Some of the hardest conversations I have with people is telling them they cannot accomplish the goals they’ve shared with me; even worse are those I have to have a conversation with about how they can reduce their living expenses – foregoing the lifestyle they’ve grown accustomed to. It tears at me, because I wonder if they really had no clue or have they been in denial? Either way, it’s not easy being the harsh voice of reality.
How do they get there? How does anyone? For some it could be medical expenses, or other things they had little control over. However for most I believe it’s an unwillingness to delay gratification. It’s difficult to deny yourself, especially to set money aside for something that will “probably never happen”; but these rare events occur with frequency. Cars are going to require more than routine maintenance (oil changes, brakes, etc) – own one long enough and something major will need to be replaced. Mechanical systems break down.
Same is true with anything else in your life – from owning a house, to having a child. Childcare is expensive, I think most of us understand that. But what about clothes, hobbies, food (especially for teens). We should know these things are going to come up, but so many seem surprised by how much everything costs.
So what to do? Few of us are going to win the lottery, so how can we prepare. Start small – save money into both your retirement account and a “rainy day” fund. The retirement accounts are usually the easiest to maintain, because most employers will withdraw funds before paying you – so you never “miss” it. It’s the savings you have to be intentional about that’s more difficult.
If you’re new to saving, start with 2% of your income to the retirement account. No, this isn’t going to fund your retirement, but it’s small enough most of us won’t notice it’s gone. The goal is to scale over time. Same is true with the “rainy day” fund. Open an online account and start an automatic transfer set for (5) days after each pay check (6th and 20th if you get paid on the 1st and 15th). Generally this is far enough to provide a buffer if there are holidays, or other delays to the money hitting your account.
I’m partial to Ally, because they’ve made it very simple to enroll and they’re offering a 1.6% interest rate (as of 5/13/2018). However, I encourage everyone to do their own homework – I like Bankrate’s website. Start with an amount small enough not to be missed, but large enough to be meaningful. For most, I wouldn’t save less than $25/pay period – but you will have to decide your own threshold. The more you can afford to put aside, the better prepared you will be for life’s “oh craps”.
Build your support network too. Try to surround yourself with positive people – not Pollyannas, but with people who understand life happens and it’s best met on your own terms. I prefer to be around people who have overcome adversity, although they haven’t necessarily had my experiences. We keep each other grounded – allowing a brief “pity party”, followed by a shoulder and non-judgmental ear. This network is best built before you need it, because when you’re in a dark place it seems to mostly attract “Emotional Vampires” (Orloff, J, 18 Jan 2011).
The most important take-away is this – shore yourself up, using small steps. Take some time to get to know yourself – what sets you off and what makes you feel great. Surround yourself with people who can help you feel great, not small. And invest in yourself financially by setting money aside. Little amounts first, increase by at least 25% every quarter (if it helps, go by key dates: Martin Luther King, Jr Day , Tax Day, Independence Day, Halloween).