Some people are born with the saving money gene, but most aren’t. So what is this gene? Think about the group of people that you know. There is a good chance that there a small number of them that always seem to have money in the bank. These probably aren’t your friends who are always buying a brand new car, living in an oceanfront condo, or vacationing at the Ritz. They aren’t the friends who make the most money, but they always have a good job. These people are willing to go out to dinner at Mellow Mushroom with you, but you will never catch them at Ruth’s Chris unless it is a corporate event. Money never seems to be a big issue with these people in a good way or a bad way, and they never seemed stressed about it. How do they do it?
People born with the saving gene aren’t really concerned with any ostentatious displays of wealth or how well they are doing, because they measure their wealth in a completely different way. The people born with this gene measure their wealth in savings, not in how much they own or how much other people think they make. They routinely make good decisions about money, or even small sacrifices, that you would probably never notice unless you looked for them. Do you have what it takes to become a saver? Here are five things that you could do to be more like your friend who always has money.
- Stop buying on credit: Think about how many monthly payments you currently have and their total value. You most likely have to pay rent or a mortgage, household bills, a cell phone bill, a car payment and car insurance ever month. Now, you might also pay student loans, a second mortgage, or an insurance policy. These are not the payments that essential to our daily lives, but optional payments in that you made a choice to take them on and it most likely was for a decent reason. Now think about all those other monthly payments that you make for other reasons. This group includes monthly payments to credit cards, timeshares, loans for furniture or appliances, boat loans, loans for a vehicle other than your main car, loans for household improvements, Netflix, premium movie channels, magazines, newspapers, gym memberships, and the thousands of new businesses that are popping up using the trendy “subscription” model that will send you food, clothing, razors, or other boxes of junk that you certainly don’t need and most likely won’t use. I bet if you totaled all of your monthly payments, you would find that there isn’t any money left to save. Rule: If you can’t pay cash for it, don’t buy it until you can.
- Stop spending money before you have it: People with the saving gene don’t think about what they are going to buy with their tax refund. In fact, they probably planned their monthly tax withholding so that they don’t get a tax refund, because that is just like giving an interest free loan to the government for a year. If they do get a refund, they can’t wait to put it in their emergency fund or apply it to next years IRA. Rule: Saving money and seeing your balance grow is more exciting that getting that new toy.
- Pay yourself first: Before you calculate how much house or car you can afford using online calculators, subtract 10% of your gross salary. This is the minimum you should be saving every year, and the best way to save it is to pretend that you never had it. I bet you can still get a pretty nice house with 10% less money, and you won’t be robbing your future to pay for it. Rule: Put money away before it hits your bank account is the best way to save.
- Think long-term: In this world of social networks, cell phones, and free two day shipping, people are used to getting everything immediately. Short-term thinking is the way of the world. However, financial success requires long-term thinking, like most important things in life. Can you forgo the instant gratification of getting a new car for the long-term gratification of financial success? I guarantee you that your friend with the savings gene can, and has done this. Rule: There is no short-term savings plan that can yield big results.
- Victim mentality: Has anyone else noticed that everyone is a victim of circumstances these days? Finances are no different. If you think of yourself as a victim of never having money, it will be self-perpetuating. People who always have money picture themselves as financially independent in the future, if they aren’t already. They plan for life’s curveballs, and when they happen, you will never hear them complain. They take active steps to make their lives better rather than blaming their circumstances on a situation. The only person that they blame for their own circumstance is themselves. Rule: If you can’t see yourself as financially independent, you never will be.