1.13 FIRE Continued - Saving ME instead - July 22, 2020
My family will find this fun that I’m giving more financial advice today but I'm going to dive in a bit further on the money side. Since I'm NOT the financially focused wizard that others are, I am in the perfect position to show some simple math and illustrate how you can commit a little each day or week to helping you reimagine the word SAVINGS and become more financially stable or secure. Join me today as I continue talking about my iteration of the FIRE movement and how to reimagine savings, even if you have little or none.
INTRO
Today I’m continuing with more recommendations on what I call the new iteration of the FIRE movement. Financially Independent and Reimagining Everything with a focus on what if you don’t have enough saved right now or want to save more. First we'll cover a bit more about why it's important and then give an example of how to reduce your debt, how to reimagine rewarding yourself by increasing your savings fairly easily and the impact you can still have if you do something for you and your financial future NOW.
Ok, so I am the least savvy financially in my family but for that reason alone, I am a very credible source. Several times each year I was in college, my father had to drive me down to the 3rd National Bank in Nashville and plead my "poor college daughter" case to remove some of the overdraft fees I kept incurring. I honestly found it way too easy to spend my parents' money. Once I actually started making my own money, I was a bit better. I was saving and thankfully, at an early age. It's still never enough and looking back, if I had been more prudent when I was younger, I'd have more savings and more money working for me. As I got a bit older, I was at least getting better at saving and even now, although I haven't mastered the art of it all yet, I am paying much more attention to saving more, spending less, and make my money work FOR me.
I am concerned though as I know there are many at or near my age that don't have retirement savings - some not enough and some possibly none. Recent study from the Employee Benefit Research Institute found that 78% of respondents think they don't have enough money for their retirement. Yikes. There are unexpected curveballs that happen throughout your life and maybe you've experienced a hardship that really hit your income hard or limited your ability to save. If so, I hope you'll hang with me just a bit longer because I believe that pausing and doing something about it now can still really help.
You come across folks on TV or internet that talk about how to best invest your money but maybe you’ve totally blown them off because you feel that you don’t have enough saved yet. So is it better to keep avoiding? Sure, it can be painful to look in the mirror and realize we didn't do something or we haven't planned for X as well as we should have. But even if you feel you haven’t saved enough by this point, it’s never too late. My philosophy is that you have to face it - even the tough issues you know are there.
Because, what if you DON’T address it? You have at least a few options. First, the odds of winning the lottery - and that's even IF you play the lottery as my chances are 99.9999% sure I can't retire from the lottery since I play about $1-$2 per year. That's math and odds I totally understand. But the odds of winning the lottery are significantly less than you getting run over by a herd of wild buffalo under a full moon while eating chocolate chip ice cream.
Second option is to step up your focus and intention and DO something about saving a bit more here and there.
Final option is to hope you have a family member or very patient and dear friend who will take you in and house and feed you when you can’t work any longer. Otherwise, you may have to go on Medicaid or be placed in a home that is not exactly what you want your final few years to look like.
So believe me, while I don’t love to talk about saving and ensuring you have a safer financial future, I think it is a critical piece of creating the life you want and having options so you HAVE to commit to making it a priority.
Now that you're with me and ready to do something, we have to tackle any debt & reimagine savings. Other than mortgage or student loans (and there may be other acceptable debt other financial experts can comment on), and possibly car loan, do what you can to remove any and all debt. EVERY dollar you spend today with credit and every dollar you have in debt costs you more tomorrow so the mere act of NOT putting another purchase on credit will save you future money.
So let's reimagine the word saving. Instead of thinking of it in the terms of depriving yourself of something right now, what if instead you define it as you taking charge and actually rewarding or caring for yourself? You may not label yourself as good saver today but that can change in an instant as I want you to think of it as you taking charge - of being your own Chief Financial Officer - something I allude to more in my book. By doing so, you are giving yourself more choices and much better options for tomorrow - the short and long term future.
Saving means understanding preserving opportunity and future options for YOU.
