HOW to Save Money - 'Save First'

lifestyle Apr 18, 2020

I teach financial literacy to students and young adults, engaging their parents in the process. I essentially ‘team up with’ parents to deliver critical lessons to their kids. I don’t just jump into teaching ‘how to save money’. In fact, it is the last thing I teach. I begin by creating a sense of urgency about the NEED to save and motivate young people to WANT to save. Then I go deep into ensuring people are in the POSITION to save by avoiding obstacles that prevent saving. That is, I give young people and their families a road map and personal process to avoid excessive college debt and the risk of being underemployed. Avoiding debt (particularly college debt) and ensuring you remain employable with growing earning power are critical preconditions for saving and building wealth. Now it is time for saving and building wealth to be our focus.

My specific approach to teaching young people how to save emphasizes the mindset and daily lifestyle choices to succeed and presents a methodology that is not only understandable, doable, and repeatable, but is not deep into math and does not involve tedious budgeting. Learning to become financially literate doesn’t have to feel like a tedious academic exercise. Financial literacy is a means to an end, a tool for better lifestyle choices and outcomes. If you achieve financial goals, you tend to be able to take more control of your life and the path you are on. If you have more control, you are best positioned to unlock your personal potential.

It all begins with the right mindset – I love baseball. I wasn’t alone as a kid when I dreamed of playing in the majors. But, deep down, I knew that being blind in one eye and lacking lots of skills (though I could throw hard, for a 12-year-old) meant that I was surely NOT going to play for the Pittsburgh Pirates. There are many things in life you may want, you may be driven to achieve, and yet, you can’t just choose to make them happen. You CAN, however, simply choose to live your life in a way that prioritizes saving money. You can choose a lifestyle that saves. You can choose to avoid some (or all) $4 coffees, $10 lunches, $100 nights out. You choose the college you go to, the debt you take on, the car you drive, the house you live in as well as the clothes you wear and ‘toys’ you accumulate.

After mindset comes the right ‘method’ – Even experienced pilots use checklists, chefs use recipes, engineers use procedures. Is there a repeatable, understandable, applicable process to save money? I’ve already said I don’t advocate for detailed budgets – they simply frustrate and fail. I suggest you ‘save first’. Literally, pay yourself first, then live off what remains. It takes discipline but is life-changing. Your expenses can be separated into needs and wants. Refine and minimize your needs and live each month aware of ‘what is left’ for some (not all) wants. Live by the formula “INCOME – SAVINGS – NEEDS = WANTS”.

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