I had a meeting where I went through a client’s current budget, retirement plan, cash flow and protection plan when we got down to the most important part of the conversation…how much was he saving a month? His "system" had basically been to add whatever's left over at the end of the month to his saving account. It usually went up and so, he didn't really ever think to question the numbers. But, when we did get down to brass tacks, he realized that for all the great money he was making, he really wasn't putting as much away as he had thought.... This uncomfortable fact was staring him in the face.
Sitting down with me, after realizing this, he got momentarily quiet and bummed out, before throwing his arms in the air and said "But I guess it is what it is…that's how much is left" before trailing off.. So, here's where I took a step back and asked him a question that I remembered my dad asking a client’s adult son on a call I overheard. "What would you do if your rent went up $500 a month? Would you move?"
My client thought about it for half a second before definitively answering "No way...I love my apartment & moving is the worst. I'd figure out a way to make it work…I'd cut back somewhere else." I said, ok, what if it went up $300? He gave the same answer…Eventually we got to the number where he actually would have to think about moving elsewhere.
My point was that he actually did have WAY MORE capacity than he thought to save money...it just had never seemed like a priority so it didn't happen. If he wanted to, if it was seen as a necessity that he had to allocate money towards to achieve his goals, he could easily save that $500 per month for his future. We know this because that $500 could have pretty easily been put together to ensure that he didn't have to move if it came to that. He admitted as such. So why the difference in attitude?
Because that would have been seen as a NECESSARY EXPENSE that needed planning for whereas saving for the future felt like a luxury that he only acknowledged if there was any money left over. If he put as much emphasis on his ability to save money (which he should, as it is the single greatest indicator of his family's future financial success) he'd plan to make it happen.
Now, part of this is our role...figuring out a savings strategy, making it automatic and consistent, and figuring out the best use of those savings to help you achieve your goals. But without that switch in mentality, without the understanding that saving money should be a given part of your world (and quite frankly, something you're excited about seeing grow) and not an “oh by the way”, none of that can happen...and it definitely won't continue if it does. As always, it’s not how much you make…it’s what you can save!
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