Think back to your high school and college years. More than likely, you were broke. The local bank happened to be your parents, and unfortunately as a result of them providing a roof over your head, funding your years of mistakes, and socking thousands into video games for you, you were at their mercy. In college, you finally became a little more independent, but you were still broke. Your savings account at this point, if you even had one, garnered absolutely no use besides the fact you had one opened and could proudly brag just as much.
You were taught by everyone that every month, you needed to deposit some fixed amount (say $100) into this savings account to guarantee yourself money on a rainy day. Then once you started working at a legit job (look ma, I’m employed!), all this talk about saving for retirement kicked in, with 401k and IRA. That’s sweet and all, you thought, but why would I be wasting money tucking it away in some account that I can’t even touch until I’m like, 59 ½ or whatever? YOLO, you told yourself. No guarantees we’ll even live that long, so why focus on it now at the ripe age of 22-25 right?
In fact, a recent survey found that ¼ of all U.S. workers had less than $1,000 saved for retirement. Here’s the better part: that paltry amount was combined savings with their spouse, if they had one. Furthermore, less than half of all eligible workers had less than $25,000 saved. To give you better perspective, CNN Money’s retirement calculator states the average person in their early 30’s should have roughly $30,000 tucked away, assuming they earn around $50,000 a year.
If there’s one thing we can agree on, it’s that we don’t save our money.
Between financial gurus, life coaches, regular joes, and you, we’ve all come up with 53 theories as to why we can’t seem to understand the concept of saving our money. Instead we choose to blow it on temporary fixes and materialistic things that will quickly fade over the short term. I won’t even pretend that I understand why, because every single one of us has gotten into situations where we’ve wasted money. And not just dollars, but I’d wager that even the best savers have squandered thousands and thousands of dollars over their lifetime getting involved in stupid shit. Yeah, that Herbalife or Amway membership was probably a mistake. So was that seminar about buying a bunch of real estate and claiming you’ll be a millionaire in under a year. Come to think of it, giving money to that homeless guy who cracked open a fresh beer and said he needed food money was probably wrong, too.
We all live and learn.
Living beneath your means is probably the most cliché phrase used by financial gurus everywhere, second only to the classic “diversify your portfolio”. To a great extent though, they’re both said for good reasons, most of which I won’t even cover because it’s glaringly obvious.
Living beneath your means is a fancy way of saying that you should stop spending unnecessary money on things that don’t benefit you. In other words, paying too much for rent or dealing with a big car loan is a fast track way to saddle you up with a shitty mid-life and retirement.
Why You Should Care Enough to Save
I know how life is, and I’m not about to instill 20 rules that will suck your entire vacation and social life goodbye. I believe in living, and while it’s important to save, you really aren’t guaranteed tomorrow and so act accordingly, but act responsibly.
The key is to build better habits of saving. Lucky for you, it’s pretty easy to pick up.
Here are just a few reasons why you should probably save a bit of money instead of buying that latest car, or overpay your rent.
Your career will probably change
If it hasn’t already, chances are it will. Latest stats show the average person will change careers something like five to seven times in their working life. Only a select few of us (the lucky few) find their career quickly in their early 20’s and stick with it their entire life. Whether they truly enjoy it or make great money at it (and both if you’re basically playing the lotto), they’re basically set. For the rest of us peasants who are navigating life, we desire either more money, more purpose, or 10,000 other things that make us rethink our career. That’s fine, but what happens when you completely switch careers? You more than likely have to start over, and that means more schooling, a probable lower salary, or extra time to find a job. For the unlucky few, it’s all three. This is where some money in the bank will help immensely.
You will probably want to do your own thing one day
Piggybacking off the career change, there’s a possibility you’ll want to branch off and do your own thing one day. Ballsy move, but probably one of the best ways to find your passion and true purpose in life. Hint: most of the time, it doesn’t involve working under someone. Even harder than just changing careers, this will require months of little income, and potentially years before the entire thing pays off, if it does at all. Are you ready for it? You either are or you aren’t, but one thing’s for sure: you’re going to need some extra money to float you in the meantime.
You want your retirement to actually be decent
Should you actually make it 40+ years of working and decide you’ve had enough of the bullshit, then congratulations, you deserve the right to sip daiquiris on some beach in Mexico. But you can only afford this if you’ve saved for your retirement. If not, well then I hate to break it to you, but your retirement will probably suck. No one likes to think ahead, but you have to. There honestly is no choice if you want to avoid worrying about penny pinching later in life.
