OK – so…. Everyone’s got money problems, right? It seems that whether you’re making money or dead broke, there are still money problems. I know lots of people who make plenty of money, and they still have money problems, so it’s not as if making the money solves anything if you’re clueless about what to do with it.
So, here’s a link.
It takes you to my renowned (in the small pond of the BHP) “Get a Grip on Your Finances” booklet. There’s nothing in this that I invented – it’s just a bunch of well-known financial principles put together in a sequence and written from a certain actor-friendly POV, since it came out of eight bazillion meetings over the years with cashflow-challenged students.
But since I don’t trust that anyone will click on the link and read it, here’s the Number One Important Item to Change Your Financial Life Forever (and you don’t need to send $19.95 or call an 800 number to get it)…:
SAVE TEN PERCENT OFF THE TOP OF ALL INCOME, AND NEVER TOUCH IT.
This should happen no matter what level of catastrophe you’re in financially. Most people don’t save because they feel they’re in such a fix that they “can’t,” or don’t deserve to, or whatever. But debt shouldn’t affect savings – and no I don’t care that the interest being charged on the debt is higher than the interest on the savings. Savings occurs no matter the fires burning around you. You can be fucked up financially and save 10%, or fucked up financially and not save 10%. Short term you’re still probably fucked up, but the difference is that the saver has decided this fuckedupitude will finally stop. If you owe an ugly world $10,000 and made $100 this week, save $10 and then face the world. It will still be ugly, but the $10 means everything to the future and very little to the present situation. The rest of this post is quoted directly from my “Get a Grip…” booklet.
I’ll just add in up front: Those who make the decision to do this and don’t flinch and don’t pull the savings out to handle an emergency will win. That doesn’t mean the converse is true, that those who don’t save lose – although I’ve observed those who don’t save or constantly blow it usually continue to exist in a month-to-month, year-to-year haze of financial stress, waiting to win a career lottery. On the other hand, those who are able to do this will win – “win” being defined here as “will get a grip on their finances and stop stressing out about it in fairly short order, usually within 12 months.” Period. It’s just a statistical observation.
Set up an automatic, recurring transfer from your checking account to your savings account. The transfer should occur once a week. The amount should be equal to roughly 10% of your weekly income. If your income varies from week to week, take an average.
If you get a bigger check along the way, or you have a great week, then you have to manually transfer an amount that reflects 10% of that great week. If you have a regular $40.00 transfer that is automatic, based on $400 a week income, and you suddenly get a residuals check for $1,000 – then you must ensure that you save an additional $100 in that week.
Notice that there is nothing here about a prerequisite that you make more than you spend. It doesn’t matter. Most people raise their eyebrows and say, “I have $500 a week in expenses, I’m making $200 a week. I’m $300 in the friggin’ hole, and you want me to save $20?”
YES. Savings occurs based on income. It’s not based on what you owe. It’s not based on you making more than you spend. It’s based on income. It’s based on any incoming money. You made $10 this week? Or you borrow $10 this week? Or you found $10 this week? Cool, cool, cool. Save $1.00, and then move on to your other issues. Pay yourself first.
Here’s the kicker: Do not touch your savings account. Ever. Don’t touch it. Don’t touch it. Don’t touch it.
DON’T TOUCH YOUR SAVINGS ACCOUNT.
We were all brought up at some point with the idea of “saving for a rainy day.” And this is why most savings accounts are so empty. Many people start the savings action, but the first time the brakes fail on their car, the savings is gone. “Rainy days” come to mean just about anything. Your savings account is not just a “rainy day” fund. Nor is it a new TV fund. It is your FUTURE. The idea is that you will never touch this money. In fact, let’s call it your future account, your prosperity account, your some-day-I-don’t-want-to-work-this-goddamned-job-and-be-able-just-to-pursue-my-friggin’-ART……..! account. Whatever we call it…
DON’T TOUCH IT.
Here is the biggest gut check of the whole program: Most are cool to this point, they get all jazzed up to save, they do it for a month or two, and then….. A rainy day hits. Dental work. Car repair. What do you do? Well…. If you come across a day when you have zero dollars in your checking, $1,000 in your savings/future account, and the rent is due, you will… borrow the money for rent. This is the hurdle. And once you cross it, you’re well on your way, because that means you’ve finally decided: your future is more important than whatever stupid bullshit is happening right now. (And don’t forget if you borrow $1,000, the first thing you will do is transfer $100 to your savings account!)
The concept here is that debt is managed. It may go up and down, but the one thing that NEVER stops, NEVER goes down, is your rate of savings. Ultimately, this savings can be transferred to an investment vehicle like stocks, bonds, real estate, a business that provides you income, etc. But for now, it’s just cash that sits in that account or CD or IRA and accumulates and earns a bit of interest. Don’t worry about investing in non-cash vehicles until you’ve got about $100,000. I’m not an investment advisor by a long shot – I just assume by the time you’ve got $100K in savings, you’ll have worked hard enough and know better what to do from there.
As things start cooking, you can raise the percentage that you save. But don’t get aggressive, save $500 in one week because you’re feeling swell, and then the next week go, “Ooops. I shouldn’t have done that. I’m so manic! Part of my charm. I’m just going to remove that $500. That was a mistake.” NEVER TOUCH THE SAVINGS. Because if you touch it once, you’ll touch it again, you’ll go back to thinking that whatever bullshit is happening right now is more important than your future, and then your savings will be gone in no time flat.
Handling debt certainly has its place in getting a grip on your finances, but it’s simply not as important a priority as INVIOLABLE SAVINGS.