  In contrast, I usually put money into my savings account every month.  Although the amount deposited into my savings account changes as my life and goals change (e.g., going on vacation vs buying a car), contributions to my retirement account are steady and unchanging. 

      A vacation or a car is a short-term goal, while retirement is a long-term goal.  It is okay to have multiple savings goals.  The key is to write down your timelines and keep the funds separate.  For example, I don’t plan to touch my retirement money until I’m at least 100.  Okay, that is a bit of an exaggeration, but I have a long time before I save enough to retire.

      Both short-term goals and long-term goals require you to save as much as you can whenever you can.  I often hear people say they don’t have enough money to save.  Yet, when I hear this, I often think, “Well, in that case, you can’t afford not to save.”  Put another way, no amount of money is too small or insignificant to save.

      For example, if you save $20 a month, at the end of the year you will have $240 (more if it is in an account that draws interest).  If you save $1 a day, you will have $365 at the end of the year.  If you save $100 a month, you will have $1200 at the end of the year.  Do you see where I’m going with this?

      It doesn’t matter if you are saving pennies, quarters, or dollars.  The goal is to save.  I began by saving spare change and depositing it into my account at the end of the year.  It wasn’t always fun arriving at the bank with all those pennies, but on my account statement they were transformed into beautiful dollars.  The bank tellers never turned up their noses at all those shiny coins, and neither should you.

      Save whatever you are able to save.  Eventually, you will be able to save more.

      Now that you know why you’re saving, how often, and how much, it is finally time to write down when you plan to reach your goal.  The Savings Tracker is a great tool to help you keep track of your savings goal. 

      Whether you will reach your savings goal in a week, a month, 6 months, or 10 years, the important thing is to stick to your plan. 

      Know that you are working towards something important, and that it will take time.

        2. Make Saving Automatic

          Whenever possible, make saving automatic.  One of the hardest things about saving is remembering to put money in your designated account, envelope, or lockbox under your bed.  Where you keep your money is up to you.  I used to keep the change I saved in a zip lock bag, so I’m not one to judge.  However, automatic deposits have made my life much easier.

          If you can make automatic deposits into your checking, savings, college fund, or retirement accounts, do it.  How beautiful is it to have your work check automatically deposited into your checking account and money from your checking account automatically deposited into your savings account?  That is one less thing you have to worry about during the month. 

          Of course, you should periodically check your accounts to make sure the automatic deposits have gone smoothly, but that is much quicker than going to the bank.  In addition, you can change the deposit time schedule and amounts at any time.  Set your retirement accounts up similarly.

          Out of sight.  Out of mind.  In the bank.  What’s next?

            3. Save More Whenever You Can

              Have you gotten a raise, bonus, or tax refund?  Did you need the money before you got it?  Were your basic living needs being met before this amazing windfall?  If so, put some (or all) of that money away.  Don’t make that face at me.  Save it.  I know you can do it.

              Since I began filing my taxes many years ago, I have always put away money if I happen to get a tax refund.  No matter how large or small the refund, I usually save half of the funds and use the rest as fun money.  Granted, this year, some of my fun money became bill money because I paid extra on the principal of my car.  In any case, I always save a portion of my raises and tax refunds.  The extra is automatically deposited into my savings account or my retirement plan.

              I guess I shouldn’t complain about not having this year’s fun money.  After all, I was able to buy the car I wanted because of all those years I saved the extra.  A car was one of my savings goals.

              Bottom line – If you don’t need it right now, save it.  You’ll need it later.

                4. Don’t Withdraw Your Money on a Whim

                  There are only two reasons to dip into your savings. 

                    1) You have reached your savings goal.  (Go forth and spend.  You earned it!)
                    2) You have an emergency and you need the money.  (Things happen.  Aren’t you glad you have savings?)

                    Aside from reaching your savings goal, you should not withdraw your money unless you have an emergency.  Let’s talk about what constitutes an emergency.  Here is a little trivia for you.  How many questions can you get right?

                     

                    Q: I want the latest phone, although my current one works perfectly well.  Is that an emergency?

                    A: NO!

                     

                    Q: My car broke down and I don’t have any other way to get to work.  Is that an emergency?

                    A: Yes.  If you don’t go to work, you won’t get paid.  If you don’t get paid, you can’t save money.

                     

                    Q: I want to buy pizza tonight, is that an emergency?

                    A: NO!  This is a real question folks.  I once had a fellow college student tell me he used his emergency money to buy pizza because he didn’t feel like going to the dining hall. He bought pizza every night until he barely had any savings left.  Really!  Just no!

                     

                    Q: My cousin (aunt, nephew, sister, brother, mother, father, spouse, friend, insert relevant relation here) called me again with another bogus emergency and needs money.  I’ve loaned him/her money in the past and I never get it back.  Is this an emergency?

                    A: Sadly, no, this is not an emergency. 

                     

                    Unfortunately, when people hear you are trying to save money, they take advantage.  I have a few friends and family members to whom I would give anything.  Of course, these are the kind, honest people who never ask for anything.  Then, there are those scallywags who will get nothing from me.  Like you, I have loaned money that has never been repaid.  The solution is to stop giving away your hard-earned cash. 

                    One way to deter freeloaders and beggars is to ask more questions than the IRS.  The conversation goes something like this.

                    What is the money for?  Why don’t you have it?  Who else have you asked?  How much did they give you?  How many hours did you work this week?  When do you get paid?  How much is your check?  Which bills are due this week?  How much do you have left after you pay your bills?  Can you give me my money back in a week?  I need my money back in a week.  Can you have it by Friday?  Oh, you can’t have it by Friday?  In that case, I need daily installments of this amount for this many days.  Let’s write out the terms.  Will you sign this contract?  Oh, you don’t need the money anymore?  That’s great.  Glad I could help.

                    And this brings us to tip #5.  Guard your money wisely.

                      5. Guard Your Money Wisely

                        To become economically savvy, you must know when to spend your money and when to hold on to it.  You have worked hard to save.  Encourage others to do the same.  Maybe then you won’t have to act like the IRS when cousin Jim comes knocking at your door.  Again!

                         

                        How do you keep track of your savings?  Leave a comment to let us know.

                         

                        Have you read the other parts of my Be Economically Savvy series? 

                        Click the links below to see what you’ve missed.

                        Part I: Save Money on the Things You Already Buy

                        Part II: How Much Money Can I Make Using Apps?

                        Part III: Saving, the Dirty Word Nobody Wants to Hear

                        Part IV: What the Heck is Compound Interest?

                         

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