I was out walking my dogs on a cold snowy day, when I got to thinking. To walk safely and comfortably on a leash, dogs need to be trained. They need to learn impulse control and discipline. In much the same way, we need to train ourselves in impulse control and discipline when it comes to our finances.
Much like visualizing the desired outcome when we’re training our dogs (sit, down, heel etc.), we need to visualize some tough questions in regards to our finances – and be honest in our answers. Do we have enough money save to cover an emergency? In this, our desired outcome should be a yes, but how much do we need?
Our circumstances may dictate what our likely emergency is.
Is my car getting older? Does it have high mileage? Can I fix most things on it myself? Your answers to these questions could determine how much you need to save for car repairs. Depending on your vehicle, new tires alone can run $1000.
How about home repairs? A new dishwasher or washing machine? If your appliances are getting older, replacement may be your next step.
What life changes am I expecting in the next 5 years? Marriage? Children? Buy a house? Retirement? Each requires financial preparedness and money set aside in an accessible account.
So how do we train ourselves to set that money aside? Just like training a dog something new, you make small steps and build on them. Step one may be to simply open a savings account. Then set up an automatic transfer every week into it ($10 or $20 or $50). To start, the amount is what you can let go into the account without really noticing it’s gone. As you get comfortable with that, increase the deposit. By training yourself to set the money aside (& automatic transfers are great tools to help!), you develop a new behavior.
If your employer offers a 401k or something similar, the same principle applies. If the idea of not having the money on your account worries you (your current trained behavior), start small. Even small amounts add up over time. I know several young adults in their mid-20’s with well over $20,000 already saved in their retirement accounts. They started small and set up the transfers automatically so they never even notice the money isn’t available.
Another important training tool is setting up a budget. Before that is effective though, you need to know how you’re currently spending. This is a tough one, but for the next week or two (two is better but one is still helpful), keep track of every single penny you spend. Every penny. Once you know where you’re spending, setting up your budget is simpler because there is less guesswork since you have concrete numbers to work from.
Remember, just like training a dog, training yourself to save a follow a budget will be step by step and they will take time. Be patient with yourself – you’re worth it!