Why Resolutions To Save Money Fail

Why Resolutions to Save Money Fail

By

Marsha Walker Eastwood, B.S.Ed., MSHSV

If you are like millions of people who listed saving money as your top resolution for the new year, you will very likely be among the millions who fail to do so. This is because resolutions are self-talk, feel good ideas that are often abandoned as soon as the holiday credit card bills start to roll in, along with the regular maintenance bills. Saving money requires research, introspection, and strategizing. It is a plan of action that follows a call to action which requires goal setting and significant and meaningful behavior modification.

          The reasons why anyone should save money are numerous. Some are common sense and apply to almost everyone, while others not so much. They all  depend on personal circumstances. The reasons to save money include emergency funding for unforeseen circumstances, surviving a temporary job or to supplement retirement income, a college education, a down payment on a house or car, leisure activities such as vacations or hobbies. The number one reason is to decrease stress and frustration by taking full control of your finances.

  Everyone needs to create an emergency fund. This fund can help cover the cost of car and home repairs, healthcare deductible, and other insurance deductibles, unforeseen non-covered dental and optical emergencies, emergency pet care, replacing appliances and other unforeseen emergencies that need to be dealt with expeditiously without maxing out a credit card or taking out an emergency short-term loan.

Income generation of some sort is the key to survival for most people. This is especially true for those in the workforce. Even a very temporary loss of a paycheck can have a significant impact on the ability to pay the rent or mortgage, buy food, make utility and car payments etc. Money previously set aside in a savings account can help tide things over until work resumes. For many retirees, pensions and social security payments fall short when it comes to maintaining a lifestyle, and the thought of outliving their money looms ever large. Salting money away during their working years can help cover the costs of rent, mortgages and even the repayment of college loans for children and grandchildren.

Speaking  of college funds, many parents and grandparents save for the college education of their child or children or grandchildren. A better reason is to create a post-college survival fund to help cover expenses for the first six months after graduation. Every graduate doesn’t leave the college campus and enter a well-paying job in their area of study, and the sixth month is when the first student loan payments come due. Creating this fund helps eliminate the need for more credit cards and those dreaded short-term installment loans.

          Employment of some sort is front and center in the lives of a great many people and having reliable transportation can make all the difference in the world. No matter how much you love your current “Betsy” or “Sam,” at some point it will need to be replaced. Creating a savings account devoted to a down payment will allow for a lower car payment and decreased interest expense over the life of the loan. The same holds true for housing. Everyone must live somewhere and for whose who dream of home ownership, creating a savings account for the down payment, escrow and title fees associated with homeownership can make the process more rewarding, and less stressful.

Creating emergency funding for priority needs is one thing and creating a savings account to help a kid out after college is another. It is so easy to get caught up in the caretaking of other people’s needs that a lot of people forget to take care of their own needs. The stress of creating a realistic work-life balance, finding those few extra moments to meditate or read a book or some other form of relaxation can take its toll quickly. While many people opt for taking staycations, creating a vacation  savings account can provide the opportunity to really get away from spending a week or two “catching up on things around the house” or entertaining others. A vacation provides an opportunity for rest, relaxation, and renewal. It also provides an opportunity to rest those credit cards.

It goes without saying that the positives far outweigh the negatives when it comes to saving money. Independence, freedom for certain kinds of debts, and the ability to handle emergencies all contribute to having greater control over personal finances. The big question is how to go about the business of saving money. Stashing a few dollars in a cookie jar or dumping pocket change into a jar is fine but what about the bigger picture? Where is the real money going to come from? In order to answer that question, you must look at your spending habits- how you spend money and why you spend it in the amounts that you do. What is a  priority and what isn’t, and how much can you rob Peter to pay Paul?

Food, shelter, and clothing are necessities of life. These necessities should be based on your own specific needs and affordability and not trying to keep up with the Joneses or the Johnsons who can afford their lifestyles. Bi-weekly visits to the nail salon is a feel-good luxury, but not if you use a credit card, it is far more expensive. If you can’t afford cash, it is not a priority. The same holds true with shoes. If you can’t afford to keep up with current styles, don’t. Try considering getting more wear out of the ones you have or better yet saving for them. A $100.00 pair of shoes placed on a credit card could very well end up costing $116.00 or more depending on how long it takes you to pay for them on a card with no outstanding balance. Multiply that by everything else you use that card for.  The same applies for a car. If there is nothing wrong with the car you are driving, or even it needs minor repairs, leverage that against coming up with a down payment and new debt. Multiply these behaviors exponentially and you will find more money to save than you realized.

Behavior modification isn’t just about how you spend money but also why. Do you make a list and stick to it, or are you an impulse buyer? Are you tempted by infomercials, slick car ads or even “stuff” at the checkout counters- earrings and purses in a shoe store, small electronics in the checkout lines in the supermarket? Do you answer the requests for loans whenever your children run short of cash? Are you taking advantage of cash reward credit, debit, and gasoline cards? Are you a new item only kind of shopper or would secondhand do just fine? If you answered yes to any of these questions you can easily see where money could be used in a savings account of some sort. In addition, all that loose change deposited in that jar could be wrapped once a month and deposited into a savings account. The same holds true for raises at work or from benefits.

While December 31st and January 1st seem to be the days for creating resolutions, any time is a good time to consider opening a savings account and making your money grow. There are several ways to do this and once again you have to consider how much money you have to deposit on a regular basis and are you disciplined enough to curb spending habits and not touch it unless there is a true emergency.

If you have less than $50 to get started think outside the box and do a comparison study. Consider interest rates offered by brick-and-mortar banks as well as online banks. Learn the importance of APY, which the annual percentage yield on your account.  Online banking offers high interest rates on your deposits, usually with no minimum balance and low or no monthly fees. If you decide to use online banking for savings always makes certain that there is a debit card attached so in case of an emergency, you have access to your money. While there is a slight difference in the amount of interest paid on their savings accounts. Ally Bank suits the needs of many when it comes to creating a savings account. They require no minimum deposit, 1.60 APY and a free checking account which also requires balance requirement. They also offer full access to their other financial products.

          Resolutions in and of themselves are just words, and without action they are as empty as a room without furniture. Behavior modification creates and answers the call to action and the results can be financially rewarding. Perhaps T.T. Munger said it best, “The habit of saving is itself an education; it fosters every virtue, teaches self-denial, cultivates the sense of order, trains to forethought, and so broadens the mind.”   

© Marsha Walker Eastwood

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