Why can’t you save any money?

There are a lot of reasons that people find themselves in difficult financial situations. Most often the reasons can be isolated to a single theme; lack of emergency fund. An emergency fund is crucial if you are serious about getting rid of debt. The truth is that everyone will experience an unexpected financial event, on some regular basis. If you are not prepared for this event, it can lead to some negative long-term impacts. The sad thing is that most of the problems that occur are not in and of themselves that devastating; however, when coupled with an already bad financial condition, the not-so-bad event turns into a real emergency.

Reasons not to save

Regardless of your situation, you have control over your own ability to save. You simply have to make it a priority. You have to be willing to sacrifice. For example, I know a single man who hasn’t used air conditioning in three years! Now that is a sacrifice.

I came across an article over at MSN Money that lists seven reasons people don’t save. The list is below with my thoughts on each.

1. Money is too tight right now – Most people will tell you that in order to save you have to make enough money so that there is still some left after all of the spending occurs. This is actually the thinking that gets people into financial trouble. It isn’t the amount that you make, it is the amount that you spend. If you keep your spending level constant and you get a $5,000 raise, you should be able to save $5,000. The truth is, most people don’t keep their spending levels constant, they raise the spending level to equal (or exceed) the income level. If you want to save, decrease your spending.
2. Every time I save a little money, something always happens to clean me out – Putting together a good budget and sticking to it is the safest way of dealing with the unexpected events that life throws our way. A lot of them really aren’t unexpected, we simply forget about them. For example, if you pay your car insurance every six months, are you budgeting a little each month to cover that “unexpected” bill?
3. I’ve got to pay off my debt first – Both Dave Ramsey’s Baby Steps and the Money Map from Crown outline a path to becoming debt free. The first step in both plans is to set aside a small emergency fund before focusing on total debt repayment. The small emergency fund is designed to keep you from going farther into debt, every time an emergency occurs. If you have the emergency fund, you simply take care of the emergency.
4. My savings isn’t earning any interest – The primary goal of your emergency fund is not to earn interest. The goal of the emergency fund is to pay for emergencies. I totally agree that today’s interest rates make earning money on savings accounts almost a laughable idea. However, that is no reason not to put money away for a rainy day. Long-term investing is where you should focus your attention when you are ready to start making money with your money, but that can and should wait until you get rid of your debt.
5. I don’t want to deal with banks – Apparently this excuse is a lot more common than I thought. Based on the article, one in 13 American households, doesn’t have a checking or savings account. That number is a real shock to me. Many of those people don’t trust the banking system and simply refuse to put their money in a bank. If you are one of those people, look into opening an account at your local credit union, or try one of the many online banks.
6. I have credit cards to pay for emergencies – This one is a two-edged sword. Using the credit card for emergencies can lead to some very interesting definitions of what an emergency really is. I agree that if you do not have an emergency fund, you should keep the credit card while you are saving up your cash emergency fund, but the goal should be to get rid of the plastic. If you
7. I’m going to win the lottery – Sure you are. I agree that every legitimate lottery has a winner, the chances of you being the winner is pretty slim. For example, if you play the Powerball lottery here in my home state of Virginia, the odds of winning the jackpot is 1 in 195,249,054. That is over 195 million chances that you will NOT win the lottery. Do you really want to put your financial future in the hands of those kinds of odds?

Why aren’t you saving?

What about you? Are you saving for a rainy day? Do you have an emergency fund? Are you budgeting each month for those “unexpected” events that occur every six months? If not, then start today by committing to decreasing your spending and paying yourself each paycheck. Whether you are using a bank, a credit union, your mattress or the cookie jar, you need to set aside a set amount every month in an account labeled ‘emergency savings’, that is used only for emergencies. You can do it, but you have to decide to.