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.