85: Adulting 101 Series: Saving

Do you think about saving money and instantly feel guilty and/or defensive about your lack of savings right now? You are so not alone. And while we’re here to tell you a bit about how much you should be saving, we spend some time in this episode of Worth It talking about why you should be saving. We hope it gets you fired up and ready to save, so let’s dive in.

 

WHAT YOU’LL LEARN 

• • [02:20 How Dustin managed to build wealth through savings… even during the 2008 financial crisis

  • [07:45 What Warren Buffet says is the hardest skill to craft

  • [09:35 Why you can still have luxury taste and save for the long-term (if you make the money)

  • [11:00 Using windfalls to build up future wealth

  • [11:40 How to leverage market ups and downs to build wealth

  • [13:30 Why you shouldn’t wait for the market to drop to start investing 

  • [16:00 The importance of saving more for a work-optional lifestyle

  • [00:30 How to shift your mindset from scarcity to abundance

  • [03:15 The difference between splurging and celebrating

  • [03:45 Why should think about saving as putting your money to work for your future

  • [04:30 The risks of pushing saving off to “one day”

  • [06:35 Addressing your mental blocks about saving

  • [07:15 Why saving can sometimes feel like a penalty

  • [08:20 Thinking about your future self coming to collect on everything you’ve saved

  • [11:15 The importance of automating your savings

 

BUILDING WEALTH, EVEN THROUGH A FINANCIAL CRISIS

It’s hard to believe that anyone came out of the 2008 financial crisis with more wealth, but those who “weathered the storm” and kept saving and investing during that time actually did. Dustin is proof. While the markets continued to bomb, he continued to set aside money to invest. The result? He’s got beaucoup bucks in his accounts now… and it’s all because he committed to saving and investing at the age of 24. 

The basic truth of saving is this: You’ll build more wealth if you start saving (and investing) now. You should save up for emergencies, and we usually recommend 3-6 months of personal expenses and 3-6 months of business expenses. Then you can start funding your Backup Life Bank (BULB), which is about 25x your minimum income requirement. And beyond that… you should be investing. 

Why? Because you can add more money each month to your accounts and benefit from long-term interest growth on those higher balances. It’s the Law of Compounding Interest we are always going about and it’s real! But before we overwhelm you with the idea of investing, let’s talk about how much you should be saving.

 

WHY NORMAL SAVINGS RATES AREN’T GOOD ENOUGH

“The experts” (who are they and where are they hiding?) say the average person should save about 10-15%, but if you’re a business owner or entrepreneur, we really think you should up that to about 25%. Automatically set aside 25% of your monthly income to your emergency funds and, once you hit those savings goals, you can start investing 25% of your income to really build up your BULB — because, let’s be real, investing will net you more compound interest than a savings account ever will.

And when you hit your BULB goal? It’s time to ball out. Go crazy and buy yourself a Tesla with cash, or buy a cabin in the woods. We don’t care how you spend your money, once you’ve paid your future self. The best part about all of this? You can build wealth on your savings and investments, and can make more money on the interest alone — all while you enjoy your extra “spending cash.”

You might be thinking, “I don’t know, Dustin and Danielle, 25% seems pretty steep…” If that’s you, it’s time to talk about mindset.

WHY YOU NEED TO SHIFT YOUR MINDSET ABOUT SAVING

We know mindset is a big buzzword here, but we’re gonna use it in a different capacity than other people might. From a financial mindset perspective, you need to really think about your savings as improving your future state of affairs. It’s also important that you shift your mindset from one of scarcity (“I can’t save that much money! I wouldn’t have any money left!”) to one of abundance (“Look at what I can save for my future while also enjoying what I can spend today”).

Of course, we’re not gonna just leave you hanging with some vague “Change your mindset” crap like that. Here are a few actionable tips you can use to actually shift your mindset from saving = scarcity to saving = abundance:

• • Try thinking about your savings as an absolute must. Think about it like your rent, your utilities, your non-negotiable plant subscription kit you get in the mail every month.
  • Think about your future self coming to collect. Do you want to live a work-optional lifestyle by the time you’re 40? Do you want to retire in your 50s after your kids go to college? Wherever you see yourself using up all that cash you’ve stashed, take a minute to visit yourself in that future. See yourself living in your “revivement” cashing in those checks, withdrawing that money, and living your best life. 
  • Automate it. Don’t think about setting aside money every month, just set it to auto-transfer. You might freak out when you have to manually do that transfer and accidentally sacrifice your future wealth for your current comfort.
  • Don’t spend it all at once. There’s another skill you need to develop, y’all, and it’s not assuming that “abundance mindset” means “spending every last dang dime.” Yes, you can celebrate and yes you can spend the money you’ve worked so hard to make, but true abundance comes when all of your needs are taken care of. So don’t neglect saving! 

There’s another thing we want to talk about: changing your assumptions about saving. 

 

YOU KNOW WHAT THEY SAY ABOUT ASSUMPTIONS

Have you ever heard the phrase, “Assume means to make an ASS out of U and ME?” If you haven’t, you’re welcome. But now we want to talk about your assumptions about savings… and how they might be making an ass out of you. 

Let’s see if you’ve said this to your (or your besties after a few mimosas):

“I’ll start saving one day, but for now I’m just enjoying the money while it lasts.” 

You do see the problem there right? Because, if things went south tomorrow, you wouldn’t have any money to enjoy. So you need to re-evaluate your goals and make sure you can take care of yourself beyond tomorrow! 

“Business is booming now, so I don’t need to save right now.” 

You know, while you’re making those big bucks, you could be setting aside just 25% (when you make a lot of money, 75% of your income is still a lot of freaking money) and building massive wealth. Save and invest when you have those windfalls — Dustin did, and he’s sitting pretty now! Plus, your business could fail… and then what?

“My businesses will keep me afloat.”

Let us make one thing very clear: you can diversify where you save and invest your cash — bonds, stocks, different asset classes, etc. — but you can’t diversify your businesses enough to build true wealth. Because multiple businesses won’t necessarily cover your 🍑. Don’t assume your businesses are going to keep you afloat if a recession hits, and don’t expect the money to keep rolling in after you want to walk away. The good thing about saving money? It makes money for you… without you needing to work. So, we’d say that’s a better investment. 

 

CALLING YOU OUT 

We’ve covered a lot of ground today, but it’s far from the first time we’ve talked about this you guys. You can go through our entire podcast library and see that we’ve been talking about this since Day Freakin’ One. But we know hearing how much you should save and actually saving that much are two entirely different things. So we’re doing something a little different this episode: we’re calling you out.

We’ve given you the foundation, we’ve given you step-by-step action plans. We hate to break it to you, but the jig is up. It’s time to start saving.

This material is for general information only and is not intended to provide specific advice or recommendations for any individual.

 

Resources & People Mentioned

• • Our FREE go-to financial and life planning resources
  • The Toujours Planning Quiz — Are we a good fit for your financial planning needs?

 

Connect With Danielle and Dustin

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