I was driving down the highway on my way home from work the other day when I looked up and saw a billboard for a local bank. It had a two sentence ad for their high-yield savings account that really caught my attention. It said:
Your future called. It said to send money
This really got me thinking about our debt culture, and how most people don’t ever bother to save for their future.
We value having things now, and for most people saving for the future never even enters their mind. In fact, according to MSNBC.com the Commerce Department reported that the nation’s personal savings rate was a negative 1 percent this past year, the worst showing in 73 years. The article continues:
As the nation’s largest generation retires, that will further depress savings because typically retirees are drawing down their accumulated savings in an effort to make up the difference between the salaries they earned on the job and their smaller Social Security and other pension payments.
“We have to face the question of whether we are anywhere near where we need to be with our savings to see us through,” said David Wyss, chief economist at Standard & Poor’s in New York.
We are not saving enough for our future needs, and we need to find a way to turn that around. We need to start saving NOW!
Saving For The Future
We know we need to save for the future, but how do we start?
How do we get motivated to start putting away the funds that we’ll need down the line?
I read an article on NPR.com where they were talking about debt. One of the quotes was from Financial Times columnist Tim Harford. He said:
Debt is your future self sending you money back in time. So the question is, are you and your future self both happy with the deal?
No, I’m not happy with the deal – that’s why we don’t do debt. This quote did make me think, what if this went in reverse, and it was our present self sending money to our future self?
Savings is your present self sending you money in the future.
Now that is a deal I’ll sign up for!
Dayana Yochim in her article, “Give Your Future Self a Raise” talks about how most people have been told to save 10% for retirement, but that it just isn’t enough. What does it take to turn that around? It’s pretty simple:
Save more. Work longer. End of story.
Sounds dull, but if you get serious about those two things — work an extra two years and sock away just 3% more in savings if you can — you will turn your entire financial future around.
Saving Is Like Paying A High Interest Debt To Your Future Self
Sometime just saving for the future isn’t motivation enough. You need to couch it in different terms.
Here’s what I’ve come up with for myself.
When you have debts, the debts become a priority, you have to pay them off before you can buy the things you want like a new gadget or a vacation.
If you don’t pay your debts eventually the creditor will repossess your house or other assets.
I like to think of savings as a high-interest debt that I’m paying to my future self. I have to pay myself for the future before I pay for other things because if I don’t my future prosperity will be repossessed. And I don’t want my future to get foreclosed on!
Tips To Jumpstart Your Savings
- Treat retirement savings as a high interest debt to be paid off.
- Set a debt goal: Set a debt goal for your retirement savings and try to make payments on that debt as often as you can. Use the Dave Ramsey debt snowball and the concept of snowflaking to add more money to your retirment savings.
- Save more: If you’re saving 10%, bump it up 15%. Save as much as you comfortably can, and automate your savings goals if you can. You don’t want to make your current life uncomfortable, but you do want to make sure you save enough. Check out PTMoney’s article, “7 Can’t Miss Ways to Kick-Start the Saving Habit” for more ideas of ways to start saving.
- Work longer: Plan on working longer in order to save more. Take on part time jobs or save other unexpected windfalls.
In my mind, the most important thing to do when it comes to saving is to just start doing it. Make it automatic, make it a habit. Turn it into a game! You’ll be happy to know that you’re paying your future self for a prosperous retirement. The billboard will now read,
Your future called, you’ve got plenty of money because you started saving!
What are your tips for jump-starting a saving habit? Leave a comment here!
I should try this and maybe it will help me save more. I remember when I was paying off high interest debt and I was very intense. Saving money shouldn’t be any different.
Frugalchicks last blog post..Fully funded emergency fund
Great advice, its not only about paying yourself first, but also making the most of that payment. I use high interest savings accounts to maximize the return on my savings. In today’s bank crisis, I know people are leary as I was. But I recently found that the FDIC has made some changes. I only will put my money in an FDIC insured savings account.
FDIC now insures up to $250,000 per depositor. Keep in mind that individual and joint accounts are insured separately, so if you have both types of accounts, your total deposits can be insured up to $500,000; that’s up to $250,000 in all your individual accounts and up to an additional $250,000 in your joint accounts.
Putting more away into a tax deferred account is also nice for dropping tax brackets. The bracket you want to avoid is $72,500. Anything over that is taxed at 25% rather than 15%. Odds are, you will be in a lower income bracket when you retire, and it could save you 10% in taxes on the money you put away that was over the $72,500 tax bracket. It doesn’t sound like much, but every little bit helps!
The down side is that it isn’t as liquid as a normal high yield savings.