Building Your Saving Muscles

by Jeff C. Johnson

Jeff in class

“Spend less than you earn” seems like simple enough counsel, but it is difficult to do in today’s world for many reasons.

Here’s how to get started if you haven’t already developed a saving habit.

Learning to save money is not unlike getting into physical condition. Imagine you want to get physically fit, and the first day you set out to run five miles. How do you think you would fare? Do you think it’s likely you wouldn’t be able to complete your anticipated five-mile run? The next day, would you be sore or even injured and unable to try running again for days or maybe weeks 

The better way might be to start with a jog around the block every day for a week, then increase it to two laps, building up to greater distances and bigger workouts, leading to better physical conditioning.

The same basic method works for the person who wants to get into better financial condition. Rather than take a thick slice out of your next paycheck, you might be better off by starting with a smaller, more manageable amount and then increasing your savings from there to a more meaningful savings goal.

How much is enough to start saving? That depends on your situation.

If you’re a student in my personal finance class at the University of Nebraska-Lincoln, you might start by saving something from your part-time job. Are you a server or bartender? Maybe you can start with my recommended initial savings rate (10 percent if possible). Or maybe all you can afford is one dollar or two dollars every day or night you work.

Just start with the largest amount you’re able to actually stick with at regular intervals. You can always increase it from there as you build your “savings muscles.” The greatest problem for many people who do not save seems to be just getting started.

Later, as your earnings rise, an increase in savings to 20 percent or 30 percent is recommended. Some prolific savers I know save more than 50 percent of their earnings!

To start, though, saving 10 percent is all about adjusting your standard of living to 90 percent of what it could be and banking the remaining amount.

Where should this saved money be directed?

Check out my next post, or get a copy of my book, The Five Financial Foundations, for the whole story on how to get started saving and investing.