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How We See It

Larry Quinn

Larry Quinn

May 25, 2012

Saving is Not for Wimps
By: Larry Quinn, CPA and Branch Manager

Saving or more importantly systematic saving, as its name implies, is the process of saving a portion of your income on a regular basis.  Most people do not save on any systematic or regular basis.

Regularly saving requires discipline.  Systematic saving and building a cash reserve are the first steps (managing debt is a close second) in creating financial confidence and independence.  Remember the adage: ‘a penny saved is a penny earned.’

Building this important piece of your financial future requires a certain mindset.  You should look at systematic saving as paying yourself before you are tempted to spend it elsewhere.  Money spent is money that usually must be replaced by working for it.  In other words, pay yourself first!

‘Budget’ is one of those dreaded words people hate to hear.  It conjures up pain and suffering.  The good news is it does not have to hurt.  Start simple by identifying ‘needs’ (groceries) versus ‘wants’ (designer shoes), and be sure to include your desired systematic savings as one of your high priority needs.  Including your desired amount of savings as one of your needs is a determination, which is the first step in disciplined savings.

Even if the amount you start with seems small, it is important to begin somewhere.  You can gradually increase the amount.  One method to increase monthly savings is to allocate a percentage (20% to 40%) of future salary increases and bonuses to your savings program.

Since sticking to our plans is a perpetual challenge, automating your monthly savings is an excellent way to achieve disciplined systematic saving.  Some employers offer a payroll savings plan as an employee benefit.  These plans automatically withhold an agreed upon amount from each paycheck and depositing the amount in an account on behalf of an employee.  If you never see this deposited into your checking account, you will not be as likely to feel the urge to spend it on something else.

So your employer does not offer this benefit.  Now what?  Most financial institutions offer depositors an opportunity to have funds automatically moved between accounts on a periodic basis.  While not a savings plan as such, automatic transfers provide a convenient way to save, regardless of the objective.  These plans tend to offer significant flexibility in starting, stopping, and altering the amount being transferred, plus a selection of several types of accounts.  Again, the idea is to enforce discipline automatically by removing the temptation to spend the savings on other items.

Avoid using credit cards to pay for everyday expenses unless you pay the card off every month.  Using credit cards may seem like you are currently spending less but your credit card debt is more likely to continue to increase since your balance is typically out of sight throughout the month until the bill comes.  Your long-term goal is to manage debt and build up your savings for the things you want to do later when not working.  To keep a long-term perspective, try to picture yourself in retirement enjoying the leisure activities you pursue, the restaurants you enjoy, the trips and vacations you will go on and so forth.

To realize a long-term goal, you will need to treat yourself from time to time.  You can eat out at an expensive restaurant or buy some new clothes from time to time as a reward for sticking to your savings goal.  Be careful not to let this sabotage your diligent efforts.  You may even set a savings goal and a reward of a long weekend trip a couple of times a year.  This helps make your long-term goal real and meaningful at the same time while continuing the systematic savings.

Maintaining your focus, determination, and discipline are required to successfully and systematically save.  It is not easy, otherwise everybody could do it.  You can follow such a path if you are willing to do so.

Want an idea of how much spending less and saving more will add up?  Check out the complimentary calculator at TBT Financial Services website by clicking on this link: .  While you are there, look around at our other valuable resources and calculators. And as always, if you have any questions, we are here to help!


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