I Don't Earn Enough to Save Money
http://www.cambridgecredit.org -- In a report on wealth and savings, researchers Steven F. Venti and David A. Wise found some high-income people wind up with little wealth, and that some low-income people accumulate a great amount. It's not the income level, or circumstance, that makes the difference, but how much people choose to save. Sure, higher earnings leads to greater potential for savings, but the real key is, how do you want to live your life? Watch this week's webisode from Cambridge Credit Counseling Corp. to learn more. Host: Community Outreach Director, Thomas J. Fox.
Transcription:Hello, and welcome to Your Money 2.0. I’m Thomas Fox, Community Outreach Director of Cambridge Credit Counseling. Throughout my career, I’ve heard time and again from people about how difficult it is to save money. Each person’s rationale differs, but the most common argument I’ve heard is, “I don’t make enough money to save.” Understandably, each of us has different circumstances. I’ve spoken to thousands of people with modest incomes who support families, manage high levels of debt, and who struggle to save any money at the end of the month. I’ve also heard from thousands of people in the upper middle class who support families, manage high levels of debt, and fail to save appropriately. (It almost goes without saying that the lack of savings in both groups reflects our country’s inattention to financial literacy.) The truth is, there should be room for savings in nearly every budget.
First, let’s dispel the myth only people who earn high incomes can save. In a report on wealth and savings, researchers Steven F. Venti and David A. Wise found that some high-income people wind up with little wealth, and that some low-income people accumulate a great amount. It’s not the income level, or circumstance, that makes the difference, but how much people choose to save. Sure, higher earnings leads to a greater potential for savings, but the real key is, how do you want to live your life? Trust me, I’ve gone through the pain of worrying about how the next electric bill would be paid, or deciding how I could afford to get my bakes repaired. I’ve agonized over the realization that I was unprepared to meet my obligations because of my financial situation. My obstacles were the same ones many of you face now – I earned next to nothing, I had no savings, and the stress of dealing with my bills left me feeling hopeless. However, my experiences eventually led me to an obvious conclusion – it’s better to live without, than be without. I decided that even though I made minimum wage, a portion of that had to go to savings. That meant I had to make some very different choices in the way I spent my earnings.
Much has changed in my life since that time, but one thing has remained the same – I am frugal, and I’m not alone. Over the last few years, I’ve read a number of stories about people who achieved extraordinary savings while earning modest incomes. There is the story of the retired social worker who left $1.3 million to charities in her community. She drove a beat-up car, lived in the same house for 40 years, but she also travelled throughout Europe and built an impressive amount of wealth from a fairly modest income. Then there is the farmer who lived in a run-down mobile home, surrounded by rusting farm equipment, who willed $2 million to his church. And finally, there is a teacher who never earned more than $28,000 a year who, upon his death, gave $2.1 million to his alma mater for the establishment of scholarships to benefit African-American children. The common thread in these stories is the belief that money is simply a means to an end. Instead of allowing money to control their lives, these individuals controlled their finances and exercised firm discipline when it came to expenses that weren’t on their particular list of priorities. They could have looked at money as a fleeting resource, but they didn’t. These regular people understood that their time and effort could mean much more in the end, and they saved money to make their dreams a reality.
You can build wealth too, simply by taking command of your earnings. Each week, pay yourself first – you worked hard, and you deserve it! It’s best to commit 10% of your income to savings, but start out with 5% if that’s more comfortable. The point is, save something. By taking the time to sit down and really examine our spending, I’m sure each of us can identify 5% to 10% that can be redistributed to savings. If you’re unsure where to start or you just want help establishing a budget, call a non-profit credit counseling agency, such as Cambridge, and work with a certified credit counselor who can get you on the road to saving.