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.