The Carr Report: Help! I can’t save for spending!

by Damon Carr, For New Pittsburgh Courier

“Damon, what are your recommended steps for saving money when you have bad spending habits?”
Signed – Facebook follower

Damon says: Saving money is the cornerstone of a sound financial foundation. You build your financial house on hollow grounds if you build it without the essential habit of saving money being the base of your financial structure. In other words, a person with poor saving habits is financially unstable—regardless of income. When the big bad wolf comes in the form of life, emergencies, unexpected expenses, buying cars, vacations, college, buying a home, disability, retirement, and even death—it will huff and puff and blow your financial house down.

Now that we establish why saving money is of paramount importance, let’s address your question. What are some best practice steps for “saving money” when you have “bad spending habits?” I’m reminded of a quote I often heard my mother say when money was tight—which was all the time—“I can’t save for spending.” Take a close look at your question. Take a close look at my mother’s quote. The answer lies therein. Houston, we’ve solved the problem.

Fix your bad spending habits!

If we simply stop spending money we don’t have and make saving money a priority, we’d essentially solve 95 percent of our financial shortcomings. Sounds simple. Why do only a few of us do it? It’s not entirely our fault that most Americans struggle to save money and make ends meet. In fact, 78 percent of Americans are living paycheck-to-paycheck. Paycheck to Paycheck? Dr. Lynn Richardson said people are living Paycheck-to-Monday. Paid on Friday. Broke by Monday! Nearly 40 percent of Americans say that they don’t have enough money saved to make a $400 car repair. Student loans, not college savings, is the way most Americans pay for college. Paying for school to get a job to pay for school is the mantra of most college graduates. Half of Americans within 15 years or less away from retirement have less than $10,000 saved for retirement.

In the land of the free, the land of ample opportunity, most Americans will die broke. Why? Because of an inability to consistently save money. I repeat, it’s not entirely our fault. This money-driven world is set up for us to fail. Let me explain:

Money doesn’t come with instructions: Financial Literacy isn’t taught in high school or college. I’ve completed Certified Financial Planning training. I learned the concept of investing, tax law, estate planning, retirement planning, and other disciplines and theories. But I was never taught how to write a check, balance a checkbook, create a budget, the dangers of credit cards, or the importance of understanding complicated financial documents before you sign them. We learn through trial-and-error, paying stupid tax after stupid tax. We get most of our financial advice from people selling us financial products. Most of them don’t understand the products they sell. They understand the commission they’re making on the sale of the financial products. Stupid is as stupid does! Most of us are financially illiterate. Financial illiteracy is a high price to pay.

The numbers don’t add up: You can only stretch a dollar so far. The cost of consumer goods and services continues to increase tenfold. Meanwhile pay raises increase anywhere from 2 to 5 percent annually, then eventually cap. Even with promotions, most companies cap you at a 10 percent pay increase when promoted. On top of that, it’s widely suggested that we save 10 percent and tithe 10 percent. Once you factor in taxes and payroll deductions, it accounts for approximately 30 percent of your paycheck. That’s half your paycheck gone and you’ve yet to pay the mortgage, car note, utility bills, and feed and clothe the family. With housing, utilities and transportation costs taking up one full paycheck, you have one paycheck left to cover EVERYTHING else. You know that I know, it’s not enough!

They’re out to get you: From the moment you wake up until the moment you close your eyes, we’re inundated with millions of impressions of marketing messages via TV, radio, Internet, and print publications from thousands of companies. Telemarketers calling. Nonprofit companies calling. If you have kids, the new name for mommy and daddy is “Give me” and “Can I have.” It feels like you spend $150 or more every time you step outside. Every company and everybody has one goal in mind, to extract money from your pockets to theirs.

Sheesh!! How’s one to get ahead financially?

Become financially literate: Most of us were never taught sound money management principles. Educate yourself. Read financial books and publications. Read my articles. Hire a fee-only financial planner. Someone who’s job isn’t to sell you financial products but to teach you how to better manage money and help you make good financial decisions. Give me a call.
Create some wiggle room in your budget: In order to save and invest money —allowing it to grow without you nickeling and diming it all the time by withdrawing it, you have wiggle room between your income and expenses. Do the math. Add up your income and your expenses. Take a hard look at how you spend money. Do what is necessary to create wiggle room in your budget. It’s one of three things: increase income, reduce expenses, and/or do a better job managing your money.

Reduce or stop wasteful spending: You’re paying high prices for your vices!

Did you know, you can blow through $10,000 per year by spending $27.40 per day on miscellaneous spending. Yep, dining out, playing the lottery, alcohol, cigarettes, weed and other vices can add up quickly.

Make saving a priority: Financial guru Warren Buffett said do not save what is left after spending. Instead spend what is left after saving. You may have heard it expressed this way. Pay yourself first. Money talking: “Save me today, I’ll save your ___ tomorrow.” Saving money is how you build financial security and financial independence. In order to make saving money a priority, you have to develop a strong reason why you want to save. If your life or the life of a loved one was dependent on your saving $15,000, you’d work extra, do without, and make various sacrifices to come up with the money to save your life or that of a loved one. Think of a strong reason that will motivate and encourage you to make saving money a priority.

(Damon Carr, Money Coach can be reached @ 412-216-1013 or visit his website @www.damonmoneycoach.com)

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