Control of money
This past week I had the privilege of becoming an advisor on a new retirement plan and enrolling participants. 90% of the conversation was on saving and budgeting, and all this was despite the uncertainty and dire headlines in the market.
While we are waiting on the data, we know savings rates went up. In other words, these very savvy savers chose to take on what is in their control—increasing saving and decreasing spending - and let go of what they cannot control—what the market is doing.
If you find yourself anxiety ridden or about to do something disadvantageous with your money (like pull your money out of the market), then this could be a moment where you would benefit from having some control. Before the chaotic month we have had in the market, I observed a lot of people dealing with new credit card debt balances or people feeling like their money really was out of control. The post-COVID inflation hangover combined with easier access to spending through Buy Now Pay Later and smarter targeted advertising on social media seem to be the latest culprits.
If you are worried about tariffs, that’s fair. But the market should not be your focus. Instead, what would tariffs do to your life? Could you or a spouse be at greater risk of unemployment? Could prices rise on goods or services that you buy on a day-to-day basis? If you agree those are real risks, you can adopt practices right now to mitigate those risks. And it’s quite simple.
Buy less stuff. Right now.
Trust me, you won’t miss any of it. Our brains ask us to buy stuff all the time, and it’s usually stuff that will make us feel good in the short term, not in the long-term. For example, did you go out to eat last week as a family? How much did it cost? Are you still deriving pleasure from it? What if you had eaten in rather than eaten out? Would you have saved money? What if that money was in your pocket right now?
There are times when spending is okay and enjoyable. We are just entering into a period where, frankly, it’s not ok. We more acutely need savings than ever before. If you don’t have an adequate emergency fund to guard against job loss or salary reduction, make one immediately. If you own a home but don’t have a repair savings account, build one now. If you don’t have a car fund for repairs, start one now. Fund these things each month.
I promise that whatever chaos or uncertainty you feel, having those savings accounts will lessen your anxiety. And any spending you forego will feel fine when you know that you are building these buffers in your life.
So, how exactly do you curb your spending? There are two approaches that go hand in hand: top-down and bottom-up.
Top-down: Pay Yourself First. Just like you are putting money aside from every paycheck into retirement, consider doing the same in other savings accounts. You can open separate savings accounts and send the account and routing numbers to your payroll department and ask them to direct deposit into each one. While you will certainly feel your paycheck go down, you will find that as months go by you will almost forget you were doing it at all.
Here are some ideas for savings accounts to pay yourself first into:
Emergency fund. If you don’t have one, consider putting $50 to $100 per month into this account. You want at least $1,000 in this account. Get there as fast as you can, maybe even adding this year’s tax refund to get you there quickly. But don’t stop saving into this account until you eventually have 3 months of what it takes to fund your monthly expenses in that account.
Home repair reserve. Set aside $25 - $50 per month or more into this account. Renting is fantastic because it eliminates the unknowns. When you own your own home, things can go great until they don’t. You want to be able to cash flow repairs or eventual replacements of appliances or your roof, for instance. Otherwise, you might have to put them on a credit card and pay for them in costly ways.
Car fund. Cars are about to become a lot more expensive. The great news is that cars can be driven safely for decades. Set aside $25-$50 per month into a car savings account so that if your older car breaks down you have the money to pay for its repairs and don’t get tempted to buy a new car.
Bottom-up: Eliminate expenses to fund the top-down increases in savings. Paying yourself first while keeping spending the same is a recipe for credit card debt. Consider these new habits and ideas to help you fund your savings accounts.
Bill review. Go through your bank and credit card statements. Find any recurring bills or subscriptions that you don’t use anymore. Cancel them. Record your savings. You might be able to cancel enough to fund your whole emergency fund!
No-spend. Where is your problem spending? Can you create a hiatus of spending for a fixed period of time? I just met someone who identified clothing and beauty products as her biggest issue. She spent out of habit, not out of need, so she set a one-year no-spend on clothing and beauty products. By eliminating the decision-making, she isn’t even tempted. No-spend can sometimes be easier than commitments to spend less because it takes a lot less brain power to have the decision already made. Check out my no-spend month challenge: https://www.youtube.com/watch?v=h_TESKS9NHg
Change food/drink habits. Do you have a daily coffee drive-through habit or find yourself eating out each week? Make a plan for one week to get up a bit early and make your own coffee. Do meal planning for the week and have the groceries pre-bought to reduce the temptation to eat out.
There has never been a better time to create new habits to get control of your money. If you want help in adopting these budgeting systems, then schedule a 1-on-1 financial wellness appointment today: https://aptusfinancial.as.me/BaptistFinancialWellness