By ABA Retirement Funds, An MSBA Affinity Partner
“I don’t have enough money to save for anything! I can barely keep my bills paid now!” “Being frugal is just too much work!” “There’s no way I can ever possibly save that much for retirement! Why bother?” If you visit virtually any message board or open comment thread or Facebook thread in response to a personal finance article of any kind, you’ll almost always find a pile of comments like the one above.
Although the words and the tone and the original article might be different, the core idea from those comments is the same: improving my personal finances is too hard and so it’s better to do nothing at all.
There are a number of reasons for that feeling.
For starters, a lot of personal finance topics are discussed in terms that are outside the bounds of what people can afford. When you start talking about saving $3 million for retirement, a person earning $23,000 a year is going to immediately feel as though the article is coming from fantasyland. It’s just not realistic.
Another key issue is that some of the strategies provided for achieving change are not realistic for the particular lifestyle of the reader. You’d be surprised how often the responses to a list of frugality tips includes people pointing out the two or three out of 50 that are “impossible,” which means that the other 48 tips must also be irrelevant and that any change is simply out of reach.
The biggest reason, though, is that change of any kind is never easy. There is always resistance to change on some level, and if you’re coming into the situation without being open to trying new things, it’s probably not going to work out well for you.
Whenever I think of situations like this, where people are resistant to change, I think of something my father told me when I was a kid. We had just watched some show about people doing ultra marathons – 100 miles or more in a single run. I had made some comment about how I thought such a thing was impossible. He just looked at me sideways and said, “If you run around the garden and back and do it a couple times a day for a year, you’ll have run 100 miles. If you just stand there and say it can’t be done, you’ll have run zero miles.”
Sitting there and doing nothing will achieve just that. On the other hand, doing something, even if it is the absolute smallest step you can conceive of, will achieve some kind of positive result, and then you have something to start with, a seed to build from.
For example, you can build a pretty nice emergency fund on a dollar a day. Put aside one dollar each day in a jar under your bed and at the end of the year, you have $365. That’s going to be enough to handle a pretty significant emergency. That’s going to fix a broken washing machine or even buy a simple new one. That’s going to replace the worn out tires on your car.
Upgrade to a coffee can and keep going and after five years you’ll have about $1,825. That’s enough to buy an older car to get you back and forth to work. That’s enough to pay rent for a month or two or more, depending on where you live. That’s enough to put a lot of food into quite a few bellies.
How hard is it to save a dollar each day? You can probably find that much in change if you look around for it. Just choose not to buy a soda today out of the vending machine, or when you go to the grocery store, choose to buy a few store brand items. Perhaps you can skip one stop at McDonalds – you’ll probably cover a week of it that way.
Want it to be even easier? Just set up an automatic transfer at your bank. Have them transfer $7 a week out of your checking into your savings account – this is something your bank can probably do. That’s literally the equivalent of finding some change on the ground each day or buying a few store brand items at your next grocery store visit. It takes almost no effort to save a dollar a day, and then you don’t even have to go through the effort of actually putting that money aside – it’s done for you.
That’s not the end of it, either. Let’s say that $365 you just saved on a washing machine means you don’t have to buy that replacement on a credit card. If you had to put it on the card, that’s another $60 a year in interest if you can’t pay it off quickly.
All of that is achieved through the most minimal of efforts.
What about that big list of silly frugal tips? If you can find just one out of fifty that you can easily do – just one – then you’re going to save some money.
Maybe you decide to start buying store brand ketchup. You buy a bottle of ketchup every three months. The store brand is basically identical in taste and costs $1 less. That’s $4 saved with basically no change in your life. Repeat that with other store brand items. You’re saving a few bucks a year with each shift – or maybe more. Store brand sandwich bags. Store brand flour. Store brand cheese. Store brand frozen broccoli. You save. And save. And save.
Maybe, instead, you decide to take on a one time project, something you just do once that keeps saving money for you over the long haul. You decide to borrow a caulking gun and a putty knife from your neighbor and use a bit of his caulk to seal up a few of your windows. You go around, strip the old caulk off of the window edges with a putty knife, squirt the new caulk out like toothpaste, spread it out with a rounded corner on the putty knife, and repeat for your other windows. You’re done in an hour, but suddenly your households hot air in the winter and cool air in the summer much better than before. Your energy bill drops by 10% permanently. That’s $100 a year, or maybe more.
Doing something is better than doing nothing.
What about retirement savings? Many people feel completely overwhelmed by not being able to afford to save for retirement. They just can’t save nearly enough to have a “good” retirement, so they save nothing.
How about saving just 1% of your paycheck?
Let’s say you save just 1% of your income for 20 years at a typical 7% average annual return. At the end of those twenty years, you’ll have most of a year’s worth of living expenses built up. If you supplement that with Social Security, it’ll last for several years of supplementing what you have and making life a whole lot better. There’s a pretty nice quality of life jump when you leap from Social Security benefits to benefits plus 25%.
If you’re saving just 1% for retirement while working a $50,000 a year job, you’re literally saving less than $10 a week. It’s barely more than a dollar a day. As I pointed out above, a buck a day isn’t hard at all. Sign up for that, let the money slowly roll in, and you’ll have $30K or so saved up after twenty years.
$30,000 at retirement is far better than $0. $30,000 means you can withdraw $1,000 a year without breaking a sweat and that money will last and last and last, and an extra $1,000 a year on top of your Social Security is going to give you a nice lifestyle bump for the rest of your life. All because you decided to save a buck a day – pocket change, really – for the last 20 years of your working life.
Doing something – even if it seems small and inconsequential – is better than doing nothing, especially if you stick with it. Something as silly and small as buying store brand sugar every time or caulking your windows once or making a double batch of spaghetti and eating a spaghetti casserole in a few days instead of dining out makes a big difference.
It’s just one little step, and it makes a difference.
The best part? One successful little step gives you the courage to take another, and that one makes a difference, too.
Doing something is always better than doing nothing.