The Value of Saving Money. A Practical Primer to Getting Stated
A Vignette on Chronic Lack of Savings
A recent article by Washington Post stated that the Internal Revenue Service is behind in processing nearly seven million 2020 tax returns, slowing claims for refunds. Several members of the general public were interviewed by this newspaper to demonstrate how the IRS’s tardiness impacts family budgets of many taxpayers. One taxpayer out of Burlington, Washington, stated, “I’m supposed to get a $5,600 refund. I absolutely need that money, and the IRS just won’t give me any answers,” said Frances Johnson, a single mother [..], who filed on Feb. 12 and needs the money to repair her car. “When I call, they say I will have to wait until the end of April.”
Pay Yourself First
What Ms. Johnson is going through is familiar to many Americans and many of our clients. That is, at least they used to find themselves in similar situations. However, that’s mostly history for a large number of them. The fundamental principle of financial management that Glasgow Knight teaches and practices is simple—pay yourself first. We are convinced that lack of savings and money for emergencies, vacations, broken iPhones, and surprise medical bills, or a highly needed car repair as is the case with Ms. Johnson above, is not a money problem (that is, in its low quantity). It’s not a money problem at all. It is a value problem.
A lion share of Americans don’t have savings because they don’t value money nor have a savings discipline to begin with. Many people claim that they would like to be financially independent, yet most of them do not value financial independence per se, or having savings and passive investments in particular.
Until there is a fundamental shift in the values of Americans, savings and financial independence will remain a fantasy. Unexpected bills, emergencies of all kinds, and other “priorities” will chip away from the monthly paycheck and there will be more month at the end of the money, than there will be money at the end of the month.
This truth hurts and someone has to state it. Therefore, here it goes, “Pay Yourself First!”
Where to Begin—Automate Your Savings, Taxes, and Other Crucial Needs
Discussions about money and financial education with our clients begin with the principle of valuing savings and financial independence. We work on shifting our clients’ value on saving money and recommend that our clients set up automated transfers to their separate savings accounts in their bank as follows:
- Savings (of at least 10% of earned income; these savings should eventually be sufficient enough to cover your living expenses for at least 6-9 months, better yet—a full calendar year).
- Taxes (whatever the estimated tax or withholding amount is going to be due; we all know that this is unavoidable, so setting aside estimated taxes if no one is withholding taxes out of your earnings is simpler than paying the full tax bill on April 15th of next year).
- Other monthly automated transfers to savings accounts may include, as desired:
- For depreciation (car repairs, new computers, new cellphones)
- For education (their own, their family members, etc)
- For medical needs (especially for those individuals who are self-insured and don’t have commercial medical insurance)
- For vacations (instead of charging a vacation to a credit card we recommend our clients set aside a monthly amount that they can use every so often for their vacations)
- Other needs, as desired (some of our clients transfer funds for their hobbies, spots and fitness, arts, etc).
Whatever remains after these monthly automatic transfers is available for consumption and the lifestyle (examples include mortgage payments, car payments, retirement contributions, credit card payments, student loans, groceries, utilities, clothes, meals and entertainment, etc).
Objections
The most frequent objection we hear from our clients is this, “This is not possible. I make so little. I have a family to feed. I can’t afford to save money or accumulate funds for other needs. I have a ton of debt and I need all the help I can get.”
Our response to these objections is in a simple question, “Have you ever tried?”
Recap and Conclusion
You see, when there is intention and the will, there is a way. That’s just how life works. The only way out of lack of money and absence of savings is in valuing money, valuing savings and wealth accumulation, and most importantly, valuing ourselves. You are too important and too precious not to save money and set aside money for your most important needs and be left at the mercy of Internal Revenue Service not issuing your “much needed” refund, as illustrated above.
It’s time to stop this practice and transform our value on saving money and savings in general. Automate your monthly savings, as explained above, in the following order: Savings. Taxes. Depreciation. Other important needs. Then, consumption and lifestyle.
Glasgow Knight Can Help
If you feel like you’d like to talk to someone about how to get started on saving money or need additional information or inspiration on this matter—call us any time. We provide this service for free as it is a fundamental reason for the existence of our enterprise—we exist to automate savings, investments, and tax compliance of all people on planet earth so that they are empowered and enabled to accomplish what really matters to them and what they really care about.
Remember—Pay Yourself First.