Saving means avoiding purchases, big and small. I used to pat myself on the back as I really didn't make big purchases so thought I was being financially prudent. Where I went wrong and should've saved more before now is in all the little purchases. I'll come back to this.
Saving means putting money aside.
Savings means NOT purchasing on credit and paying $200 for the thing that was on sale for $120 but you financed it on a credit card for too long and now it ends up costing you $200. NOT a bargain.
Saving means putting YOU first. You have to take care of your family - I would never tell you otherwise, but don’t do it at the expense of you. Don’t give your kids - especially adult children more than what is needed until you save for your financial security first.
So let's get into fun with math. If you're a visual person or have trouble understanding math without seeing it, you may want to get a pen and paper to write as I share. Otherwise, you can check out the video version of this podcast with the math visual on the screen or the transcription notes here to help.
I'll quickly compare 4 scenarios - you spend $300 on something today on credit card with 18% interest, you spend $300 today in cash, you spend $0 and don't purchase that something, and finally, you save that same $300 over the next 90 days and gain 4% in interest.
Reminder that this is an example - simple exercise so you understand and hopefully really rethink your next possible and non-essential purchase.
We will look at the impact at 24 months or 2 years and 5 years, just to show how stark the difference can be with 1 easy commitment by you to focus on that saving $100/month.
| Your non-essential spending in 90 days | Spend $300 on credit card & pay minimum $15/mo | Spend $300 cash | Spend $0 | Save $100/mo 4% interest
| After 90 days | | | |
| At 24 months | - $359.35 | - $300 | $0 | + $2638
| Cost or Benefit to YOU at end of 2 years or 24 months | -$359.35 -$2638 = -$2997 | -$300 - $2638 = -$2938 | $0 - $2638 = -$2638 | +$2638
| Cost or Benefit to YOU at end of 5 years | -$359.35-6630 = -$6989 | -$300 - $6630 = -$6930 | $0 - $6630 = -$6630 | +$6630
Save $100/month - like I shared some examples on last week's episode - eliminate $4 coffees and eating out for 1-3 people 1 time - maybe 2-3 times for fast food restaurant) and you probably have it. Heck, even if you save $10/week and start putting $40/month into that formula, that will still help move you in the right direction. There are many wealthy folks out there and if you have a chance to really look closely, they can be really cheap. And I mean that as a compliment! They pack their own meals and drive non-flashy used cars.
Even if you get started and then fail or backslide - not the end of the world. Maybe you saved only $45 instead this month but if the new big step for you was that you didn’t add to your debt, you're already saving money.
So again, pause and look at your actions right now. You CAN reduce expenses now. You don't need to buy that shiny new object. You don't have to have the most beautiful car to get you around. You can buy great quality used items on Craigslist or Let Go or other ways. You can make more meals at home inexpensively by planning a bit better. Ground beef used to go a long way when I was growing up as my Mom used it for spaghetti and fed 4 of us over 2-3 nights with that beef instead of 1 night of hamburgers.
Instead you will prioritize YOU and take steps now to make it better for today and tomorrow. Heck, it might even help you sleep better knowing you are tackling this head on and doing something about it.
I hope this helps either enlighten you or inspire you to make better choices for YOU now and possibly even commit to reading 1 article each week on how to better have your money work for you. That's an easy choice for me and one I can stick to. It also helps when I see something new and shiny I'd like to have as it grounds me back to thinking that it's not worth me having to work an additional year or two or sacrificing a trip next year to a national park.
I am a huge advocate that getting out into the park or nature is inexpensive financially but deeply fulfilling personally and I have posted videos and pictures from such trips on my Instagram and YouTube Channels - search for DestinationU Wendy and you'll find it. I hope you check it out and look for more recommendations on how to stay focused on you and how to set up your best NEXT within our DestinationU community. Check out my Destination Unknown book, tackle our free weekly personal challenges in the Facebook group or receive inspiration to get out and play more and find yourself through adventure in my Instagram posts.
Thanks again for listening and remember that it's never too late to invest in you. Keep focused on you and your priorities and what easy steps you can take today to make today and tomorrow your best next chapter.
