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| Uncommon Sense | Why so many women cant save
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The important thing I emphasized to Brice is that even if a check goes missing and she only gets $4,000 this month, she can adjust the percentages -- and still save.
Could she sock away more? Technically yes, but I say no -- for now. It's more important to start small and keep at it than to overreach.
2. I dont know where the money goes Another classic reason people don't save is because they avoid doing the math and realizing that they can. This is what happened when Stephanie and I analyzed her household finances.
| Stephanie's monthly budget | | Category | | | Amount | Pct. | | Gross income | | | $6,417 | 100% | | | | | | | Committed expenses | | | $3,732 | 58% | | Rent | | $1,200 | - | | Taxes | | $1,128 | - | | Health insurance, etc. | | $604 | - | | Cable | | $85 | - | | DSL/Phone | | $100 | - | | Gasoline | | $55 | - | | Groceries, etc. | | $300 | - | | Health care | | $30 | - | | Car insurance | | $100 | - | | Public transit | | $130 | - | | Fun money | | | $640 | 10% | | Irregular expenses | | | $100 | 2% | | Debt repayment | | | $835 | 13% | | Long-term savings | | | $0 | 0% | | Retirement saving | | | $167 | 3% | | | | | | | Budgeted expenses | | | $5,474 | 87% | | Remainder | | | $943 | 13% |
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The remainder of $943 was money that wasn't in her budget but wasn't in her bank account, either. Stephanie was taken aback by this number. "Where is all that money going?" she asked.
I explained that the crystal ball function on my calculator was down, but the evidence indicated she and her husband were spending it, most likely on irregular expenses, which are barely accounted for in her budget.
Stephanie resolved to track their spending more closely and to try to put another $50 toward saving for irregular expenses and $50 toward debt.
That would have them setting aside $150 each month to cover irregular (often unexpected) expenses like car repairs or a colleague's wedding gift, which is 3% of their gross, and $885 toward various debts, which is almost 14% of their gross.
3. Saving means Ill have to live on less This is the saddest of excuses because it's so backward -- and because so many people buy into it. I did for years. Lyndsey, 27, is just breaking free of its grip now.
When she first joined the group, Lyndsey's main concern was paying back her debt, toward which she's putting a whopping 17% of her income. She thought that putting more money toward saving would only cut back her lifestyle.
But here's the good news: Lyndsey is setting aside $100 per month for irregular expenses, and she doubled her retirement contribution from 2% to 4% of her income. Here's her situation:
| Lyndsey's monthly budget | | Category | | | Amount | Pct. | | Gross income | | | $3,750 | 100 | | | | | | | Committed expenses | | | $1,843 | 49% | | Taxes | | $900 | - | | Rent | | $585 | - | | Health insurance, etc. | | $108 | - | | Groceries** | | $0 | - | | Cell phone | | $80 | - | | Utilities | | $100 | - | | Health care | | $40 | - | | Commuting | | $30 | - | | Fun money | | | $375 | 10% | | Irregular | | | $200 | 5% | | Debt repayment | | | $650 | 17% | | Long-term savings | | | $0 | 0% | | Retirement | | | $150 | 4% | | | | | | | Budgeted expenses | | | $3,218 | 86% | | Remainder | | | $532 | 14% |
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(** Lyndsey's favorite grocery store, also known as Mom and Dad's place, doesn't charge her anything for food.)
In addition to her fun money, Lyndsey has an extra $532 a month, which sounds like a lot for a single woman with few major expenses. Clearly, she could shave another $100 or more off that for long-term savings, if she wanted to, and still enjoy a swingin' single life. But to me, it's more important that she's developing a savings habit she can stick with for now.
The cash-flow way of thinking
The misconception that underscores all three of these anti-saving attitudes is the notion that savings is a subtraction.
Women, especially I think, tend to equate savings with being on a diet: I have to cut back, deprive myself, do without.
In fact, what research by the Consumer Federation of America showed is that you need savings not only for peace of mind but to spend on all the various things that crop up.
So rather than think of it as savings, think of it as future spending money.
This requires embracing more of a cash-flow mentality, almost as if you were a corporation and had to plan ahead for unseen operating expenses, employee raises, material price increases and so on.
It's taken me a loooooong time to get this concept through my thick skull and into my brain and my bank account. Even though this year I've been saving only about 4% of my gross (not including what I put toward debt, about 13%, and retirement, 6%), I have seen a huge payoff.
Things like brake repairs and my husband's upcoming trip to California are covered, thanks to that little 4% savings cushion.
Translation: Less debt, more control. And in the long run: More money in your pocket and, therefore, more choices.
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