Can you remember the first person to tell you, “Save that money?” Was it a parent? Maybe a boss at your first job?
You and I both know the importance of saving money. But why is it so hard to actually do?
We’re pulled in a lot of different directions and given competing advice. We’re told to save for a rainy day, but YOLO so you’ve gotta live for today.
In today’s instant gratification world, where I can hit a virtual button on my phone and have a physical product arrive at my house in hours, the idea of delayed gratification has become a foreign one. But it’s still essential if we desire financial security.
And that’s my goal here, to help you save money so you can achieve financial security.
Like many people, there was a period in my life when I struggled with money. Fortunately, I changed my behaviors and got on the right path. Today, I’ve helped countless people get on their paths to financial success over my 20+ years as a financial advisor. I’m honored to be named to Investopedia’s list of the top 100 financial advisors many years running.
Here’s what we’ll cover:
- A reality
- The importance of priorities
- Your savings plan
Let’s get started.
Money has time value. The longer we wait to pursue our financial goals, the harder they become to reach. If you started saving as a baby, it would be a heck of a lot easier to retire at 60 than if you waited until you were 40.
And, it’s important to enjoy life today.
What’s required to become financially successful is balancing these competing interests. So how do you do it?
The importance of priorities
I love the story about JFK visiting NASA during the space race. Our best people were working around the clock to make sure we were first into space. Late one evening, Kennedy noticed a janitor diligently working away. Intrigued, he approached the man and asked, “Why are you working so late?” The man responded, “Mr. President, I’m helping to put a man on the moon.”
How you look at something makes all the difference. It’s true of our work, relationships, and our finances.
When you think about saving money, what comes to mind? Do you feel you’re depriving yourself? Or do you feel you’re positioning yourself? It’s possible for two things to be true at the same time, and this is an example of that.
When we save money, we are making a sacrifice today in exchange for a better tomorrow. In order to be successful with money, you need to internalize and embrace this perspective.
The importance of goals
Our goals play an important role in this process. Without a compelling vision for your future, you’ll have a hard time making sacrifices today. If you think you’re going to be dead by 66, the idea of waiting until 65 to retire doesn’t make a lot of sense. Alternatively, if you think you’re going to have an incredible and rich life as a retiree, surrounded by loving family and enjoying wonderful experiences, that’s something to look forward to.
So how does one create that compelling vision for the future? That’s where goals come in.
I like to think about goal setting using six key areas. Within each area, I think about short, mid, and long-term desires. Here are the six areas:
Family. What do you want from a family perspective? Perhaps you’d like to start a family, or have a better relationship with existing family members? What does a great family life look like for you?
Community. Who and what is your community? If you’re looking for one, who or what will it be? If you already have one, how can you nurture and strengthen it? What does a great community look like for you?
Career and financial. Are you doing meaningful work you’re called to do? How can you start doing this kind of work, or do more of it? What does financial success mean to you? What are your most important financial priorities?
Wellbeing. How can you improve your physical, mental, and emotional health? How would you like it to be? What would you like to be doing more of? What does ideal wellbeing mean to you?
Personal development. What would you like to be learning just for the sake of learning?
Peace of mind. Peace of mind means feeling safe and secure. What would give you peace of mind?
To help you with your goal setting, you can access our Goals course for free.
The role our values play
Our values serve as the lens through which we see the world. Consciously and unconsciously, they help us make decisions on how we allocate our most important resources like time, attention, and money.
Since this post is about money, we’ll focus on that. What about money do you value? Do you value the choices it provides? Do you value the experiences you can have because of it? Do you value the things you can buy with it?
In a perfect world, what would you use money to do? Would you buy every new tech gadget? Would you travel the world? Would you like to have enough so you never have to think or worry about it again?
What would you never do with money?
The more clarity you can get around your personal values, the more successful you’ll be with your money. To help you explore this further, you can access our Values course for free as well.
Your savings plan
When you get clear on your goals and values, it helps to balance today’s desires with tomorrows. And that’s what we want. We want to feel like we’re living a good life today, and that we’ll have a good life when we’re older.
I touched on time horizon while discussing goals planning, and it’s really important for saving and investing as well. We need money today, we’ll need it in 10 years, and we’ll need it in 30 years. How do we position ourselves for success?
Short-term. This is zero to three years.
Common desires. Creating an emergency fund, getting out of debt, and having money for annual vacations.
Accounts. Because of the need to access our savings immediately, this money is best kept in liquid accounts like checking, savings, and money market accounts.
Mid-term. This is four to 10 years.
Common desires. Many people are interested in saving for the down payment on a home, funding a child’s education, and traveling.
Accounts. A taxable brokerage account is a great way to save and invest for mid-term priorities.
Long-term. This is 10+ years.
Common desires. Most of us are interested in being able to retire or stop working full-time, create a legacy, and to be financially independent.
Accounts. Qualified accounts like 401(k)s, IRAs, and pension plans are great ways to save and invest for retirement.
If you’d like to dig deeper into creating your plan, check out our Saving and Investing course.
By changing your perspective, and getting clear on your goals and values, you put yourself in the right frame of mind to save money. Simply saving money for the sake of saving money isn’t a sustainable plan.
You’re someone who can be financially successful if you invest the time to do the work. You got this.
If you’re ready to take control of your financial life, check out our DIY Financial Plan course.
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