How I Save Money
When I was younger and earned less money, I was encouraged to save. Put a little away each month into savings! That is a wonderful sentiment, but after meeting expenses, what is ever left over?
Some years back after hard times I took a new job, set up new bank accounts, and had my paychecks direct-deposited into Savings. Using the online banking interface I set up a monthly recurring transfer from savings to checking. I began saving money without effort.
It is hard, though, to start from nothing. A windfall helps. If you are me you don’t want to squander good fortune, which is what one naturally does without some sort of system. It is harder, though, to start from nothing.
When you have some savings, you see interest accumulating on the monthly statement. You’re getting money for free! Neat! Sure, it isn’t much but dang it is nice to get ahead of the curve. Times have been good these past years, my savings account has enough money in it to maintain my normal monthly allowance for 3-6 months. (And somewhat more than that if I am layed off and collect Unemployment Insurance.)
Once I have about six months worth of expenses saved up, I usually purchase a CD, which means the bank holds on to my money for a certain period of time, with a certain guaranteed return. Anything beyond six months of income I invest in stock market index funds (ETFs) because I have read that over a long enough time horizon, the stock market provides a better average rate of return than banks do. I can afford that risk, but it is nice to have that one pool of money in a CD coming back to me with a certain return at a certain date, in case things have gotten squirrelly.
While we are in the middle of a nasty recession, my own job is fairly secure. Last time I had savings enough to roll over, I decided to forego the currently-low interest rates and instead buy straight into an ETF. This was in March, when the market had pretty well bottomed out, so although my other stocks and 401(k)s and the like have lost value, that lot of stock purchase has grown in value by 40% and I can smile and claim to be a financial mastermind.
Oh yeah, those 401(k)s . . . and my employer’s stock-purchase program. Times are good: my salary is considerably more than my expenses, so lots of money is drained away from my paychecks into retirement savings, and another pool of capital, before it hits the reservoir of my savings account, which I then tap into my checking to meet expenses. A wiser person than me would manage investments such that one pool is for retirement, another for a house, or a college fund, or whatever . . . I’m not that clever, which is why contributing to 401(k)s is nice: that money is set aside by government mandate! My main financial ambition these days is to buy a house, probably after I get married. (That is a different topic.)
Another financial ambition I have been putting off is college money. For the one part, I don’t have kids of my own yet, and there’s no guarantee I ever will. But I am also an Uncle and a God-father: there are children I know whom I want to succeed . . . on the other hand my own experience is that after I was discharged from the Army, I was a non-dependent and eligible for a lot of financial aid, and I attended an inexpensive state school. It is nice if you can rely on your parents’ generation to help you through school, but I also know that “God bless the child that’s got his own.” That’s not to say I don’t want to help, only that I know that even if I can not help, a way can be found.
All the same, it is a challenge and a strain sometimes to live on a “fixed” income, when there is plenty of money that could be spent so easily. To be sure, I kind of enjoying saying “no” to fancy stuff, and driving around in my old car, making do with less, as generations before have done. But I also like to eat out for lunch, take my girl out, fly home for holidays, buy nice clothes, and support my hobbies. I’ll squeeze a little extra out of the piggy bank for the holidays, maybe a vacation, and other one-time expenses like maybe a new computer, and the occasional needs of broke relatives, but I am mostly tight-fisted. The past few months I have had a growing credit-card balance. I raised my “allowance” for the first time in years to pay it off quicker, but I’d rather endure the sting of interest rates that encourage me to say “no” more often than to raid the piggy bank . . . even when times are good, money is a hassle.
If things continue to go well, I like to think there will be a day in the future where I stand proudly in the newly-purchased house that is the fruit of my labors and discipline. Then I’ll have decades of mortgage payments to look forward to. I’ll feel even more nostalgia for the earlier lean times, when life was full of possibilities. But I will also have the thrill of knowing that my settled, successful, middle-class life offers possibilities of its own.