What’s one to do when after paying all the bills there’s nothing left for the fun things in life? You want to travel. You want to attend a major sports event. Fill in the blank: You want to ______. Lacking spare funds or facing debt needs and worries amidst a wish list of need-to-do and like-to-do things is not fun at all! Getting out of that ditch and affording to enjoy some “smell the roses” activities takes a game plan. I have one and its playbook works. In a series of articles, I’ll be sharing the plays in it. Saving money is the starting line in the game. My Golden Rule of Saving is the finish line. Let’s start moving down the field.
Most people realize that money doesn’t grow in trees and seldom falls from the sky. I say “most” because I’ve encountered people who seem to behave as if it does. They believe in the phrase “it came out of the blue”, alternative wording for “it fell from the sky.” My use of “seldom” is also intentional. An accident might cause some cash to fly out of a security vehicle. However, if retrieved it’s best to return it. The currency can be readily tracked. If you don’t return it you could end up reading this article while confined in jail.
After all the unrealistic and extraordinary sources for obtaining cash are considered it settles in that one must accumulate cash by the quite ordinary act of saving it. A dependable routine for steadily building up a reserve of cash is essential. That reserve permits one to pay for anticipated larger needs of life by planned accumulation of savings for timely availability.
At an early age, there is that “piggy bank”. With mine, I learned a valuable lesson. Saving coins at a regular monthly increase in the incremental amount resulted in my stowaway cash growing faster and faster. I’ve heeded it all my life.
Later in life it was replaced by the so-called “penny jar” whereby one regular puts one’s pennies into a large jar. It gave important lessons, too. It’s more effective to regularly put in all of one’s loose coins. Add any windfall money to that. The sort that seems to “fall from the sky,” meaning it comes about unexpectedly. Things like a $10.00 rebate for buying a back pack and a $100.00 rebate for buying a particular camera were fed into mine. Occasional monetary gifts, occasional winnings from a bet in a horse race, income tax refunds, etc. were plopped in, too. If left in, after a year or two that penny jar would contain several hundred to several thousand dollars. I didn’t let it burn a hole in my pocket.
Let’s turn down the path to more programmatic, adult approaches to seriously saving money.
One approach is to arrange for a consistent amount of money from your paycheck to be automatically deposited into a bank savings account. Those much larger adult age savings will accumulate at a steady rate. As pay raises occur say annually, consider increasing the percentage to be taken out. That way, the savings will grow faster and faster. Here again, this is most reliable if you never withdraw any of those funds.
The other side of the savings spectrum is to control one’s spending. Controlling expenses is the most important step toward minimizing personal debt. Minimizing personal debt allows maximizing personal savings. So control spending like a wise miser
The step of a locked in regular bank savings pattern is the first action to take. Maintaining a fixed deposit amount has the overall benefit of setting the resulting consistent “adjusted take home pay”. That’s the base amount from which to manage one’s daily, weekly, monthly and annual financial needs. If controlled effectively, then the long term financial needs can be successfully managed via tapping accumulated savings wisely. If planned properly, even when occasional expenditures are made using them, the remaining reserves will be sufficient and will continue to increase.
Perhaps, the advocacy of controlled automatic savings paints an overly “rosy” picture. For some readers the reality of doing it is a daunting obstacle, not an open gate to paradise. Lots of us have experienced a feeling of having to “make ends meet.” With every paycheck, withholdings for taxes, and government retirement programs, etc. have reduced the gross pay to a lower take home pay amount. Normally, one then acts to pay one’s bills and hopes to have extra money left over to devote to optional spending. Maybe you have the feeling of “there is never any money left over after paying all the bills”. The idea of further cutting one’s take home pay by enacting regular withdrawals for savings feels insurmountable if not impossible. By following my gameplay, you will overcome that. Here are the first few plays.
My game starts with having as many bank savings accounts as I need to sort my larger savings needs into different cubicles. For ongoing everyday needs, two are at the forefront and they always get a monthly deposit
The PRIMARY SAVINGS ACCOUNT is used to accumulate funds for known regularly needed purchases of higher cost. Yearly medical, dental and eye care examinations and ensuing costs such as eyeglasses exemplify such purchases. Clothing, shoes, gifts and other holiday costs, and insurance premiums are other common items. Homeowners incur costs such as lawn and tree care services. Another purpose is to steadily increase savings for possible longer term needs such as painting one’s house.
The RAINY DAY SAVINGS ACCOUNT serves as base of money in reserve to pay for periodic unexpected needs and emergency needs, and periodic expenditures for “smelling the roses.” A rainy day for finances is day that interrupts the sunny days of life with an event that costs a significant amount of money. Paying the deductible amounts on medical emergency and auto accident insurance claims, failure of a water heater, removal of a dying large tree, etc. are example big raindrops.
As to “smelling the roses”, what’s a rose? A rose is anything that fits in the context of either “splurging” for gratification (satisfying a feeling of “I earned it”) or for periodic escapes from the doldrums of everyday life is a rose. Celebrating a major wedding anniversary; attending a professional sports event or concert, and weekend getaways are example roses. In a pinch, the smell the roses funds can also serve to put a smile on one’s face when using cash instead of a loan to purchase something.
My playbook also relies on creating separate bank accounts for specific items. Saving money for your child’s future college costs, a planned future auto purchase, for a daughter’s future wedding, a down payment on a first home? Create an account for each one. Avoiding comingling money helps one to be disciplined about accumulating funds needed for each. As the funds build up, you can periodically move some funds into certificates of deposits accounts to earn greater interest.
My playbook handles travel costs (going on a vacation, attending a wedding or college graduation, etc.) by a mix of PRIMARY SAVINGS ACCOUNT and RAINY DAY SAVINGS ACCOUNT and paying some things (for example, meals) with out of pocket resources.
Anything else is paid for “on the fly” (either by check or credit/debit card) using one’s take-home pay.
So all is rosy now? Not really. Next time well move closer! I’ll be explaining my Golden Rule for Saving.
For now, start imagining some roses to smell. Down the road, you’ll be doing it.