How to keep money: Have you ever killed yourself to save your money only to have some big life event happen and then lose it all? If you haven’t, please let me know! I want to know your secret. However, for the overwhelming majority of us, it’s very difficult to save and keep money? Why is that? How can we save, and keep our money, on our way to financial freedom?
Well, the answer is complicated, but stay with me. I had a mentor years back that would tell me that people like to spend their money. In essence, when people get money they spend it. At first, I didn’t really believe that. However, the more financials that I prepared, I slowly began to see that my friend was right. We, as people like to spend our money for the most part. The reasons for this are many, but just to name a few.
The problem: Why saving is so hard?
First, we mostly live for the moment and want to see immediate action. While we all should be preparing for retirement and/or preparing for a rainy day, we want immediate satisfaction. More times than not, the opportunity cost of sitting at home on Saturday night versus going out to eat and to the movies becomes too great. In other words, when faced with saving a few extra bucks and being bored versus spending and being entertained, the later tends to win out! On a more grandiose scale, when we get that bonus, what happens? Let me guess. You have an internal conflict brewing over whether to save or whether to take the family to the beach! And let me guess, the beach wins out?
Or how about you work hard to save 5 grand, only to have your air conditioner completely go out? Yep, I’ve been there. In fact, I once worked hard to save several thousand bucks only to give it away because a colony of bees decided to build a hive in my flower bed. And I had to call a bee charmer who failed miserably. Then, I had to hire actual professionals to get rid of the things. Needless to say, the 2 grand we worked so hard to save evaporated overnight.
If you’re like this, you aren’t alone. In fact, the examples above are all me by the way. You can bet your bottom dollar that when it’s bonus time, against my better judgement, I’m already packing to go to the beach! As humans, especially in the West, we’re all about spending money and enjoying life. It’s very difficult for us to put money away and keep it saved. So what’s the solution?
The solution: Part 1: Save and keep your money
First, if you’re not saving for retirement, please start. No matter if you’re 20 or 50, there’s no better time. Even if you can only afford 5 bucks a month, that’s better than nothing. You never know what can and will happen. I know way too many people who didn’t maximize their retirement and are not living as comfortably as they could be. Nevertheless, you want to aim to build up a good 3 to 6 months in savings that you don’t touch or a rainy day. If you haven’t thought to do this, then now is a great time to start that as well. (COVID – we’re talking about you!). But on top of that, how can start saving extra so we can grow our assets and our net worth?
Well, if you’re like me and you put a large sum of money in your savings account, it’s just yelling at me screaming “SPEND ME!” I check my balances every day, and I encourage you to do the same. With fraudsters and other devious actors out there, you want to know what’s going on and stay on top of any situations. The same goes for my credit cards, my brokerage accounts, and my retirement accounts. I check them every day. You should too!
However, one way I have been able to save on top of my emergency supply is this. This is not my original idea mind you. I’ve actually seen numerous authors, financial planners, and you name it propose this. However, it doesn’t seem to be widely known or put into practice.
The solution: Part 2: Save and keep your money
Here’s what I would propose. Open up a checking account that you can’t access very easily. Allow me to elaborate. Years ago, I opened up a checking account from a bank that’s about an hour’s drive from me. I don’t have checks for this account, I don’t have a debit card for this account, and I don’t have a credit card for this account. I’ve sat it up to where I can transfer money into this account, but I can’t transfer money out of it. That means, if I want to get money out of it, I have to drive an hour to do so. Sure, I can check my balance, and I actually do, but I can’t withdraw this money.
You might be surprised just how much this can help. Whether it’s checking or savings doesn’t matter. Seriously, with interest rates so utterly pathetic right now, it doesn’t matter whether you put it in savings or checking. I would advise that you try and set aside 1 % of all money you have coming in and transfer to this special account (also not my idea). Then, as you get raises, I would advise that you try and put all, or at least a portion of your excess income into this account too. That way, you won’t miss the extra money. If this isn’t possible, see if you can start with $10 a week. Everyone can do that. Then, as you get extra money, put that excess into your slush fund. You’ll honestly be surprised how fast this will add up. Even 10 bucks a week can add up over several years. Now, imagine if you can do it over the course of 30 years?
Conclusion: Save your way towards financial freedom
- Open up a checking/savings account that you can easily transfer money to, but you can’t easily get money out.
- Make a commitment to transfer money to this account regularly (weekly, monthly, etc).
- Every time you get a raise or additional income coming in, put away this extra income in your account too.
- Watch your money grow and get closer and closer to financial freedom!
Happy saving and investing!
Let’s all retire early together!