Whenever we think of saving, we always think of it with respect to a dollar amount or the present and future values of money or simply how much we’ll have in the bank, with interest compounding daily weekly or monthly, in twelve months. Well, let’s shift our thinking a bit. Let’s instead consider the habits, discipline and values we’re creating by saving. Furthermore, consider who’d benefit from such habits, discipline and values…your kids, siblings, parents, your grandkids and so on.

 NO SAVINGS, NO GOOD!

If you don’t have a specific amount of money in your savings account could it be because of your habits? Americans had a negative savings rate, which means they spent more than their income. For example, Keisha Smith has a credit card, savings and checking account. She has her $500 check directly deposited into her account. She pays her bills and is left with $100. She spends that $100 during the week on food, gas and shopping. She then buys some new furniture using her credit card for $500. Keisha just stepped outside of living within her means. More importantly, she didn’t save any money left from her check and can’t build her savings.  In addition, because she bought furniture on credit, she is without any funds AND has debt over her head that she must pay back over time creating another bill that she can’t afford. She has debt and consequently has a negative savings rate.

CHANGE…OVERRATED OR TOO HARD TO ACHIEVE?

Your spending habits speak volumes about your saving habits. Every time you spend $1.00, you’re losing $0.20 in savings, if you strive to save 20% of your income. Most of us know we’re slacking with respect to saving for various reasons. Some of us, “gotta have it now,” “caught it on sale, ““always get what we want,” “are living paycheck to paycheck,” “don’t have any money to save,” you get my drift? We know that saving more means spending less and that comes with change. Change isn’t easy all the time but it’s necessary.

Just look at what our country is currently experiencing with healthcare reform. During Clinton’s era we attempted healthcare reform, said we desperately needed it, but it didn’t happen. George W. Bush took presidency in 2000 until 2008 and we cried, “Healthcare is a must, it’s too expensive to be healthy and I can’t afford it,” “it sucks”, “we need a change in healthcare.” It didn’t happen. It’s clearly necessary but it didn’t happen. Now, President Obama’s giving it a try and some say the recent election of Senator Scott Brown will prevent healthcare reform. We’ll have to see. My point is that change can be necessary and we can want it but we have to allow it to happen. As much as we want things to be different with our finances we must be ready to act differently and improve or eliminate habits. This change is necessary if we are to see any growth in savings. 

DISCIPLINE IS A MUST

It’s said that it takes 40 days to change or start a habit. Some say it’s 60. Regardless of the number, it will take some time but it’s worth it. You know why? Because you’ll be making changes that will affect your entire life, not just your financial life. Additionally, you would have gained a new sense of discipline that will inspire more discipline and empower you to reach your goals.

Discipline is often underestimated in the process of accomplishing long-term goals or an on-going task, such as saving money or budgeting regularly. However, it’s no foreign idea. We’re disciplined in lots of areas of our lives, such as going to work. We are sure to get up on-time and that we structure our tasks around work hours. Now, understanding this discipline is derived from necessity more than desire, it’s important to highlight the idea of choice. We choose to be on-time and responsible employees, thus we’re disciplined with our approach to getting to work on-time. We can transfer this same idea to other areas of our life, including our health and, just as important, our financial health.

Written By: Dominique’ N. Reese, Financial Planner, Optimum Capital Managmenet