The Savvy Life

By Melissa Tosetti

One of the goals of Savvy Living is to: Save 20% and spend the rest with abandon.

Keeping in mind that the average savings rate in the U.S. is currently 3.7%, getting to that 20% goal may feel like an overwhelming task... but it can be achieved! The trick is to get there 1% at a time.

First of all, if you're only saving 1% - 3% of your salary, congratulate yourself for saving anything at all. At least you're in the habit of saving. Now, it's time to take it to the next level.

Start, by taking a look at your last paycheck and calculating how much 1% equates to. For example, if your paycheck is $2,000, 1% of that paycheck is just $20.

Now ask yourself, if you set up an automatic transfer of $20 from your checking account to your savings account each payday, will you really miss that money? If you can still put gas in your car and food on the table, set up the transaction right now.

The next step is to put a note in your calendar for two months from now to see if you can bump up your savings amount by another 1%. In fact, make it a habit to check in every other month to see if you can increase your savings amount.

Initially, your contributions will feel small, but you will have the opportunity to build on success and your savings will grow.

Don't wait for the magical day that you can start saving 20% all at once. That day is not going to come. There will always be something to distract you from your goal... especially when that goal is to start saving $400 all at once.

Even if it takes you 2 -4 years to get to that 20% goal, you will get there... and have had 2-4 year’s worth of savings built up along the way. 

As you know, the Golden Rule of Finance is to spend less than you make.  How do you do that?  Strive to have left over money in your checking account at the end of each pay period.  Even if it is only $5, that means you have successfully spent less than you make. 
 
Once you get into this habit, make a game of it and try to have more and more left over at the end of each pay period.  You can then transfer that money to your emergency savings account if you are working on building that, or to something fun like your vacation savings account.

During speaking engagements, I often get asked if it's better to pay down debt or to put money away for retirement.  My answer is always - do both.  

It's understandable to want to put all of your financial efforts toward paying off debt.  However, depending on your financial situation, that could mean putting off contributing to your retirement for several years. 

In a recent article, David Bach, one of my favorite personal finance authors, wrote about how it's equally important to pay down debt and build wealth.  He suggests paying 50% of the money you "pay yourself"  into a retirement account and 50% of it toward paying off debt. 

I strongly suggest reading his article How to Save For the Future While Paying Down Your Debt.  It's filled with solid information to help you create a strong financial foundation.

David Bach

By Melissa Tosetti

One of the major goals of Savvy Living is to save 20% of your income so you can spend the rest with abandon.

Now, if you haven't been able to reach that 20% goal yet, that is ok.  It can often take 3 – 5 years to get to that point.  What is important is that you're saving something and that you have created the habit of saving. Just remember to always be on the lookout for opportunities to increase the amount going into savings.  That strong financial foundation is key.

At the same time, and here is where things can get a little tricky, you have to give yourself permission to spend the money that is left over after you have taken care of your true needs such as: 

• Automatically put money into your savings accounts
• Paid your bills
• Bought groceries
• Bought gas (or whatever you need in order to get to work to get that next paycheck)

If you do not give yourself some freedom around spending, there is too much potential to get frustrated and stop saving altogether.

Now this is where you need to be very honest with yourself and find a balancing point as you decide how much money you are going to allow yourself to spend as you please.

1. Purchase a year's worth of office supplies for half of what you would pay any other time of year.

2. Check out the juniors department and pick up trendy clothes and accessories to add a little spice to your wardrobe staples.

3. Now is the perfect time to stock up on athletic socks and underwear.

4.Dig past the purple and pink backpacks and you can find sophisticated bags that are worthy of taking to the office.

5. Now is also a great time to pick up a perfect lunch container.  It will inspire you to take your lunch to work – saving you even more!

7. Not surprisingly, futons and desks are also on sale.

8. Mini fridges and microwaves won't get much cheaper than they are right now.

9. Storage containers and closet organizers can be found at bargain prices.

10. If you have been waiting for the right time to buy a new computer or laptop, now is that time.

I had the pleasure of giving a speech to the California Asian American Government Employees Association.   

As I started to talk about Savvy Habit #6 – Spend money on the things you want - one of the attendees raised her hand.  She gestured toward my PowerPoint slide and suggested that I change the wording to read “Spend money on the things you need” not the things you want.  She further pressed her point saying that if we all spent money on the things we want, we would spend too much – especially when it comes to kids because they want everything.

I told her that I appreciated her comment, but that the wording on the slide is intentional.  The key is to know exactly what it is that you really want and not to spend on things that just catch your attention.

We don’t work at our jobs simply to pay the bills.  Money should be enjoyed. Those who live The Savvy Life have created a strong financial foundation. They pay themselves first by putting money into a retirement and emergency savings account.  On payday they take care of all their bills as well as fill their cars with gas and buy their groceries.  Once those crucial items have been taken care of, they know exactly how much they have to spend on what they truly want. 

Being savvy is a streamlined lifestyle.  It’s about saving in the areas that are not as important to you so you can focus your spending on the things that are important to you.  Know what you really want and stay savvy so you can acquire it.

* CAAGE presentation at the San Francisco Main Library.

• Start by saving $25 for a few paychecks. 
• Next, try saving $35 for a few more paychecks.
• Once you achieve those first two goals, saving $50 a month will be easy.