It seems like only yesterday that savers were dorks. They kept piggy banks. They drove last year’s cars. They fished in their change purses for dimes while the superstars flashed credit cards.
Today values are changing. The new object of veneration is not money on the hoof but money in the bank—and the dorks have it. The more you save, the freer you become, because time is on the saver’s side. Compound interest floats all boats.
Like most people who make their own money, I started out living paycheck to paycheck. I could cover my bills (most of the time). But I “knew” that I couldn’t afford to save, so I didn’t bother. Even had I bothered, my small $20 or so a week wouldn’t have seemed worth the effort.
Some years (and many lost $20s) later, I learned I was wrong. Anyone can put money aside, at any level of income. You just have to do it. Of all of the New Era’s new virtues—daily jogging, eating bran, going green—saving money is the simplest and the least demanding of your time and attention. Savers can lie in a hammock all day lapping ice cream and still feel good about themselves. As for the value of a tiny $20 a week, take a look at the below.
A financial plan is grounded in savings. That’s how you get enough money to pay off your debts and accumulate an investment fund.
How much should you save? The answer comes from ancient times: you tithe. It was learned generations ago—and is still true—that most people can save the first 10 percent of their incomes and hardly notice. I can’t tell you why it works, only that it does. Tithing seems to collect the money that otherwise would go up in smoke (it’s 9:00 a.m.; do you know where yesterday’s $10 is?). On a $40,000 paycheck, you can save $333 a month, $4,000 a year. On $60,000, shoot for $500 a month, $6,000 a year. On $100,000, save $833 a month, $10,000 a year.
I hear you, I hear you. You say you can’t do it. Your rent is too high, your bills are too large, your needs are too great, your credit lines are too long. None of those things is actually an impediment, but it will take you a while to see it. So start by saving only 5 percent of your income. Take that money off the top of every paycheck, and live on what’s left. What will happen to that pile of monthly bills once you start putting 5 percent aside? They will be paid! You’ll still go to the movies and put gas in your car. Your standard of living will be unchanged. Those savings pick up dollars that leak through your fingers unseen. The rest of your life goes on exactly as before.
You say you don’t believe me? Fine. Try it and prove me wrong. When you find out it works, raise your savings to 7 percent. I predict that you’ll be at 10 percent within the year.
If you’re already tithing to your future, take a moment to feel superior. What’s life without a touch of smug?
From MAKING THE MOST OF YOUR MONEY NOW by Jane Bryant Quinn. Copyright © 1991, 1997, 2009 by Berrybrook Publishing, Inc. Reprinted by permission of Simon & Schuster, Inc.