Can’t Save? Know Why?
Posted by Gail | Filed under Saving
The path to hell is paved with good intentions. If you’ve tried to save and you just can’t figure out where you’re going wrong, it may be that you’re making one of these classic mistakes. Do you see yourself here:
Meet Angela. Angela wants to save. She’s tried and tried. But no matter how many tricks or tips she uses, it never works. She’s opened up pay-yourself-first accounts, had the money moved automatically, only to find herself dipping in mid-month. She got herself one of those snappy accounts that rounds up debit card purchases to force her to save, only to find herself transferring the money back to her chequing account because she’s run out of money before payday.
Angela’s problem: She hasn’t figure out her cash flow.
Angela’s solution: Angela needs to look at how her money is coming in and how it’s going out. She should look over three to six months’ of her credit card and bank statements to find the expenses she often overlooks that cause her budget to jump the rails.
Say hello to Mike. Mike wants to buy a house in the next two years. On an income of $4,200 a month net, Mike hopes to have a downpayment of $40,000 saved in the next 24 month. Problem is, Mike can’t seem to make any headway on his goal. He’s frustrated.
Mike’s problem: His goal may be too ambitious. In essence, Mike wants to save 40% of his next two years’ income for his downpayment.
Mike’s solution: He needs to reassess his goal to see if it is achievable or just designed to frustrate the hell out of him. If there’s no way he can save $1,666 a month, he’s set his goal too high. He may have to extend how long he’s gong to save, or find a way to make more money.
Say hi to Sam. Sam knows she needs to save for retirement but at 40 she thinks she may already be behind the eight ball. As a freelancer, she’s found herself dipping into savings over and over whenever she’s hit a dry spell. Now she’s concerned she’ll never make up the time she’s lost.
Sam’s problem: She’s focused on the past instead of the future.
Sam’s solution: Sam has to forget about what’s done. Now she needs to make a plan for the future and stick to it. She mustn’t set the bar too high and frustrate herself (like Mike did). She has to be realistic. But she also has to be determined not to dip into her long-term savings, so she has to set up a separate emergency fund to deal with those interruptions in income she experiences as a freelancer.
Figuring out your saving barrier is the first step to bashing it down or leaping over it. If you haven’t been a saver, it’s time to take a good hard look at what’s been stopping you. Throwing your arms up in frustration won’t lead to a solution. But it may lead to a sad, poor retirement. If that’s not what you want, take a good hard look at your money and make some changes.
And here’s Halley and Paul: Halley is a saver, Paul is not. Every time Halley manages to squirrel away $10,000, Paul sees it as a windfall and books a vacation, buys a new toy, or runs up his credit card on dumb stuff and turns to Halley with puppy-dog eyes.
Paul’s problem: He’s got no self-control. And, perhaps having never seen that much money all in one place, he feels “rich”. Halley’s problem: Paul.
Halley’s and Paul’s solution: Halley can try to spread the savings around so Paul never sees it as a big enough pool to feel “rich.” Or she can lock it away in investments that can’t be broken so Paul can’t get at it. ‘Course that won’t stop him from buying now knowing that Halley will bail him out later. So maybe the big solution is for Paul and Halley to have a serious talk about their money and negotiate their differences.
While Halley may want to save a whack of cash each year, if Paul feels it’s at the expense of having a life, he’ll continue to buck. But if Paul’s spending keeps Halley from hitting her saving goals, she’ll grow resentful. They have to come to an agreement: Paul gets to have a little of what he wants as long as he doesn’t throw Halley’s plan off track. If he does, he knows what the consequences will be because in their negotiation, she’s made this clear.
January 29, 2013 at 4:25 am
Will have to bring it up again… make following your cash convenient for you… now with smart phones, you got an app for that… and that literally changed my life. Not linked to any account, totally personalized. I got budgets for things, but mostly, since where ever I go, my phone goes… It’s convenient to put your expenses in and follow up. Not only do I keep track of my cash flow, I know my net worth in details.
Since I had this, I have money in the bank, money in my saving account, my emergency account and my vacation account… the credit card is getting paid off as planned, so is my loan.
This was about the best thing since sliced bread for me. The pro version was $7 (which I was finding pricy) but the free version convinced me of the value it held. In case you wonder, I use MoneyWise…
January 29, 2013 at 8:18 am
The budget has to be realistic. Here are some of the things I stopped fooling myself about, and it made a huge difference in my savings.
haircuts
dog expenses
kid classes
kid school lunches and field trips
Timmies
weddings, showers and stag & does
family gifts
birthdays
birthday PARTIES
Christmas and
office Christmas parties
oil changes and car maintenance
Look at what you spent last year. Total it up. Add the lines in your budget.