You don’t want your kid or kids to make you broke
Kids are expensive. By government estimates, you’re easily cracking over $240,000 to raise a kid from birth until the age of 18 (north of $300,000 with projected inflation). If you decide to pay for your kids college education, you’re in even $30,000+ deeper. Really deep. Having a kid can provide an immense amount of joy for a person or couple, but it sure ain’t a cheap thrill. So on top of trying to save for your own retirement, you’re having to fund this tiny little human. Part cool, part weird, part mind-blowing. The best part? There really is none, besides the satisfaction you somehow made it all those years without completely fucking up and granted your kid turned out decent. Either way, you’re going to need every penny you can get, as it will be that much harder to save with a kid or two in tow. Start putting money away when you can, before all these responsibilities hit.
You want to live life a little
You’ll probably have the itch to travel halfway across the world once in awhile, purchase that fancier car, get a vacation home/timeshare, or any of those other classic adult things. If you’ve kept track with making sure your retirement isn’t falling off the rails, there’s much more breathing room to partake in some impulse buys. And that’s perfectly OK. You know why? Let’s revisit what was said earlier:
You really aren’t guaranteed tomorrow and so act accordingly, but act responsibly.
I believe most people fall into one of two categories in their late 20’s or 30’s: either completely clueless about their finances, or much too detailed, tracking every dollar that comes in and out.
You need to live a little. Enjoy life a bit.
The cool part is that focusing on saving earlier in your life makes it exponentially easier as you get older. It’s naturally harder to play catch up as the years go on, namely due to this lovely principle called compound interest. Google it if you don’t know what that is, because I can’t help you if you have no idea.
What’s the Hold Up?
Maybe this was an eye-opener for you and you’re beginning to realize your retirement isn’t quite on track. The good news is you’re still fairly young and as the saying goes, while the best time to plant a tree was 20 years ago, the next best time is now. That only means you’re capable of starting today what you couldn’t start yesterday. So why is it so hard for people to actually apply the simple concept of living beneath our means and not waste all their money? Hard to answer, and again not what this article is about. But if you want a few tips on how to dig right in and start saving money today, here are a few:
Follow the 50/30/20 rule
In order to relax a bit, prevent your hair from falling out, and make paying attention to your finances a better habit, follow the 50/30/20 rule. Fairly simple: 50% of your take-home monthly income is allocated towards fixed costs that are necessary to pay on a month-to-month basis like rent and gas. 30% should then be allocated to variable costs that you can adjust as necessary, such as the cable bill (hopefully you don’t have one), subscription services, and the like. The last 20%, and maybe a bit more, would be allocated towards your savings and retirement. Don’t touch that shit.
Stop drinking as much
Now that you’ve hopefully gotten the early and mid-20’s party stage out of your system, you can relax a bit on the consumption of liquor. Maybe you still consider it a crutch and need it to have fun, and you feel weird being out without holding one in your hand. If you want to get that temporary spicy thrill from drinking, have a couple drinks at home before you head out.
Stop wasting money on dates because you have a desire for attention
You know exactly what I’m talking about. The desire for attention goes both ways, but men are likely the ones dropping more money on dates since tradition rules. Either way, you got lonely and signed up for any combination of Tinder/Bumble/Coffee Meets Bagel/Plenty of Fish/Hinge/Ok Cupid. So now you start going on dates, and the money’s flying. What’s there to show for it? Focus on yourself first, instead of others.
Stop worrying about what everyone else has
Social media is a killer. When you become concerned about what others have and ways you can impress them, your money starts disappearing like David Copperfield’s cheap thrills. Except this isn’t an illusion, and it’s really straightforward. Unlike the smoke and mirrors in magic, when you buy something materialistic, you lose money. There are no games or trickeries here. So step one, stop trying to impress someone. It’s like the equivalent of going to a get-rich-quick seminar: you get super hyped by the speaker, your emotions get preyed on, and before you know it you open your wallet with the intent to buy something. Only later do you feel like the sucker because you got nothing out of it minus a temporary buzz.
Don’t get sucked into this rabbit hole. Worry about yourself first, and you’ll find yourself making huge strides toward fulfilling your own goals and destiny.
Build Better Habits
Like anything else worth a lick in life, it takes time and consistent small successes to see big results. If you aren’t a saver now, you can instantly become one with a little discipline. If you are a saver now, pat yourself on the back for being ahead of the vast majority of American workers. And if you just don’t care, take a little time to think about your life and what your goals are. Big life changes are scary and unavoidable at times. Make sure the few things you do have in your control are taken care of.