Why is Saving Money So Hard?
I’m gonna guess most of us have trouble holding on to money we save when the next thing we “need” comes along: a new iPhone (cuz the one you have has none of the new time-saving gadgets), new designer sunglasses (cuz you left the last ones at the beach), new dress for the upcoming wedding (cuz you wore the only one that fits to the last family event), or anything else that pops up. We have some incredible ways of rationalizing why we need to spend the money we are putting aside, if we don’t have a plan for that money.
So, that brings up an important question: why is saving money so hard?
Let me explain. When you “save” money for the sake of saving money, you have no incentive not to use it for something you want to buy now. Most of us remember when our parents made us put some part of our soda bottle money or birthday money into a savings account at the local bank. With great pride, we found our savings book and presented it to the teller along with our few bucks and saw the entry in the book with the total. There was some sense of accomplishment in doing that, but it was short-lived. The usual incentive to save was to buy something we really, really, really wanted, like a new sweater, a new bicycle, or something which would give us immediate gratification when we bought it. And then we started to save for the next thing we wanted.
As adults, we continue to do that, except for the miracle of 401k plans. This vehicle is a forced savings for a specific purpose: retirement, and there is a penalty if you take it out before you are ready to use it for that purpose.
Shouldn’t we have something like that for our “savings”? More importantly, it is important for us to know why we are saving money. If you have a goal, then the temptation to raid the nest egg for some immediate gratification is calmed. You will think twice before you raid it.
If we begin to look at savings as a part of our deferral of income to sometime in the future, it has more meaning. The 10% nugget most planners advise is really great unless you know why you are saving it. Do you have an emergency fund? That is usually pegged at 3 months of living expenses kept in a place you can get your hands on it WHEN YOU NEED IT TO PAY YOUR BILLS. So if you lost your job, or your spouse did, you could survive for three months until the next paycheck comes in.
How about a down payment for a home? That is usually figured at 23% of the value of the house you want to buy. You can figure that one out.
Hopefully we helped to answer why saving money is so hard and what you can do to make it a little easier. If you begin to look at the end game for the money you save, the saving of it becomes much clearer and less sabotaged by the things you thought you needed along the way. Get saving folks!