“I really want to do that … but I need more savings first.” The statement hit me like a boomerang. I was talking about my VW bus restoration project with a young woman I just met who brought up savings. Savings? Really? She looked about 10 years younger than me, and she had savings?
CNBC reported on two conflicting surveys regarding Americans’ savings in 2015. The first from GoBankingRates.com, CNBC reported: “The rate comparison website surveyed 5,000 people and found just 29 percent of them had $1,000 or more in savings account.”
The second survey was conducted by America Saves from the Consumer Federation of America. America Saves conducts surveys three times a year, with 1,000 respondents, “to find that top earners have higher levels of savings interest, effort and effectiveness than the rest of the population. For example, 84 percent of people who earn more than $100,000 annually reported to be interested in savings, compared with 72 percent of people with annual incomes between $50,000 and $75,000 and 68 percent of people who earn less than $25,000.”
First off, it is no surprise people who make more money have more money to save. The basic barrier to savings is having money not already spent, right? I mean folks can’t really think about saving for anything if they are facing eviction.
And that’s my starting on all of this. How is it that I am 35 years old and don’t have anything saved for retirement, let alone an emergency? Last week I wrote about my Live Local goals for 2016. I realize I have finally made progress on some of the big ones (like debt), but I hadn’t realized I needed to actually think about the next step: saving and creating some kind of cushion to bounce on when the crisis hits—or if I ever actually retire (highly unlikely).
Part of it is I haven’t quite adjusted my perception about where I am in my life and what I need to do. I never got a corporate job with a regular salary and retirement plan; neither did Jock. For years we struggled with foreclosure problems on the house we live in on Princess Street. It was a windfall in the form of Jock winning the Purpose Prize that got us out of playing roulette. One of the reasons we function well as a couple is, by and large, we share the same values. We have a similar entrpreanureal outlook, too: for me it’s the bookstore, for him it’s the invention.
At the end of our lives neither of us would be happy to look back and say, “I coulda, I woulda, I shoulda … but, instead, I made the responsible decision.”
The early financing of Jock’s peanut sheller and trips to Africa paired with it came from a second mortgage on the house—which was part of the roulette situation. “You gotta try” is the motto around here—something we consider more than risk aversion. Of course, we don’t have children together, so there is no college to save for, no expenses of child rearing, no emergency fund for childhood crises. If we did have small people running around the house (though, this has to be the least child-safe house in NC), to be honest, it wouldn’t be an option.
Of course, 2008 and the following years have been tough on a lot of people. I am not alone in the experience of looking at a pile of bills on the dining room table and deciding the proverbial rainy day had come before scurrying off to sell what little jewelry was left. Actually, in 2010 I sold pretty much anything I could that wasn’t nailed down to try to cover bills and expenses.
Slowly, things got better. The book store started picking up, writing picked up, the economy improved, and I started chipping away at the mountain of debt. But that’s all it was: chipping away. I’d make progress, then something would happen, and I’d be right back where I started. Save? With debts at 20-percent interest, how could I save? Not only did I need to make the payments, the interest added up while I slept. Anything “saved” that wasn’t applied to those debts was a net loss.
Now that we have our heads above water for the first time since we got together, we need to change course. But, again, it can take some time to adjust. I plan to go back and spend some time with a book I have covered in this column a lot: “Your Money or Your Life” by Joe Dominguez and Viki Robin. I need to get a real picture of what I am looking at. I will report more once I have more information. I do know the one thing we have going for us is just how close to the grain we live: We don’t spend money to impress other people, so we don’t have flashy cars or cell phones, expensive furniture or McMansions. Hell, we both dress like we’re homeless. Maybe we might try to address that one this year—probably not.
In the meantime, I am going to try to start saving … toward what? Possible crisis, I guess. I’m starting small: The current goal is to put $5 a week in an envelope. If gods forbid we have another unexpected emergency, like Hilda’s accident before Christmas, there will be something to bounce on, at least a little cushion, maybe. When asked how they plan to pay for unexpected expenses, typical responses in America include credit cards and home-equity lines, according to Yahoo Finance. So it’s an important question to consider: What would you do if faced with a sudden cataclysmic home repair or medical expense? How do you plan to pay for it?
Here is the problem: How do you know when you’ve hit the rainy day you’ve been putting money away for? Or, are you just rationalizing?
I have a real problem with this. Entrepreneurship involves putting upfront money into a project with a long term plan to get more out of it than what’s put in. To be honest, it’s a more socially acceptable form of a gambling addiction. It is called “investing,” but that’s just semantics.
The bigger question I need to start asking myself, regarding all decisions, especially financial ones, appears to be: Why am I making this decision? Is this a knee-jerk in crisis, or is there really a good reason I am doing this? What could I do differently for a different outcome? One thing is certain: Having cash on hand, no matter how much, to face an emergency does make it easier and gives me more options to choose.
So, join me in my new resolution to try to figure out savings. I will report back on how it goes. In the meantime, any insights readers have to share with me would be appreciated.