Why Should You Save?

Why Should You Save? | Josh McAlister

This blog is the third of the four-part series of ‘giving every dollar a job.’ This section of the four uses of money is talked about the most – and my message is nothing new under the sun. The goal of this article is to connect the ‘why’ of saving to an analogy I found helpful, and then provide some strategies on how to effectively save.

As a reminder, below are the four categories where every dollar can go:

1. Taxes

1. Charity

1. Savings – Our Discussion for today

1. Lifestyle

Why Should We Save?

Bourbon – a drink saturated with history. In 1964 – Congress made this the official spirit of the U.S. To be classified as Bourbon, it must be produced and meet the following strict rules:

• Made from a minimum of 51% Corn

• Distilled at no higher than 160 Proof

• Aged in New, Charred, White Oak Barrels at no more than 125 Proof

• Must be bottled at minimum of 80 Proof

• Must be made in the U.S.

If the distilling process does not meet these requirements, the spirit is not a bourbon, it is a whiskey. Important to note this fact for later in the article.

At the time bourbon goes into the white oak barrels – it is a clear liquid, not the iconic amber we all know it as.  The amber coloring is absorbed over time from the wood, the liquid contracts and expands with the change in seasonal temperature. Perfect taste and coloring are acquired over many seasons – true Bourbon connoisseurs would say 7 years at a minimum.

Think of the business dilemma a bourbon distillery owner must face – their product goes into Oak Barrels, and there is no hope for cash flow until 7 years has passed! Once the bourbon goes into the barrel, you simply must wait for the completed product.

Saving money has so many correlations to the bourbon industry, a few named below:

1. There are no shortcuts – you must follow the process.

1. It is highly unlikely you will get lucky: meaning, you will not one day just start saving money, or hopefully you have made your spirit in line with the requirements of bourbon.  Chance does not win.

1. Good results take time!

Saving Strategies

We are a culture of immediate gratification. We do not want to delay good feelings for the future – and unfortunately, that is what savings is all about. Like good bourbon – saving takes time to really see the fruit of your labor. Below are some strategies to implement that can help ease the burden of saving:

Determine Your Savings Goal

All our clients go through the four uses of money exercise on an annual basis – and from there, we can mutually agree on a number to give, save, and spend for the year. By doing this simple analysis, you can then determine a benchmark to hold your household accountable to – you either hit your savings mark at the end of the year, or you did not.

Write it Down

Write down your savings number! A written plan is a plan that can get executed. Write it on a sticky pad near your computer, your mirror, or make it your phone screen saver. This will reinforce your savings goal, and when it is in front of you, it is likely to be met.  

Automate Your Savings

Ease the burden – you must make savings easy. If the process to save is hard (and it naturally is) it will be hard to save. Automate everything and further, hire a CFP® to help automate everything. Ways we help our clients automate is that our office handles all savings transfers – from recurring 401k contributions, IRA/Roth IRA transfers, and brokerage account transfers from each paycheck. We want to remove the headache of our clients doing this on a weekly basis – frees up headspace for them!

Track Your Progress

If there is not a system to track your progress on your savings targets – then there is no hope to hit your savings goals (or course correct if you must, which you inevitably will). We recommend tracking on either a monthly or quarterly basis, depending upon each individual client’s preferences.

Conclusion

Note that these planning strategies might perk up your ear, but the devil is in the details. Executing a savings number is hard – and takes time and patience. My challenge to you is this – seek out an advisor who will plainly setup a system to first determine your needed annual savings number, and then help you execute to hit that savings goal. Like good bourbon, there are no shortcuts, and if you try to find one, you most likely will end up with a finished product of whiskey.