Why you can’t save - MoneySense

Why you can’t save

The path to hell is paved with good intentions



If you’ve tried to save and you just can’t figure out where you’re going wrong, it may be that you’re making one of these classic mistakes. Do you see yourself here?

Meet Angela
Angela wants to save. She’s tried and tried. But no matter how many tricks or tips she uses, it never works. She’s opened up pay-yourself-first accounts, had the money moved automatically, only to find herself dipping in mid-month. She got herself one of those snappy accounts that rounds up debit card purchases to force her to save, only to find herself transferring the money back to her chequing account because she’s run out of money before payday.

Angela’s problem: She hasn’t figured out her cash flow.

Angela’s solution: Angela needs to look at how her money is coming in and how it’s going out. She should look over three to six months’ of her credit card and bank statements to find the expenses she often overlooks that cause her budget to jump the rails.

Say hello to Mike
Mike wants to buy a house in the next two years. On an income of $4,200 a month net, Mike hopes to have a downpayment of $40,000 saved in the next 24 month. Problem is, Mike can’t seem to make any headway on his goal. He’s frustrated.

Mike’s problem: His goal may be too ambitious. In essence, Mike wants to save 40% of his next two years’ income for his downpayment.

Mike’s solution: He needs to reassess his goal to see if it is achievable or just designed to frustrate the hell out of him. If there’s no way he can save $1,666 a month, he’s set his goal too high. He may have to extend how long he’s going to save, or find a way to make more money.

Say hi to Sam
Sam knows she needs to save for retirement but at 40 she thinks she may already be behind the eight ball. As a freelancer, she’s found herself dipping into savings over and over whenever she hits a dry spell. Now she’s concerned she’ll never make up the time she’s lost.

Sam’s problem: She’s focused on the past instead of the future.

Sam’s solution: Sam has to forget about what’s done. Now she needs to make a plan for the future and stick to it. She mustn’t set the bar too high and frustrate herself (like Mike did). She has to be realistic. But she also has to be determined not to dip into her long-term savings, so she has to set up a separate emergency fund to deal with those interruptions in income she experiences as a freelancer.

Figuring out your saving barrier is the first step to bashing it down or leaping over it. If you haven’t been a saver, it’s time to take a good hard look at what’s been stopping you. Throwing your arms up in frustration won’t lead to a solution. But it may lead to a sad, poor retirement. If that’s not what you want, take a good hard look at your money and make some changes.