This post goes out to all my fellow friends in their 20s who still just cannot seem to find any extra money for their savings accounts.
In the spirit of the New Year, I’ve been doing what many people do this time of year – contemplate all the things I want to improve in my life and how I want to make this new year better than the last. One of my personal objectives was to start saving more. I know there’s wiggle room, I just need to make a plan and make it happen. So I made said plan and was starting to feel so proud of myself for figuring out how to not only put money into my general “backup” savings account, but to also put money away for upcoming vacations, grad school tuition, even the car I’ll most likely be buying in 3-5 years.
But then I talked to my dad who asked “Have you increased your 401K contribution to 10% of your paycheck yet?”
10%!? That’s so much! If I do that, I won’t have enough money left over to follow through with my new savings plan!
And throughout the continued discussion my dad said, “You need to save for your retirement! It’s important to start early so your money grows.” And as we continued talking about saving in general he had this to say about my generation: “I just don’t understand why your generation needs a bill in order to put your money there… If your car is already paid off, you should still pretend you still have a $200 bill every month for your car but instead of paying your loan company, pay yourself. Then when it’s time to buy a new car, you’ll be ready. You don’t always need to go out and get a loan.”
It hit me that our generation is one that feels like we should be able to do whatever we want when we want – and we want it right now. We don’t know (maybe because our parents didn’t teach us) how to plan ahead and take time to save. Instead, if there’s money in our bank account, we spend it as soon as it comes in. We make impulsive decisions. We decide it’s time to buy a car and go buy it – sometimes barely putting any money down.
I was so proud of my savings plan because it was better than what I had been doing in the past – but it’s not as good as it should be.
We shouldn’t just be relying on loans for everything we want to buy – or rack up our credit card debt. We should be saving in advance so we can pay in full (or at least increase the amount we put down). By forcing yourself to save every month ahead of time, as if it were a bill, you’ll have less money left over to work with and should be able to pull back on nonessential spending. And in time, you’ll have plenty of money to make those bigger purchases without paying for interest on top of it. (And then that money can go towards something else! Oh my gosh, you’re going to be so rich…)
Now, I know we all know we’re supposed to put money into our savings every month. Obviously, the concept is old news. But actually doing it is another thing. It’s the last thing we think about when paying our bills and for most people, it’s an afterthought, not a goal. “Oh hey, my bank account is a little higher than usual after I paid my bills. Maybe I should put $100 in my savings account…”
But what if we could actually stick to it? Grow our savings and actually be able to make our money work for us? Paying yourself for the car you haven’t yet purchased means saving thousands in interest – which can be used for something else you want to buy in the future.
So my New Year’s resolution is to look at money smarter, to force myself to save, and here’s how I’m going to do it:
- I will treat my savings account payments as bills. If I can’t afford to put $XX into my savings account then I can’t afford to shop online or go to an expensive restaurant.
- I will contribute 10% of my paycheck to my 401K.
- I will read Rich Dad, Poor Dad (I’ve heard it’s a really good book about being smarter with money. I’ll let you know what I learn)
Here is an example of how I want to save money each month with sample numbers. As I save the amounts for each category, I’ll color them green. If I miss a payment, it’ll be red. In this example, I’m showing an instance where I only need to save $1000 for school and $700 for a September vacation, so when I reach those amounts, I put the extra money towards other categories to keep my overall saving consistent.
I think it’s a little more fun to save when you can actually see where the money is going. I’ll let you know how well I do this year! Maybe you can try this yourself and see how it works for your own savings goals!
I am challenging everyone in my generation to think about this because I don’t think we do as often as we should. Take a look at some of these articles to see what actual experts are saying about us: