In the old days a man who saved money was a miser; nowadays he’s a wonder. ~Author Unknown
The Great Recession has taught most of us the importance of having a financial cushion to make us more comfortable. And thankfully, as a nation, we are saving again. I often refer to a savings account as a stress reduction account; having one helps you relax. (These lovelies were made by Mary Mullet-Flynn of Back of The Moon Watercolors, http://mooninspiredgifts.com/ Doesn’t this photo just make you say, “Ahhhh,” ?)
Our ability to save is no small victory, given that just prior to the Recession, most American’s were not only spending all they earned, but had a significant amount of debt (mortgage, student loans, credit card etc.). Many of us have been able to change our behaviors–either by choice or by necessity. Either way, it’s something to celebrate.
In order to build up your savings account, you generally have to either:
(1) reduce your spending in order for those funds to go into savings or
(2) generate another source of income to put into savings.
Since a recession is typically accompanied by significant unemployment, most of the savings built up over the last few years has been purely due to #1: By reducing spending. That’s hard to do in our “Buy it now” culture. So, again, celebrate!
I counsel clients who are trying to save for a particular goal (be that emergency reserves, a down payment for a home, college, retirement etc.) to do the following:
1. Set a SMART goal: One that’s Specific, Measurable, Achievable, Realistic and Timely
2. Have a set amount from your paycheck or checking account automatically transferred into the desired savings vehicle (be that a savings account, a 401(k) or similar plan, 529 College Savings Plan etc.) Read “The Automatic Millionaire” by David Bach http://www.finishrich.com/books/automatic_brandhome.php and you’ll never look at your money the same again.
3. Keep a photo of what you want in your wallet or on your device. This little visual reminder helps keep you focused.
4. Track and celebrate your progress.
What’s interesting is that, once you have built up a sizable savings balance, you are less likely to want to spend it; so you end up spending less as a result and end up saving more. Maybe this is what’s behind the adage, “The rich get richer.” My parish priest was telling me about the old TV show “I remember Mama” and how Mama, when faced with a large expense, never wanted to use Mama’s bank account, so the kids all pitched in doing odd jobs to raise the money to pay the expenditure. It turns out that Mama never had a bank account after all, but the thought of protecting it helped teach her kids to work for what they want. This is a very valuable lesson that applies to every generation.
There’s a woman in my “I HATE Budgeting (But I Like Having Money)” support group who states that “A good habit is a gift you give yourself.” I love that. Managing your spending and channeling your energy towards saving is a wonderful habit and wonderful gift.