Growing up, I had a low self-esteem. Realistically, there was nothing wrong with me. I had two loving parents, a sister, a home, a dog and plenty of friends and relatives. I was intelligent enough and did well in school. But, most of the time, I didn’t think I measured up. I didn’t think I was pretty enough, smart enough — or rich enough.
So, what do these insecurities have to do with saving money? Find out how your mind can trick you into thinking that having lots of things will make your life great. Ultimately, you’ll learn the secrets to building financial security — by changing your thinking and your behaviors.
The Early Days
It all began with my mom and dad’s background.
My dad, born into poverty, worked since he was age 10 and ultimately became a successful entrepreneur. My mom, born into middle class, was raised in a two-bedroom apartment with cost-focused parents. My parents were children during the Great Depression. They shared a similar value set; live within your means, work hard, take calculated risks and save a portion of all income. Those values were embedded in my upbringing.
Mom and Dad bought their first house together when I was age 5. They had a choice to buy a relatively expensive home in a tiny neighborhood or a fixer in an older, established neighborhood. They chose the fixer-upper, gutted it and made it their own — all for a fraction of the cost of the home in the upscale neighborhood.
My dad loved luxury cars, but he grew up dirt poor. In order to buy his first car, he learned to work on cars, bought an older model and made the repairs himself. As he aged, he rarely bought a new car but chose a slightly used Cadillac, Mercedes or Lincoln Continental.
Faulty Money Mindset Could Have Derailed Me
I could go on, but let’s circle back to my perceived early insecurities. I believed if I had more, I’d be happier. But that wasn’t going to happen in my parent’s household. I was not going to get everything I wanted that I thought would make me happy.
In fact, I remember when my best friend, Julie, went to the hairdresser before a big junior high school dance. I was so jealous. My mom’s response to my request to get my hair done for the dance was:
“You have your whole life to go to the hairdresser. You don’t need to get your hair done at age 13.”
As a child, I didn’t appreciate the theme of delaying your wants and desires. In fact, I blamed my parent’s financial conservatism as a contributor to my insecurities. This was quite silly. In fact, that practice of questioning before you buy has enabled my own family to succeed financially. As an adult, I embrace the ideas that saving and wealth building are a mindset. By practicing a lifestyle of deliberate and thoughtful spending, it becomes habit.
Somewhere along the way, I incorporated the idea that delaying my wants and needs, saving and investing could lead to greater wealth. Over the years, I learned to be happy and appreciate what I already had, not what stuff would give me. This singular belief is the cornerstone of contentment and a path to building wealth.
I received a tremendous gift from my parents. By learning to delay gratification and spend conservatively with discipline, the practices of my youth are now ingrained habits. It’s not hard for me to say “no” to myself. I prefer to re-purpose clothing and household items for new uses. Not only does it save money, but it’s fun.
But, what can you do to develop a savings habit if you were never taught to delay your wants?
If you weren’t raised this way, then it’s on you to learn smart saving and spending habits. Unless you have a fabulously high-paying job, it’s your personal challenge to learn how to live today and to spread your earnings out over your entire life. You can learn how to save and invest in order to have wealth and enough money to spend on what really matters. And the process can be as fun as the end result.
Vacations, Car Repairs & Retirement: Why You Want to Save Now
Understanding both why and how to save is the first step. Here’s what happens if you elect not to save.
If you have a financial emergency, such as an expensive car repair, you’ll need to borrow at high interest rates — probably from your credit card — to pay for the repairs. Ultimately, a $2,000 car repair could cost upwards of $3,000 or more, depending on how quickly you pay off the bill.
Or, if you want to go on a vacation and there’s no money saved for that purpose, again, you go into debt for a year or more just to pay for a one-week vacation.
What about your wedding? Many folks spend tens of thousands of dollars that they don’t have on that “special” day. Yet, in actuality, they are mortgaging their financial future by borrowing to pay for an expensive wedding.
Saving for the future needs to go beyond emergencies, vacations and weddings. Retirement statistics are grim for those who don’t prepare. In 2016, the average Social Security check is around $1,340, according to the Social Security Administration. Unless you believe that’s enough to live on, it’s prudent to put some money aside for retirement as well.
How to Save and Invest Today for Long-Term Financial Security
Challenge yourself to find ways to save and invest — you might like it. I actually enjoy finding ways to cut costs, save money and watch our net worth expand. The return on delaying gratification is tremendous.
I was in line at Target with a handful of coupons chatting with the woman behind me. Her daughter picked up an item and asked her mom if she could buy it. The mom immediately checked the app on her phone to see if it was discounted. The mom reported to her daughter that it wasn’t on the discounted list, and so she couldn’t buy it this trip. This mom’s cart was filled only with items both on her list and on sale.
There are scores of savings strategies. For example:
- Some people excel at couponing. Others use saving and shopping comparison apps.
- Some limit shopping to one or two days a month.
- There are even consumers who designate no-spend months.
- We strive to have several vegetarian, low-cost meals per week and monitor how much we eat out as well.
- Another habit our family practices is looking for low-cost substitutes. My husband is committed to only buying clothes out-of-season at a deep discount.
For the greatest money-saving impact, focus on the big two: housing and transportation. These are typically the largest budget items for most families. If you can slash these costs, you can free up cash for saving and investing.
Save Money on a New Car
Before buying a car, check the Kelley Blue Book five-year cost of ownership. For example, we’re in the market for a new car. One of our cars is a 1998 model and our newer car is a 2003 model. We noticed several low-end luxury models in our price range.
But after looking at the five-year cost of ownership, including repairs and insurance, they didn’t make sense for us. In fact, most people will do well to buy a used model to save on depreciation.
Save Money on Housing
I write about the housing topic in “How to Get Rich: Without Winning the Lottery.”
In sum, the difference between spending $800 per month on rent by living with a roommate or two and $1,200 adds up to $4,800 per year. Take that $4,800 and invest it annually in a diversified low-fee mutual fund. With a projected 7 percent annual return and 30 compounding periods, you can amass approximately $521,689 for retirement. That’s how to make one lifestyle change grow into over half a million dollars.
The Best Way to Save
Through experience and smart money strategies, I learned that growing your wealth is not the key to self-confidence. Accepting that you’ve got everything you need now to be happy can change craving for things to fill an emotional void. Money will only solve financial problems and can reduce economic stress.
Unless you expect unlimited earnings that will last throughout your entire lifetime, you’re confronted with daily money choices. Regardless of your current financial situation, a decision for financial security starts with your personal commitment.
There are wealthy, high-net-worth school teachers and low-net-worth business executives who earn more than $150,000 per year. To stay motivated and encouraged about your financial future, keep track of your income, expenses and financial goals. Track your progress and have confidence that if you make small, wise spending, saving and investing decisions today, you’ll reap financial security tomorrow.