Saving is a pain in my neck. It doesn’t come naturally to me. Although I didn’t grow up poor, my parents weren’t financial savants either. In the end, to become a good saver is about setting a goal, creating a habit. Or as Tim Ferris puts it, setting a fear. My fear is life will happen, Murphy’s Law will rear its ugly head and I’ll be unable to afford basic necessities, like housing. Years ago, my dad died unexpectedly 9 days before Christmas during my senior year in high school. Weeks later my mom was declaring bankruptcy and the bank foreclosed on our house. My Nana stepped in and made sure we kept a roof over our heads. You’d think an experience like that would jolt anyone into financial literacy. But, I’m an experiential learner and I don’t like making a mistake just once. I need to experience a screw-up multiple times before it really sinks in. So after I graduated college with enough student loans to buy an Alpaca, bounced enough checks to cover the salary of a bank executive and got fired from my first job, it occurred to me I should try saving a little. So seeing I’m not very good at it, I made it as easy as possible using internet banking and direct deposit.
Part of my problem is my belief that you can’t take money with you to the great beyond, might as well blow it now. That’s not exactly “adulting” (which we all know is code for being boring) so I’ve developed techniques to help me. Here’s what I’ve done to help me plan for the future. BTW, none of this is truly original, I’ve begged, borrowed and stolen from others.
- Very first thing I did was save 15% of every paycheck in my hospital’s 403b retirement account.
- Then I opened a CapitalOne360 checking account. I originally opened it in 2007 when it was ING but has since been bought by Capital One (what’s in your wallet?). What makes CapitalOne360 nice is the interest rate is higher and the fees are lower.
- Once I opened a 360 checking account I switched my direct deposit to this account.
- Next, I opened a variety of 360 savings accounts. Things I initially wanted to save for included taxes and insurance. I owned a condo and the property taxes were paid separately from my mortgage. Knowing I was going to owe a large chunk of change every 6 months (which is how often my property taxes are paid), I simply divided my annual tax bill by 12 and had that amount pulled from my checking account every month. This way, when the tax man mailed me my bill, I had the cash available.
- I then did the same with every bill I knew about beforehand. Things like my insurance (both car and home), car tax, etc. I also saved for other things. My girlfriend at the time (now my wife) was traveling to Turkey for work and when she finished her project I was going to meet her and spend 2 weeks backpacking the country. I knew I didn’t want to use credit to pay for the trip so I set up a 360 savings account and began squirreling away cash. After several months I’d saved enough to cover my expenses during the trip. Similarly, friends of mine wanted a dog, so they established a “puppy fund.” They saved money until they had enough to cover the first year of expenses for their new dog. Whatever you’re planning, saving cash for it consistently will make it much easier and less expensive than using credit.
I also cut back on my expenses as much as possible. I stopped paying cable (meaning I discontinued service, I called the cable company and I paid my last bill. I don’t want you thinking I just up and stopped paying), I stopped paying for gym memberships (see the part about the cable), I switched my cell phone plan to Republic Wireless and I lived in the simplest living space I could find. A condo isn’t for everyone, but at the time I was single, and I enjoyed travel and hated lawn care. I was also living in the northeast and loathed shoveling snow. A condo enabled me to lock the door, go to Turkey or Colorado or Vermont and not worry about my place. In any case, living as simply as possible and letting go of as many “things” as possible freed me to pursue travel and life experiences.
Look, however you need to frame it in your mind to do it, do it. The Tim Ferris idea regarding setting fears versus goals makes sense to me. People are motivated more by fear than anything else. Marketers know this. That’s what “keeping up with the Joneses” is all about, the fear of looking different or uncool. But all these slick marketers are doing is tearing money from you to pay for their vacation to the coast of France. In the end, you need to decide who you’d rather be: the sucker paying for someone else’s vacation or the financially secure rock star living on your terms.
(On the other hand, this guy may have it figured out…)