Everyone knows the key to building wealth is through saving and investing. Yet last year, the U.S. Commerce Department's Bureau of Economic Analysis revealed that Americans had a negative savings rate for the first time since the Great Depression.
So why aren't people saving for their futures? While a number of excuses may be given, few are legitimate.
"Unless you're working in a sweatshop
and you're getting paid 12 cents an hour, you can save,"
says Rob Bennett, who writes the Financial Freedom Blog
|Before you can stop
making excuses, you've got to understand just
why your argument is not valid.
No. 1: I don't make enough money.
"We think we don't have enough money because we're
always the last ones in line," says Julie Stav,
author of "The Money In You!: Discover Your Financial
Personality and Live the Millionaire's Life." What's
the first thing you pay when you get your paycheck?
If the answer is your mortgage, your car note or your
credit card bills, you're probably buying into this
One reason many people don't think they
have enough to save is because they don't know where
their money is going or how much money they're spending
on items they don't need. "People say, 'Money just
goes through my fingers,' or, 'I don't know what happened
to it,'" says Stav. If that's the case, "pay
attention and bring it from the unconscious to the conscious."
Once you find out what you're spending money on that
you don't need, you'll realize it's all money you can
In order to make sure you save that amount, have it automatically taken out of your account before you pay anything else for the month. "The first check you write every month should be to you," says Stav. "That should go to your savings. Start with 5 percent; hopefully you can get to 10 percent. When you get a raise, put half of your raise in savings."
No. 2: I'll get around to it later.
"The answer to that excuse is: Someday never comes,"
says Bennett. "You get older and the more bad habits
you have, the harder it is to break them."
People who put off saving and investing also don't get the benefit of time, which is one of the greatest factors in successful wealth accumulation.
"It's little by little that you're able to accumulate vast amounts of money," says Jeff Harris, founder of The Family Legacy Forum, an organization based in Lake Wylie, S.C., that helps families preserve wealth. For example, someone who starts saving $100 a month at age 20, earning 7 percent interest, would have about $380,000 at retirement age. Someone who waits until age 35 to start would have only $122,000.
No. 3: I deserve a little luxury in my life.
The purpose of having a healthy savings plan is not
to deny yourself the pleasure of buying things you like
today. Not only should you be saving for retirement
and emergencies, but you should also reward yourself
by saving for things you'll want to splurge on sometimes.
If this is your favorite excuse, Stav suggests creating
separate accounts for various savings goals, including