broadsideblog

It’s all about the Benjamins (or euros or pesos or pounds) — are you saving?

In behavior, life, Money, women on March 15, 2013 at 5:06 pm

That’s the American $100 bill.

Saving money is my single greatest challenge. (That, and earning a lot more — like trying to double my income this year in a dying industry. No pressure!)

Today’s New York Times paints a grim picture of how tough it is to save money now, especially for younger people:

A new study from the Urban Institute finds that Ms. Brady and her peers up to roughly age 40 have accrued less wealth than their parents did at the same age, even as the average wealth of Americans has doubled over the last quarter-century.

Because wealth compounds over long periods of time — a dollar saved 10 years ago is worth much more than a dollar saved today — young adults probably face less secure futures for decades down the road, and even shakier retirements.

“In this country, the expectation is that every generation does better than the previous generation,” said Caroline Ratcliffe, an author of the study. “This is no longer the case. This generation might have less.” The authors said the situation facing young Americans might be unprecedented.

A broad range of economic factors has conspired to suppress wealth-building for younger American workers; the trend predates the Great Recession. Younger Americans are facing stagnant pay — the median income, when adjusted for inflation, has declined since its 1999 peak — as well as a housing collapse and soaring student loan debt.

I grew up in a family with good taste and the money to indulge it — cashmere and trips to Mexico or France, a nice house, decent used cars, good food. My maternal grandmother inherited an insane amount of money and ran through it as fast as she possibly could, blowing it on jewels and furs and gorgeously-decorated apartments and a limousine service with a thin driver named Raymond.

It’s weird to grow up around a lot of money and develop tastes for luxury — and then choose a field, journalism, that has rarely paid me enough to satisfy them.

Saving money is so boooooooooring!

And so utterly necessary.

American Buffalo (coin)

American Buffalo (coin) (Photo credit: Wikipedia)

But I save 15-25 percent of my income every year, as does my husband. It means a lot of self-denial and self-discipline, certainly if your income is barely meeting your basic expenses, even pared to the bone.

I’d so much rather go to Paris and buy lots of pretty clothes and see Broadway shows and go away for romantic weekends. But to save the dough we need to retire — which we very much intend to do — demands it. Working freelance also means having no idea, most of the time, what my annual income will be. Not even next month’s.

So it means being aware at all times of what I’m earning, spending, saving and carrying in debt, (and at what rates of interest.) It’s only in the past three or four years — and I’m in my 50s — that saving diligently has finally felt worth it, as my retirement fund is now six figures.

It feels good! (Cue James Brown…)

James Brown (2001) during the NBA All Star Gam...

James Brown (2001) during the NBA All Star Game jam session (Photo credit: Wikipedia)

It’s terrifying to plan so far ahead, to hope we’ll live that long, and healthily, to wonder if all this daily self-denial is even worth it. I get why people don’t.

Saving a ton is certainly easier if you also earn the maximum you possibly can. That might mean working two or three jobs for a while.

Many women, though, remain deeply uncomfortable asking for more money, whether in a salary negotiation or freelance gig. No one is going to hand it to us!

One of my favorite books — every woman who works must read it – is “Women Don’t Ask”, which examines the many reasons women continue to receive lower pay than men for the same work. Mostly because we’re too damn scared to ask for more! (Men do, almost every single time.)

The more I make, the more I can save. (And occasionally splurge.) That motivates me every single time to ask for more work and the highest possible rates for it.

Here’s an honest and moving post about money — and being in your 20s and needing/wanting a lot more of it.

Here’s a really interesting interview with an expert in behavioral finance who thinks we should be forced into saving by the government, as they do in Israel and Australia.

saving and spending

saving and spending (Photo credit: 401(K) 2013)

Do you save money?

Do you find it difficult?

Any tips you can share?

  1. I’ve always been a saver. I grew up in a frugal family – only one car at at time kept for at least 10 years at a time, clipping coupons, preserving/canning food, living within/under our means rather than above – and through this they were ‘the millionaires next door’. This way of life was a product of the experience of my grandparents – poor, undereducated but hard working immigrants who came to Canada with next to no money and had no social assistance. I am thankful everyday that that way of life is innate to me because of the wisdom/perspective of my parents and grandparents, making saving easy for me.

  2. Thanks for sharing this…I think it’s such a complicated behavior.

    My husband grew up with little income (his father was a small-town preacher) but has never once lived without a solid paycheck. So saving $$ was not nearly as urgent for him as for me and my freelance family; you have good years and not-so-good years. If you’re unable to tighten your belt HARD it’s tougher than if — as you have (yay you!) — you’ve been doing this for many years, as a natural/learned decision.

    I think it’s also challenging if you’re susceptible to peer pressure and/or live around much wealthier (or high spending) folk. You have to be fine (we are) being the ones with the 12 yr old Subaru in a parking lot full of shiny new things.

  3. Your car is 12 yrs old? My Mazda is just turning 11 this week. I think I should get another good year or two out of it. I am my father’s daughter.

    The older I get the less peer pressure matters. I do like the finer things in life however, only if I can get them on sale. And I’m happy to make do with anything that still works, and if it still works for me. As reflected in my 5.5 year old iPod and my 4 year old smart phone.

    One thing I will always have money for is travel. I never take a vacation without travelling somewhere, and my frugal lifestyle means I can do just that without a second thought.

