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Why is it so Hard to Save Money? Here are Five Reasons to Consider

George Grombacher February 20, 2023

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Why is it so Hard to Save Money? Here are Five Reasons to Consider

Why is it so Hard to Save Money? George talks about five reasons we struggle to get where we want to go financially, and shares insight into how to overcome them. 

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George Grombacher

Episode Transcript

Why is it so hard to save money?

Pretty straightforward. If you think about it, I need to spend less money than I earn. If I put away 15% Of all the money that I earn, that will essentially almost guarantee that I become financially successful. If you don’t believe me, go ahead and use some kind of a calculator. There’s all kinds of great online savings calculators that can help you figure out if you started saving 15% of whatever your income is, today, spread that out or stretch that out to the year that you want to stop working. See how much money you’ll have. That was one of the key findings in that kind of breakthrough groundbreaking, groundbreaking book, The Millionaire Next Door, if you can save money, if you can put away 15% That is really one of the key drivers for positioning you For long term financial success yet, here we are.

Vast majority of us are living paycheck to paycheck, too few of us have any money saved, we wouldn’t be able to come up with 500 bucks in case of an emergency. There are just reasons or signs all over the place pointing to the reality that we are not all that great with money. So why is it so hard for us to save it, because I can point to

some of the symptoms or the bad things that are happening, but without giving any reasons or an explanation of what you can actually do, that’s not super helpful. So I want to go through five things with you. And hopefully, they will be of benefit and get you moving in the right direction. Because you you are 100% Capable of being financially successful, there’s very little reason why you cannot get to wherever it is that you want to go with money. So number one, money is a lot, no two ways about it, it is a lot. To be good at money, we need to be able to have a budget and have a plan for our spending, which is really all a budget is just a plan for our money and our spending and our savings and all of those things. But it’s so key. We need to be able to do that. We need to have an understanding of investing. And that’s enormous, like an invest in the stock market. Am I going to use a 401? K? Am I going to buy ETFs? I’m going to invest in the s&p 500 get invest in real estate, am I going to do crypto NF T’s am I going to do bonds, we’re going to invest in gold, small businesses.

That’s a lot. There’s no two ways about that. It is a lot. So understanding that. But of course, you need to understand taxes, I need to understand insurance when they’ll have to worry about estate planning. If I’m a business owner, I need to worry about all those things, too. So

I’m not saying it’s easy, not by any stretch the imagination, it’s just one of the main reasons that we are struggling to save money, we’re struggling to be moving in the right path financially, because it is just a lot. So number two, many touches, everything touches directly or indirectly, pretty much every aspect of our lives. Money will dictate the kind of food that I eat, it’ll dictate the car that I drive, the place that I live, it’ll dictate potentially the place that I send my kids to school, it’ll dictate where I go on vacation, what kind of hobbies I do all of these things. So it just has its fingers, really touching every aspect of our lives. So I think that is one of the main reasons again, it’s overwhelming, it’s a lot.

And then they get directly leads number three to a third reason which is money is really, really emotional. So it’s an emotionally charged that

Daniel Kahneman, who is you became very always probably really famous all the time. Daniel Kahneman, probably a really famous person for the moment he was born. But he became famous. He wrote a book called Thinking Fast and Slow. And he ended up winning the Nobel Prize for his research. And I think he was a psychologist that wanted an economics or I may have those mixed up, you might be an economist who won the Nobel Prize in psychology. But he became fascinated with why people human beings make decisions around money. And through his research, he figured out that upwards of 80% of the decisions we make around our money and our finances are based on emotion. Now, let that sink in. Do you think that 80% of your financial decision makings are based on emotion? I remember when I heard that I was like, No way. No way. 80% of my decisions around money are based on emotion that I thought about and I’m like, No, yeah, and I

think that that’s probably true. We do make so many kind of snap decisions or snap judgments around money just impulsively based based on our emotions. And these days.

With technology, we have the ability to buy, literally, probably literally everything we want. With the push of a button, simple one click, and that thing shows up. And it shows up in my house really, really fast. Or it can whatever you, you get the idea. So when we, when we allow ourselves to make decisions quickly based on that emotional reaction, whatever thing we’re triggered by if it’s I’m hungry, I want to have food delivered to my house immediately, or I’m bummed out, or I’m stressed out. So I’m going to buy something online to make myself feel better. I mean, we do it all the time. That’s the reality Daniel Kahneman was right.

The way to begin moving past that is just to start recognizing our behaviors, saying, You know what, I feel this way, I’m motivated to buy this thing or do this thing or spend money on this, whatever it is, wonder why that is? Why am I feeling this way, and work to sort of pull that thread and get to whatever the motivating cause is. And that’s how we move from thinking emotionally or responding.

