For what I will to do, that I do not practice; but what I hate, that I do. –Romans 7:15
Saving is the backbone of any budget.
If you don’t practice saving now, I recommend you start with those periodic non-monthly expenses like these.
While you’re at it, if you have a pet, include vet bills. Your pets are members of the household too
What usually happens when these services are needed? We go in at the appointed time and plunk down the credit card on the way out. There’s nothing wrong with that, provided we have enough to pay off the credit card bill at the end of the month. But any one of these quarter, semi-annual or annual expenses may well put us over the top of being able to pay the credit card bill in full. We start to run a balance, pay interest, let the balance get out of control, pay only the minimum balance, pay more interest. It’s a slippery slope. Let’s not fool ourselves.
Credit is delayed agony.
The only way to prevent that agony is to budget for expenses we know are coming. Save a portion every month so when the bill comes due, we can pay cash or pay off the credit card bill in full. All of these expenses are periodic and require short term saving (a year or less).
Car and House Maintenance
Dental, Eyecare and Vet Visits
If you’ve never saved using a budget before, this is a good place to start. Estimate the cost of each of these expenses for the year and divide by 12. These amounts are reserved in your checking or liquid account until needed for the purpose specified. No, don’t borrow from one to pay another. You’ll be on another slippery slope. Keep this in mind.
The purpose of a budget is to reserve funds for a particular reason.
If you balance your budget every month down to the last penny, as you should, you’ll be able to pay for everything without running a balance on the credit card—well, unless you’re living over your means. More about that later.
We know what to do. Why don’t we do it?
Most of us have never been taught to save. Saving, like any habit, is best learned in childhood. It’s funny. We teach our children not to run out in the street, to eat their vegetables, not to talk to strangers, but nothing about how to manage money or how to save. If the little darlings want anything, it’s given to them with no strings attached.
It was bad when I was a child, but now it’s even worse. Children are pushed into debt. Who can go to college these days without a college loan?
The truth is we haven’t done our job as parents unless we’ve taught our children to save, beginning no later than six years old. Make saving a habit. Early. But don’t take the child’s birthday gift from grandma and put it into his college fund. A child doesn’t care about his college fund. The thing he’s saving for must be something he wants. Fortunately, children want so much, you have plenty of opportunities to teach him. Anytime a child wants something, give them the money little by little. Call it their savings for whatever it is. Let them see the funds grow, experience delayed gratification. Just don’t make them wait years. Start out with weeks and extend the length of time to save for something to match the child’s age.
It’s hard for an adult to learn saving.
The reason it’s hard is because of what Paul said in Romans 7:15. But it’s not impossible. There are three psychological concepts that will help you develop a saving habit. Let me say up front, I’m not a psychologist, haven’t even played one on TV. What I’ve learned comes from observing human behavior, including my own.
1. People do what they want to do.
You’ll have to convince yourself you want to save. No one else can do it. If you have faith, take it to God, pray about it. Somewhere within yourself, you’ll have to decide whether you want to save or not. Without that desire up front, you won’t succeed.
2. People crave accomplishment.
Simply put, this means we want to know our efforts are worthwhile. At gut level, we all want to know our lives have meaning. We want to succeed in our work, know that we’re needed by our loved ones, even believe we make the world a better place. When this need isn’t realized, we feel worthless, leading to all sorts of problems. Saving is a tangible measure of accomplishment, something that will make you feel good about yourself.
3. People need to be affirmed.
Affirmation may come in many forms—a college degree, a promotion at work, winning an award, getting a book published. Whatever it is, it lets you know you’re recognized, but never forget self-affirmation is the deepest kind. It doesn’t matter how many people congratulate you, if you don’t see your success, it doesn’t matter. Being successful in saving not only makes you feel good about yourself, it earns the respect of your family and business associates.
There you have the best way to start a saving habit. Reserve the funds for those periodic expenses so you don’t have to rely on credit. Next week, just in time for those winter heating bills, I’ll discuss another living expense in the budget—utilities.