    Regarding your point of a solid paycheck influencing saving behaviour – I had bouts of unemployment between bits of contract work early in my career and that definitely helped to solidify my saving mentality. That, and I’m the only breadwinner in my ‘family’. ;)

    • One reason we bought a Subaru is knowing they go forever; we got whacked hard with $3500 in repairs this year but know we will get another 100,000 miles from it. I hope in the next 2 to 3 years we may buy a second new-used car so we have something nicer. But it’s not my top priority; redoing our ancient kitchen is, and that is a big investment.

      Boy, you and I were separated at birth! I use an “old” cellphone (not a Smartphone, but android) and have zero interest in a new one. All its features suit me fine.

      I also spend every spare penny on travel and trips — we just blew $500 on a ticket for me to accompany Jose to Tucson for 2 weeks in May (where he will be working) and a rental car for me to use on my own. I am SO psyched! I love the Southwest and have friends to see and hope to re-hike the Grand Canyon. I have never ever regretted a penny spent on travel while I have deeply regretted $$$ on clothes/shoes/some entertainments.

      I hear you on flying solo! I was on my own after my divorce, paying $500 every month just for health insurance, for seven years when Jose moved in with me and began helping with expenses.

  4. I save as much money as I can and I hope to make a lot more. If you don’t spend money every time you step out your door or you go online, it helps.

  5. Thank you very much for the link!

    Yes we save…but it doesn’t seem to add up very substantially. My salary is extremely low to start and even after 4.5 years it’s still pretty grim. I did ask for a raise after I took on two other people’s workload, but was told “That’s not how things work here.” I was angry enough to spit nails! Add to that it’s already one of the worst paying counties in the country for women. Honestly the only thing that has kept me at my job (great supervisor aside) was the knowledge was that there was NO other work to be had in my area. Believe me I looked.

    • That sort of cheap-o bullshit makes me completely nuts. It’s one reason freelance work appeals to me — the only limits on my income are related to my own ability to think/plan/network/sell and negotoiate. Even if I accept some crappy paid work I can make up for it with better paid gigs. A set salary is a real trap for many people.

      Sorry that you have been through this. I suspect (?) it has stiffened your spine in this regard. i.e. your value.

  6. One cannot save money one does not have.

    The poverty line is higher than ever to climb over, and one cannot build a ladder when one is busy robbing Peter to pay Paul. It used to be easier to pay-as-you-go, but the system is rigged to maximize interest payments from the poorest demographic. There are two reasons why it is more advantageous to tax the poor versus the rich: poor people pay their debts consistently ensuring a constant in-flow of revenue for creditors (plus interest), and the cumulative “wealth” of the 99% is far larger than the low-tax, loophole-dependent revenue from all the rich combined.

    Saving is a a fairy-tale to people in the debt-trenches. The bank accounts we can afford are money-making schemes for banks that funnel more out in unnecessary fees and over-charges than they pay depositors in interest; the big-bank failures hiked credit card rates to astronomically high percentages, which keep interest payments rolling in as people are forced to pay only the minimum payments (a $1000 credit card bill now takes over 16 years! to pay off at 23% APR); poor people who believe in the college-degree myth are drowning in student-loan debt, which is now a government, revenue scam; we are suffocating under the rising costs of medical bills, food, gas, and day care; and as shitty politicians slash public-school funding farther and farther, the yearly out-of-pocket costs for parents are inhibiting their ability to house, clothe and feed their kids.

    There is a reason so many people are poor-we’re supposed to be; we make rich people richer. We hemorrhage rent money to fund their corporate governance. We cannot save money we never have, and we surely can’t save money when we’re too busy just trying to save ourselves.

    So, saving money? No ma’am. Sadly, we are not.

    • Do you see any solutions to this?

      “we are suffocating under the rising costs of medical bills, food, gas, and day care”

      The insane costs of food and gas are two that I feel every week (no kids.) The cost of our public transit (and tolls) went up by 10 percent last month. My income sure did not. I didn’t plan to spend my entire life living in a one bedroom apartment but with job insecurity I couldn’t see assuming anything in the way of a higher mortgage so I stay put.

      My rage at this government greed will surely kill me.

  7. We save diligently and it has allowed us to bridge this last year without any real income and without a totally Spartan lifestyle or being forced into debt.
    Always good to have some backup funds for when stuff starts breaking down around you or for when disaster strikes.

  8. For my own retirement fund I’m saving 10% of my income and receiving another 9% from my employer, it’s a government requirement if your employed 40 hours or more a week that your employer contributes to your super fund.

    Ideally I’d prefer to save more than this but we are renovating our home, to make it more comfortable for us in the long term, and my partner and I hope to do some travelling overseas whilst we are young (ish) and healthy so it’s all has to balance somehow. Regardless of my current plans I probably should go through the books again and look for more ways to save so thanks for the reminder.

    • I have never once had an employer match, which is really frustrating — my Canadian employers did not offer it and I did not stay long enough in any American job; they demand a year’s employment and they lay people off here with lightning speed…So it’s all on me (and my husband. He does get a match at work.)

      We re-did our only bathroom and now want to renovate our kitchen. After that, we’re done putting $ into this place. But the pleasure we get from the reno is enormous. Much as I adore travel, you’re only gone for a while, but you get to enjoy your home every day.

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