Financially, making financial moves based on motion to moving towards making more logical decisions based on emotion. Now, I’m not trying to turn you into a computer, or anything like that. But the more we can just be aware,

our motional spending or emotional decisions around investing as well, because that’s really where it gets catastrophic. It’s not so much that I’m buying something online, it’s when I have been saving in my 401k, for example, and I open up the internet, and I see that the stock market is down by 30% 40%, or whatever it might be my initial my, my emotional response, my my, my trigger is, I want to get out, I want to sell the investment. Because the same part of our brain that responds to financial loss is the same part of our brain that responds to mortal danger. So when you smell smoke in a building, your impulse is to get out of the building, or you hear something behind you, you’re walking down the street at night, you’re scared, it’s the whole fight or flight thing. So that part of our brain when you see the stock market standard tells you to sell but, you know, intellectually, that that’s not what you’re supposed to do. You’re supposed to buy when things are low and sell when things are high. But we emotionally want to do the opposite. We emotionally want to buy when things are high, and sell when things are low. So that if we were to, as so many of us do, when the market crashes, 2001 2008 2000, and whatever it was the most recent crash, they’re always going to be coming. The only way you really lost money was when you sold at the bottom. Because if you had simply held on in 2008, stock market went on this crazy up bull market where it went up, up, up, up, up, up, up. So the more we can be aware of the emotional decision making that we are prone to do, the more we position ourselves to be able to make more logical kinds of decisions. Number four is all too often we take a short term perspective. And that’s true of everything. Success in most every area of life requires some kind of a sacrifice. I want to be a physically healthy person, I need to make sacrifices on what I’m putting into my body. Instead of just eating pizza and cake and drinking beer every day, or whatever it is you like to eat, because it tastes awesome. I know that I can’t do that all the time. Because if I just do that all the time, that I will not be that healthy person that I want to be getting up in the morning, going for a run, exercising, going for a walk, that’s not fun, it’s more fun to stay in my bed, stay comfortable, especially if it’s cold out my goodness. But I make the sacrifice, discomfort because I want to be healthy, I want to be strong, whatever it might be, whatever that motivation is to essentially take a longer term perspective. And the same thing is true of money. So I would rather have a wonderful lifestyle right now I want to do awesome things. I want to have nice things and want to spend money on stuff. The money comes in, I want to consume perfectly human, maybe most human thing in the world. But we know God willing, I will be one day an old version of me. And I need to be putting money aside I need to be saving that old version of me be very grateful. This younger version of me. Not young but younger version of me put some money away. So shifting from the short term perspective to a longer term perspective. Not super fun, but super necessary.

And then the last one, number five is that we don’t have a plan. And this, again, is true of everything in life. So money touches, everything touches every aspect of life. So does getting better, getting better touches every aspect of life. So we need to have a plan for

anything that you’re interested in doing. You want to learn how to play the guitar, you need to put a plan together, say, Okay, I want to learn to play guitar. How much time do I have to really devote to doing this? I can probably spend 20 minutes a day. Okay. If you want to read more, you know, I can’t all of a sudden read 30 books a year. But can I read 10 pages a day? Yes. That’s a really simple plan. When it comes to our money, we also need a plan. And I think a lot of the time when people hear financial plan, it’s this very intimidating, big, complicated thing. And I’m not saying that it’s not it can be. But a financial plan is also as something as simple as I’m going to get out of credit card debt. So I’ve got a credit card with a $2,000 balance on it. Okay, I want to get this paid off. All right. So we can either back into it by when I want to have a habit paid off, I want to pay it off this year. So I’ve got 12 months. All right. So I’ve got a $2,000 balance, want to pay it off in 12 months. That’s essentially whatever 12 divided by 2000 divided by 12 is sort of back into it that way. Or you say, Okay, well, I’ve got I can probably free up an extra $100 a month

in my budget, went through my cash flow went through my budget, I found $100 extra that I can put towards this credit card debt, how long will it take me to pay off $2,000 in credit card debt, and probably maybe 18 months, you can get that done or 20 months, something like that. So appreciate that. There’s interest and all that.

But again, there’s wonderful resources that are free online and calculators and junk like that, that will help you put together simple plants. Another example is if you want to save for the down payment on a home, so you want to figure out okay, this is the house that I want to buy. So here’s the dump payment that I can save up. How long is that going to take me and you factor in a certain interest rate. Or if you’re just saving the money.

Point being it doesn’t need to be super complicated. You can make little financial plans for everything in your life. And obviously, I encourage you to have a more organized, robust, comprehensive financial plan. But let’s not let perfect be the enemy of good

and just start figuring out little things you can be doing along the way. So there are five

I don’t know if there’s simple five reasons why it is that it is so hard for us to save money. I think that they are all over accountable. They’re all things that we can certainly manage. The one of the big things about being good at anything, certainly being good at money is being intentional about it and setting that intention and say yep, I want to be good with money and want to position myself for success. I want to be doing the right things. I want to feel confident I want financial peace of mind. So more we could start approaching it that way, the more you can realize that you 100% are somebody who can become financially successful. It’s all available to you. So remember, do your part by doing your best

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