When you stop fooling yourself. you CAN save.
January 29, 2013 at 8:21 am
We are like Halley and Paul. It’s why we have had vacations, a trailer, and a large screen tv, to name just a few purchases my husband has made. And why I have a beautiful diamond ring
We balance each other though. I’m a saver, so is he, but then he likes to use some of that savings. We’re in good shape. Truck loan paid off in 2 more payments. Car next month will be paid. Mortgage done by July. At 42, I think we’re okay. Next focuses are: a major trip, a Reno, and 2 daughters to put through university.
January 29, 2013 at 10:10 am
@KarenM while some of those things seem like good ideas to cut back on, the oil changes isn’t one I’d cut back on (unless you’re talking about doing them yourself instead of paying). It’s for sure something to be doing regularly, just make sure it’s done inexpensively or DIY.
I’ve been teaching my son to do oil changes the last 6 months. So Grandma brings her car over to have him change the oil. Except he’s at school, so I end up having to crawl under the car to do it. I drain the oil, and top it up with another 4 liters. Then I check the oil level, and it’s WAY high. I’m completely puzzled. I chat it over with grandma, and figure, well, I dunno. Send her on her way and tell her to watch the level for a day or two.
Grandma carries on, but the car is acting funny, like it’s running in first gear. Grandma is worse with cars than I am, so she keeps driving. Eventually she takes it into a garage to get it checked.
Turns out, I didn’t drain the oil. I drained the transmission oil, then added 4 liters to her already full car, giving her 8 litres of oil. So there’s grandma driving around, oil going everwhere, and a completely dry transmission.
So what did we learn? Well, my son was at school so he didn’t learn anything at all. Grandma however, has learned the hard way not to be bringing her car to me to get the oil change. I’m an insurance broker, not a mechanic.
January 29, 2013 at 10:15 am
I was definitely an Angela. In the past I have tried and tried. Then when I finally took the time to see oh my expenses are X and thus why I keep needing to dip into my savings to cover this or that. I have decided to put away a smaller amount of savings for now until I can get a better paying job.That way the amount I can save will stay saved and I have enough funds to cover my expenses. So I no longer feel like I’m not saving anything.
January 29, 2013 at 10:23 am
LifeInsuranceCanada – KarenM wasn’t advising to cut back on oil changes, she was advising to add the expense into the budget.
January 29, 2013 at 10:36 am
Hi Gail;
I’m like Sam…. I divorced badly and ended up with ALL the debt…. he was the Paul and I was the dummy! After I forgave myself (I’m a bit older than Sam, in my mid 50’s) I took the bull by the horn, have my emergency fund growing slowly, have almost all the debt paid off (debt fatigue after 10 years, but necessary) and have had the odd vacation just so I don’t go crazy. After the debt comes the mortgage, which I hope to have paid off by 60. Since I have 2 pensions, one of which will double at 60, and I work damn hard, the debt is shrinking fast and the future doesn’t look too dim any more. At 60 if all goes well, I can morph into a job that may pay a bit less, but will be less stressful and lets me have some fun and relaxation.
We all have stories, some are good, some are not so good. Take the situation, figure out a solution and stick with it, no matter how hard. Trust me, much better to feel the pinch now than look at a bleak retirement. Or worse, forced to work til you drop.
January 29, 2013 at 10:46 am
@LifeInsuranceCanada, hilarious….but true, we must know our limits.
January 29, 2013 at 11:23 am
The first year I used Gail’s budget sheet I added a line for “other”, things that I didn’t know I’d need. The following year I averaged the previous year’s “other” spending and put that number into the cash flow so it wouldn’t be a surprise.
January 29, 2013 at 12:05 pm
I think what Karen M is trying to say is not to forget to put things like haircuts, etc into your budget, not to eliminate them or reduce their frequency. You need to keep up with your car maintenance, but don’t have to do it every month. If you don’t budget for it monthly, then you won’t have the money when you need that next oil change…same thing with haircuts. Women generally don’t need one every month, but plan ahead and the money will be there.
