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When I was 10, I decided to save up money to get a horse. I put a big thermometer-style poster on my closet door and got to work selling friendship bracelets, babysitting, loan sharking my older brother (truth), and eventually getting a real job.
All over the internet you can find these thermometer-style savings goal trackers, as well as many other styles of trackers that do the same thing: step you forward towards an absolute dollar amount to pay for your goal desire. Track your vacation savings, Christmas fund savings, house savings, etc.
But here’s the thing. When we’re young, our basic needs are met by others, our responsibilities are minimal, and any savings we do is mathematically discrete from other needs. A teenager can save up for a TV for their bedroom using a slick savings tracker, and when they get to the goal amount, they go buy the TV. Fixed savings goals do the trick; simple as that.
We adults can do the same thing saving up for {insert savings goal here}… but what happens more often than not, is we’ll have to use the money for something more urgent and unexpected, delaying our desired outcome for that savings.
That’s because saving money as an adult, especially when you own a home, a car, and have children and pets, is more about having money for more invisible “goals.” Meaning, most of our savings gets spent on non-specific needs and wants.
Life just isn’t that simple anymore. The solution isn’t a vacation fund savings tracker which focuses on getting to an absolute value of savings to cover the trip cost.
The solution is to focus on your continual savings rate.
Building up your monthly and yearly savings rate allows you to keep your savings account sufficiently fed to handle adult-level savings needs: keeping an emergency safety net, funding the regular influx of unexpected expenses and irregular bills that are always flying your way, as well as building up extra for those vacations, Christmas gifts, and more specific goals you have.
You build that savings rate by replacing outgoing cashflow from your “fixed” bills and “just-as-fixed” spending habits with flow to your savings instead. You make changes and make the shift.
I never did get that horse, though I did save up a lot of money over the years as a kid. But ultimately, I gained something more valuable: I learned that savings is about continually feeding a savings account so that it will support you when you realize you have other things to pay for (like a computer for college) before getting yourself a pony.
What’s your monthly savings rate now? What change to bills or spending habits could you make to afford increasing it a notch?
Make the change, then repeat, repeat, repeat.
Do not save what is left after spending, but spend what is left after saving.
Warren Buffett
Becoming rich is hard. Staying broke is hard. Choose your hard.
Eric Worre
I hope you enjoyed this edition of Under 2, an email series designed to share quick bites of wisdom to empower your financial journey (while keeping it short). Be sure to sign-up below to get these messages in your inbox.
All for now,
Lindsey