Yesterday, as I was reading Yahoo news I seen an article title that caught my eye. The article written by Tamara Holmes for Bankrate.com, was titled, "6 (worthless) excuses for not saving money."
In the article Ms. Holmes discusses several excuses people give for not saving. The excuses she cites are:
1. I don't make enough money.
2. Ill get around to it later.
3. I deserve a little luxury in my life.
4. Someone else will take care of it.
5. I'm saving through my 401(k).
6. This item or service will pay for itself.
Her response to the "I don't make enough money," seems indicative to that thoughts of most personal finance authors. In that they have no idea, how the real world lives. They address there answers to those who live at and above the average American income. In their minds (or so it appears) no one in America makes less then the average income.
"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 excuse.
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 be saving.
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."
While she has a point, about not knowing where your money goes, if you make 30k and u, it is quite another issue when you make less then 20k. The fact there are many of us that are in real need of finding a good second source of income. I have no question that I would be able to live on my 19-20k, if I didn't have my car loan taking so much of that income. A year ago it was my mortgage that was weighing so heaving on me. It is clear that this author, does not know all that she is talking about when she tries to paint all American non-savers with such a broad brush. She has some great points, that all of us can learn from, but she needs to take a look at lower income Americans as well, and help them learn to not be stupid like me and borrow for a car that they can't afford. Instead they should save say $100/month and then in 20 months buy a $2000 with cash. Then they can begin saving again, to save up for the nicer car on down the road. This is what Dave Ramsey teaches, and if I could sell my car and get out from under this loan, I would. However, I have to dig myself out of this "stupid tax."
***UPDATE***
I want to thank all of you who helped make this a popular post on pfblogs.org.
--
I did want to clearify a pont of misunderstanding, while I refer to my own stipid tax of the car I bought in January, before I learned what Dave Ramsey taught, the car loan replaced my mortgage. As soon as my mortgage was paid off I bought the car, and the loan was about $10 less then my former mortgage payment.
The point of the article was that most PF writers, write their articles as if everyone make 30k plus. As an advocate for the poor, I realize that many people make less then this median income, while utilities and rent/mortgage take up most, if not all their income. The reason, is utilities can not as easily be cut like other expenses. Even Dave teaches these expenses should only be like 25% of your income. That is almost imposible if you make less the 30k.
I think the point is that if you had had a budget (known exactly what your income was and what your current fixed costs were) and had been "paying yourself first" then you would have known that you couldn't afford the car loan before you even took it out, and therefore would not have made that mistake.
ReplyDeleteUnless you are actually starving and without a roof over your head, putting a small amount aside as savings before you start spending your income will mean that you get ahead.
Spending on everything you want or need, and then trying to save what's "left over" never works, no matter what your income is.
On the one hand there are examples of people living on a few dollars a week in the slums of India that manage to save up the few dollars needed to pay for their kids schooling. On the other hand people like Elton John and Michael Jackson can earn millions a year and still end up broke.
ps. I think your long term goal of $1m might be a bit on the high side - try to calculate a realistic ten year goal first, and aim for that...
enoughwealth -
ReplyDeleteI think you missed my point...1st my car replaced dollar for dllar my mortgage. 2. There are people that are worst off then me...if I can barely make it, and I am puting a few dollars in savings, but utilities are the same no mater what you make and they take nearly all my income, someone that makes less would have a harder time then even I do.