The future doesn’t save for itself

Recently a friend asked me about how much I typically save per month, just to get perspective from someone else. I had a rough idea, but when I looked at the numbers realized I’ve actually been saving a little more than I even thought. Of course, most emerging adults feel pretty broke, and the prospect of being able to afford huge purchases like a house can feel nigh impossible. So sometimes the goal is just to be, you know, less broke.

Noting all of that, I thought it might be helpful to share some savings tips and tools that I’ve found helpful. But let’s start this off with a couple of clarifying facts:

First, there is no “right amount” to be saving other than as much as you can without creating unnecessary strain on your current financial situation. Whether that’s spare change or more than half your income, do what you can. You’ve got to start somewhere, and saving even a little will mean you’re better off down the road.

Second, I am not the expert on this. I wasn’t serious about saving until I started getting serious about my finances, which (unfortunately) was in the later part of college. I never had insane spending habits, but it took me too long to start being proactive about saving. Once I was serious about it, I got really serious. In the 8-month stretch between graduating and getting hired full-time, I saved like a maniac. At least 75% of what I earned — and more when I could manage it — got saved.

Now that I don’t have to pinch pennies quite so hard, this is my plan:

• A static emergency fund of 3-6 months’ expenses (it’s currently at about 4 months, and I’m working on building it up). This fund is not to be touched except for emergencies, and just sits in my savings account until I should need it.
• At least 30% of my monthly income into general savings, more whenever possible. This is a catchall pot that can be used for emergencies if necessary, but ideally will keep growing until major milestone purchases come up down the road.
• 6-7% of my monthly income goes to repair/replacement savings, specifically for my car and furniture (though it’s in the same savings account as everything else). You don’t want the refrigerator going out to keep you from paying rent.
• About 2.5% of my monthly income goes to “gift savings,” basically so that I set a little money aside every month and then when birthdays and Christmas comes around I’m set instead of stressed.

In total, roughly 40% of my income gets saved, plus I have the emergency fund. I realize that’s a way hefty number for some people. While saving should never be an afterthought, it should also never outrank a roof over your head and food on the table. But if you’re treating yourself more often than you’re setting money aside for the future, it’s time to reassess. Here are some ways to help:

Set a savings goal. I can’t emphasize this one enough. If you’re just saving to save, there’s less motivation to do it well. If you’re saving for something, or to a certain amount, you’ll be more likely to remain committed to the plan.

Invest, or at least get interest. If you’ve got a big chunk that doesn’t need to be touched soon, invest it in safe stocks/mutual funds that show consistent appreciation over time. (Pro tip: Appreciation means it grows in value.) If you don’t have a lot or want to be able to access it quickly (called “liquidity”), then at least throw it in a savings account. It won’t make you money per se, but it will at least keep it from losing value due to inflation.

Rule of 5s. Every time you get a $5 bill (or a $1, or a $10, up to you), that gets saved. My grandma does this, and especially if you deal in cash fairly often it can add up quickly.

Make technology your friend. Set up your bank account to automatically transfer a certain amount into your savings every month, or use a savings app like the ones that round up your purchases to the nearest dollar and transfer the change into your savings account.

Save what you spend. Anytime you spend money on a non-necessity (groceries are a necessity, eating out is not, etc.), put the same amount or even half that amount into savings. This one requires some discipline not to fudge what is or isn’t a necessity, but can help curb spending while also adding to savings.

Budget the fun stuff. The less complicated but more intense version of the preceding tip is to just don’t buy stuff you don’t need, but it kind of sucks. The best compromise is to set a budget for what you’re allowed to spend on fun stuff, and save whatever extra you have beyond that.

Immediately save any unexpected funds. Tax refunds, gifts, or any other money that comes to you apart from regular income can go straight to your savings. If that bums you out, think about it this way: it’s money you wouldn’t have had otherwise, and since it’s extra you can afford to save it! Your future self will thank you, I absolutely promise.

Saving can be a little bit of a painful and slow process, but getting set up for the future is smart, even if boring. What tools do you use to save? Let me know in a comment below, on Twitter @ohgrowup, or Instagram @oh.grow.up! Thanks for reading, and good luck adulting!

 

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