The reasons you’re not saving

The key to getting back on track

In 2016, desperation forced me into making a bad decision.

I had to accepted a job offer in software sales for a company that I knew wouldn’t help my career, and where I knew I wouldn’t have the support I needed to succeed.

There was only one good reason to take the job: I needed the money.

My back was completely pinned against the wall. I had just been laid off from a similar role at a much bigger company, I was living in San Francisco, and my MBA student loans amounted to paying a second rent.

I had maybe three months of living expenses in my bank account with zero other prospects in sight. This job offer was lifeline. My situation was entirely due to the fact that I didn’t have enough savings, and therefore time, to find something better.

I ended up spending the next eight years creating a sure-fire system to ensure I’d never be in this position again.

Why we don’t save

There seems to be universal agreement that building savings is a good idea yet few of us actually do it.

This paradox is easily explained:

We don’t value savings

You only need to look as far as social media to see that we reward those who play the status game. You never see a bunch of likes for people who finish funding their Emergency Reserve. It’s all vacations, designer clothes, and expensive meals.

We’re not taught how to save

Saving money isn’t taught in school. Those that save either had parents who taught them how, endured a terrible experience they never want to repeat (like me), or somehow developed a natural interest in personal finance. Everyone else never stood a chance.

Saving requires sacrifice

Saving a dollar for tomorrow means not spending it on something you want today. That’s enough of a reason to quit early or just not start at all.

We’re too optimistic

We’re bad at imagining any kind of negative future that might follow from our actions today. Just look at climate change, and people who smoke. Savings is no different.

We have a blind spot when considering how we might fare when the world deals us a bad hand. We tend to assume things will just work out.

If any of the following ring true, you’re in good company:

• You feel guilt and shame about not saving enough

• You’d be in dire straights if you lost your job

• You have a constant low-level worry about hefty bills coming up later in the year

• You know that an unexpected big expense would force you to go further into debt

In short, most of us are bad savers and for good reason.

The way out

“The best time to plant a tree is 20 years ago. The second best time is now.” – Chinese Proverb

If you have little to no savings, the best thing you can do is start building today. Everyone starts from zero and with the right plan and approach, you can dramatically change your fortunes in a short period of time.

The key is to realize that there are actually four flavors of savings, and that they’re built in a specific order:

1. Scheduled Spending: Money you set aside for known future expenses

2. Rainy Day Funds: Money needed in case of a temporary calamity

3. Aspirational Spending: Money for things that are optional but important to you

4. Emergency Reserves: Money needed in case you lose your income

Saving in this sequence arms you against threats in the order they’re most likely to strike. You immediately develop a clear understanding of precisely how the sacrifice you’re making today is benefiting you in the immediate future.

That feeling is addictive.

Scheduled spending prepares you for the expenses that you know are coming while Rainy Day funds neutralize threats that you're currently vulnerable to.

Your Emergency Reserve buys you time to replace your income after it's been lost, and Aspirational Savings works as a release valve that allows you to enjoy some of your hard work after completing steps 1 and 2.

Savings begin to matter

Your relationship with savings begins to change the moment you earnestly begin building them. I can clearly remember how my feelings of stress, anxiety, and guilt began to give way to feelings of accomplishment, progress, and purpose.

With each month that passes by, the nearest threat gets further and further away until you reach a point where even a loss of employment is nothing more than a minor speed bump.

I’m currently between jobs and had to replace a water heater last month. This expense would have been catastrophic back in 2016. Today, the most inconvenient aspect of the event was lining up the plumbers to provide quotes.

When your savings game is right you can look forward to:

• Knowing you're on track to handle every big bill on the horizon

• No longer freaking out over news of a recession or rumors of a layoff

• Being ready to handle any of the nasty curveballs life throws your way

• Satisfaction and relief that comes from knowing you’re finally on the right track

3 steps to becoming a master saver

0. Start (or restart) using budget software

1. Organize your budget to include

• Scheduled Spending

• Rainy Day Funds

• Aspiration Spending

• Emergency Reserve

2. Reallocate any existing savings you have into these new categories in the order listed above

3. Figure out your next savings goal and get to work

Since taking that bad job, I’ve been laid off four more times. In each period of earning, I dutifully worked this savings plan. It wasn’t a straight line, but I always knew where I stood and what to work on next.

When you have a clear strategy and plan to follow, building savings becomes one of the most fun and rewarding projects in your life.

With this blueprint for building savings in hand, you’ve got everything you need to start your savings journey. Now it’s time to get your back off the wall.