January 29, 2013 at 1:10 pm
Does anyone know a budget app that you can share with a partner? (i.e., you can both keep track of expenses with one budget amount) My darling spouse has many excellent qualities, but tracking expenses is not one of them. I drove us both mad asking him where all the little bits and pieces were going (and of course, they add up!) He’s really good with electronics though, so I thought if we had “virtual envelopes” in some kind of budget app that we both tracked, he’d see when the budgeted amount for that category was done… Perhaps a pipe dream, but perhaps one of you knows something I don’t!
BTW-I used to have a “Paul”, so I started making the money “disappear” automatically into accounts he couldn’t see (but knew about-no secrets is my policy) and the problem disappeared along with the savings. Of course, many discussions about money happened along the way too, but this was the solution of spending money that was supposed to be for savings.
January 29, 2013 at 2:10 pm
DH and I definately fell into the Angela category. We didn’t run into trouble with using credit to fill the gap but we just found that we were never getting ahead. When I received Gail’s book that outlined the jar system, it was such a revelation. It’s so funny how easy it is (saving money, that is) now that we are focused and know we have a system that works for us.
January 29, 2013 at 4:10 pm
This is such a great, timely post for me. Every single response had something to teach me a lesson, or reinforce what I already know as Gail-truth. The oil change experience practically had me in tears from laughing so hard; thanks for sharing. And God bless Grandma.
As far as haircuts/colorings, etc…I’ve been dyeing my gray hair since I was 23. I’m now 55. Half a life-time! This year, talking it over with my daughter and girliefriends (I’m single, so no spouse/partner to confer with) I’m going gray. There’s another $1200 to my bottom line! Yes, it’s going to cost a couple $100 visits up front to pay for a short short cut and weave, but 3-4 months from now I can cut my “salon services” line to about 15% of what it’s been. Am I excited now!
And….unbelievable, I finally got a HUGE promotion at work. Huge you say? Well, I was at the top of my rate range, nowhere to go, and my boss came through and gave me a new title (yes, new & more responsibility) but also with a 12% raise! This has been a great beginning of the year for me, and I’m so happy this post hit today to remind me to 1) save, 2) pay some bills sooner than I’d thought, and 3) take a one-time $100 for daughter & me to just enjoy.
If I’d not read this today, I’d have done it the other way around. Thanks Gail and every single person who posted! You all remind me that at 55, life is still coming at me and I have the tools to live it with optimism.
And a special thank you to 55 going on 60 with a plan in place. You inspire me and, with your sharing, I was able to understand that truly, I am not in this alone! Best of luck on your journey; you seem to have it all in place.
January 29, 2013 at 5:42 pm
I’ve always been a saver but I see nothing wrong with spending on vacations and some luxuries as long as retirement funding is in place and you have no debts. If the car is paid for and the mortgage will be paid off before retirement, then go on some holidays or buy that new gizmo.
January 29, 2013 at 6:40 pm
I’m a bit like Mike, I make lofty goals first and then try and figure out how to reach them. This isn’t all bad though. I wanted $50,000 dollars by the end my 4 years of being and Officer Cadet (salary $1,200 net) and I walked away with $40,000 for a down payment. Next goal, pay off my mortgage in 5 years. How will this be accomplished? I have a vague plan, but am on track so far.
January 30, 2013 at 3:27 am
@psychsarah – Check out this ladies website. She has a whole system to have budgeting system to include “his and hers” accounts. She has a lot of great idea on there! Hope it helps you out
http://www.funcheaporfree.com/2012/10/the-7-bank-accounts-every-family-should.html
January 30, 2013 at 8:40 am
@psychsarah i use an app called EEBA (it does not sync to any actual bank acct). It works like gail’s jars system. I put “money” in each “envelope” every budget period & i take money out as i spend it. The entries are sync online so couple can track how much $ they have left in the “jar” in real time.
January 30, 2013 at 11:59 am
I deal with a “Paul”. The first time we had $1000 saved in our downpayment jar my DH was ecstatic because he “had never saved that much cash before”!! I was astounded because I pretty much put myself through college… Needless to say, everytime that jar got to $1000, I removed it and stashed it in an account he couldn’t access (with his permission) so that he wasn’t tempted by the bigger picture. You should have seen me trying to round up and cash out everything for the $10K down. I was like a little squirrel: $500 here, $2K from that RRSP, etc!!
February 4, 2013 at 10:13 am
Does anyone know of a good FREE budgeting app for Blackberry? I would love to have the jar information at my fingertips!
Thanks!