A Quick Note on Saving—The Topic We All Hate

Saving

We hear it all the time – different ads on how to lose weight. “Take this diet pill and you’ll lose 30 pounds in a month!” “This electronic ab exercise belt will change your life!” “Wear these shoes and you’ll have calves like an Olympic Athlete!” Yeah, right. Want to know how to lose weight? Exercise often and have a well-balanced diet. Who is shocked by that?

Saving is like losing weight: everyone knows what to do, but actually doing it is another story. There’s pressure to spend money and not save everywhere. From advertisements for new clothes and the new Apple product to the satisfaction of a nice dinner and an expensive bottle of wine, it’s easier to spend than to save. We all have many expenses competing for our limited paychecks. Especially for recent college graduates, a starting salary can easily diminish after paying for student loans, food, rent, utilities and insurance. Saving requires discipline, but you can make it a lot easier on yourself by establishing these habits as early as possible.

The concept of saving is simple and obvious: do not spend more money than you have. But the key to saving is setting aside the money before you have a chance to spend it (or before you even know it’s there). As soon as you start receiving a paycheck (or ASAP if you are already receiving a paycheck), set up a direct deposit with your employer to transfer a percentage of your paycheck to savings. For example, you can set up a direct deposit of 10-20% of your paycheck to your 401(k), 403(b), IRA or some other type of savings account. If you do this immediately, as in before the first time you see your full take-home pay excluding savings, you will establish your spending and lifestyle habits based on your take-home pay after savings. This is the easiest way to save money.

Just remember: saving is all about changing your outlook from your present to your future. And as we discuss in the next post on time value of money, the more you can save now, the exponentially more you can splurge on later. But, maybe most importantly, keep all of this in perspective – you only live once, so find the right balance. Just don’t forget that you and your loved ones have a future, and you can make the most impact on that future by acting NOW.

23 comments

    1. Thanks for the question, Genny. If you’re low on money (most people are), obviously you either need to earn more and/or spend less. Focus your time and money (including any loans) on building your career and increasing you earning potential. Then take a close look at your spending habits (there are plenty of tools out there to help with this, such as Mint). Cut down on unnecessary spending immediately. As you cut your spending and get any raises, focus on directing those funds straight to savings.

    1. Budgeting can be key (unless you already mentally challenge each purchase), but I was trying to keep this topic as brief as possible. I have found that people do not like getting preached to about saving as the message is straightforward. Also, it’s important to first set aside money so that you can then budget based on the money you have available after already setting aside savings.

    1. My analogy was not intended to be offensive in any way: I understand attacking weight loss (or even choosing to do so in the first place) is not the same for everyone. Thank you for reading

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