It took a few years, a few bad decisions, and many mistakes but I eventually learned my lessons and became pretty smart about spending, avoiding debt and managing credit wisely. I feel confident calling myself an expert when it comes to budgeting, prioritizing, and living well within my means. But when it comes to saving - I kind of suck.
I learned about credit and debt in early adulthood the way most people do - by screwing up. I got my first credit card at eighteen, used it to party and buy stuff I didn't need, then half killed myself working to pay it back. Fortunately, I had a good job and made good money (for a student) and was able to pay it off. But the cycle had started. From that point on, however much money I had available in credit became however much money I had to spend. As life got more expensive, I was able to pay back less and less every time I racked up that credit card bill.
A few years later, I found myself married with a mortgage, two leased cars, financed furniture and countless maxed-out credit cards. It wasn't until after the divorce, when I bottomed out money-wise, that I learned my lesson. Alone and broke, working late every night on my laptop to save on childcare costs during the day, every penny that I made went to keeping us alive. When I finally got to the point that I could start making a serious dent in my debt I made it count - and when that debt was finally gone I promised myself I'd never let myself get there again.
And I haven't.
I'm in fantastic financial shape. I have no debt beyond a very manageable mortgage. Our household budget is a masterpiece of planning.
But when it comes to saving, I seriously suck.
For someone who earns a living as a "frugal family living" author and expert,I should probably be a lot better at saving. But somehow we manage to spend everything we have every month, no matter how much that is.
Part of it, I know, is just where we are in our lives. A young, active family with three school and pre-school age kids - between groceries and sports and school and activities and child care the money flows out as quickly as it comes in even with a careful budget.
We do have savings in the form of RRSP's and RESP's - automatic payments withdrawn monthly from our accounts for our retirement and our kids' education. Because it's automatic we don't even think about it. But although we do have "extra" money built into our budget each month for "saving" - an umbrella phrase we use to cover emergency savings, savings for the house, savings for miscellaneous unplanned expenses should any come up - somehow it always gets spent. No matter how much we make or how much extra we have come in we always end up living practically paycheque-to-paycheque.
The importance of keeping extra savings set aside - savings we don't end up folding back into our budget for something or another - hit home last winter when we had a major home emergency for which we were completely unprepared. You'd think the experience would have taught us to plan out our savings better, but we still seem to just keep spending what we have. Goal-oriented saving we can do - saving up for a new deck in the backyard, saving up for our annual Disney trip, saving up for a new couch. But long-term saving that just sits there seems to be something we're just not very good at.
We are not saving-savvy.
How do you handle savings? Do you set up an automatic system to set aside money each month or put it in an untouchable savings vehicle? How much do you set aside for emergencies and long-term savings?
Originally published as "Not So Saving-Savvy" on my weekly column at gailvazoxlade.com