3 Lame Excuses For Not Saving Money
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It’s common knowledge that if you want to be wealthy, you have to save and invest. But looking at statistics, it seems this knowledge is becoming less and less common. In 2005, the United States recorded a negative savings rate for the first time since the Great Depression. We live in one of the most prosperous times in the history of the world, yet we’re not saving. Why?
Well, here’s a short list of lame excuses that people give to justify not saving.
1. I’ll do it later. This is a common excuse among young people and probably the lamest. A young person in their 20s thinks “I’ve got 60 years to save money. I need to enjoy myself now.” If you’re in your 20’s, NOW is the time to save. You have plenty of time to let the magic of compound interest grow your wealth. Start young and you can save less and still make more money in the long run than if you started to save later.
To give you an example of the power of compound interest, consider two different people- Jack and Jill. They’re both 22 years old and both have an extra $2,000 a year. Jack takes his extra $2,000 and socks it away in a IRA Account with a 12% return. Jill on the other hand spends her $2,000.
Jack saves $2,000 a year for 6 years and doesn’t save a dime after that.� Jill spends her extra $2,000 a year for 6 years, but decides she should start thinking about the future. She finally opens up an IRA account with the same 12% interest that Jack gets. She invests $2,000 each year until she’s 65. The chart below shows the value of Jack and Jill’s respective accounts when they’re 22 years old. Remember that Jack only invested $12,000 while Jill invested $74,000.
| Age | Jack | Jill |
| 22 | $2,240 | $0 |
| 23 | 4,509 | 0 |
| 24 | 7,050 | 0 |
| 25 | 9,896 | 0 |
| 26 | 13,083 | 0 |
| 27 | 16,653 | 0 |
| 28 | 18,652 | 2,240 |
| 29 | 20,890 | 4,509 |
| 30 | 23,397 | 7,050 |
| 35 | 41,233 | 25,130 |
| 40 | 72,667 | 56,993 |
| 45 | 128,064 | 113,147 |
| 50 | 225,692 | 212,598 |
| 55 | 397,746 | 386,516 |
| 60 | 700,965 | 693,879 |
| 65 | 1,235,339 | 1,235,557 |
They ended up with the same amount, but Jack saved less. Imagine how much Jack would have he kept saving $2,000 a year after the first six years. Whoa! He would have been a millionaire a couple times over.
2 . I don’t make enough money. If you earn a paycheck, you earn enough to save. It doesn’t have to be much. Start off small. Sock away 5% of any income you make into a high yield savings account. You’ll be amazed how little contributions can add up quickly. Gradually work your savings up to 15% of your income. Whenever you get a windfall like Christmas gifts or a tax return, put half in the bank. Slowly, gradually, by saving money you’ll find yourself with a small fortune.
3. I deserve a little luxury in my life. Many people sabotage their savings plans by taking the money and splurging on stuff they don’t need. Usually the justification is they’ve worked hard and deserve the splurge. I’m battling this excuse in my life right now. I really want to buy a Macbook. I have the money for it and could easily go to the Apple Store and buy one. I justify the excuse by telling myself I’ve earned it from the hard work I’ve done and the sacrifices I’ve made saving. But do I really want to lose $1,000 in savings for something I don’t really need? No way.
Instead of looking at “things” as luxuries, think of saving as a luxury. When you save, you’re giving yourself the luxury of financial freedom. How nice would it be to not have to worry about money? Pretty dang awesome.
What some other lame excuses that you hear people give for not saving money? Drop a line in the conversation box and add to the conversation.
I found your site on technorati and read a few of your other posts. Keep up the good work. I just added your RSS feed to my Google News Reader. Looking forward to reading more from you.
Allen Taylor
I’m not sure about other people, but judging from me and my friends I think there may be one other reason that needs to be added to this list: not being familiar with savings accounts. I’m 19 right now and I have saved some, but when I read this article I didn’t know what an “IRA” account was and the term high-yield savings definitely brought my eyebrows up. I plan to go research these types of savings accounts now, but before coming across this post I didn’t really have any idea about them.
Me and my friends would definitely be much more interested in saving if we knew how and where to open a good savings account instead of the Washington Mutual savings accounts we mostly have.
Great site by the way, I really enjoy it.
@ Sean- That’s great you’re going to start researching. That shows you have the initiative to take control of your life. Very manly. Good luck with your research.
If you want a better savings account, you might consider an ING account. They have great rates. Email me through the contact form and I’ll send you a referral. If you put in $250 you’ll get $25 for free.
I hope you keep coming back. I’ll be posting several posts on personal finance for young people. If you haven’t already, make sure to subscribe to the blog and tell your friends, too.
Excellent information, I’m going to send it to all of my friends.
Much thanks
I would love to hear your opinion on different saving methods and high yield methods.
Currently 40 years old I must admit it took me most of my life until about age 35 to get it into my thick head to tuck some dough away. Nobody was giving me money and I was spending all I had. I encourage all the whippersnappers to start early even if only a little. Now I am trying to play catch up and while not impossible it is pinching me a bit. Just do it damnit!
~Larry
A bit related to No. 3, some people actually do not know the difference of wants and needs. Some would say something like, “I need to buy use my savings on this one” when in fact it is something that they could live without.
If Jack had saved 2000 a year until he turned 65, he would have 1,235,339+1,235,557.
I recently subscribed to your blog and have really been enjoying it.
There are many different ways to “save.” There isn’t anything wrong with treating yourself to luxury once in a while, but you must have discipline. If you can budget a purchase far enough in advance, you can enjoy luxuries and save at the same time.
This may seem counterintuitive, but if you want to save money in the long run, pay for quality and take care of your stuff. Sure you can buy a $90 dollar pair of dress shoes, but how long are they going to last you? If you buy a $300 pair of shoes, if you take care of them and resole them when you need to, you will save more money in the long run. It’s the same for everything, whether it’s kitchen utensils, safety razors, or luggage. Quality eventually pays for itself.
Every man needs a little motivation sometimes. Plan ahead and enjoy your savings.
Just to help people out, what Joshua said on the amount if Jack saved continuously 2000$ until 65 he would not be making 1,235,339+1,235,557. He would in fact make much more, though Joshua used nice logic it wasn’t quite sound. I have forgotten the formula but im guessing Jack would have made around 3 million-4 million. It just goes to show how powerful a savings account is.