There are two instances in my life where saving REALLY started making sense. The first when I wanted a Nintendo Game Boy more than my own parents! (Haha….) and the second when I hit my first $50,000 in my 401(k ) :) Both drastically different stories and decades of my life, but both with the same underlying takeaway: Saving feels better when it starts adding up!
Now obviously this is a no brainer, but it took me quite a while to figure it out – as dumb as that may or may not make me. It wasn’t until an interview I did with Kathy Kristof of the L.A. Times 4 years ago when it finally sunk in.
She was doing an article on bloggers and their frugal living tips, and as always I managed to throw in something about my love for 401(ks) which I was obsessing about back then. For years my dad had told me to pay attention to it and soak up as much FREE money from my employers I could get since a lot of them had some awesome matchings going on, but it took me some time to get going :) And when I did, I got hardcore about it! To the tune of socking away 90% of my paychecks and living off pennies until my 401(k) was maxed out. Man those were the days…
Here’s a clip from the article:
J. Money of Budgets Are Sexy (budgetsaresexy.rockstarfinancials.com; yes, that’s his nom de plume; he doesn’t want his boss to know his sideline) is only 29. But he has $115,000 in his retirement plan. Why? He decided to make the most of the free money he got in 401(k) matching contributions from his employer by saving the maximum amount possible each year. Better yet, seeing the balance rise so rapidly has inspired him.
“It’s hard to get motivated when you’re just watching your $50 or $100 contributions adding up,” he said. “But when I hit $50,000, I thought, this is so cool – and it’s easy. Now I’m used to living on less, so it’s not that hard to save.”
It was saying that 2nd to last line there out loud which really gave me the epiphany. The “this is so cool” part. It was! I was FINALLY SAVING MONEY!! And it was all because I had gotten over the “tipping point” of when all that hustling and frugality started becoming more worth it. It’s a lot more motivating to see $50,000 in an account because of your diligence than, say, $50.00 – even though that’s where we all have to start out at. It was at that point though when it really sunk in and I knew I had to keep on going strong and never look back. (And here we are 4 years later!)
This is similar to my childhood days of trying to save up for the original Nintendo Game Boy circa 1989. Every kid in the world wanted that thing, but it was just too hard saving a dollar here and there to finally reach the grand finale of $90 to get it. I’d save – at best – $5 or $10, or maybe even $15 and then I’d give up and start all over again. The pain of it taking forever and not being able to spend money killed all kinds of motivation for me. Especially since my allowance back then was only $1.00 a week! Haha… (Do you know how long 90 weeks is to a kid??? When there’s candy and baseball cards and everything else trying to tempt you? ;))
To make a long story short, I failed over and over and over again trying to save up for that thing, until one day I hit my record of $40.00. Again, that “tipping point” where it got a LOT easier to keep saving week after week – and faster too, it seemed! – ‘cuz I had crossed over that hump where the stash just got larger and larger every time I peered in! For the first time ever I felt like Scrooge McDuck, minus the ability to dive into my cash hoard.
After hitting that first $40.00, I eventually got to $50.00, then $70.00, and finally landed at $80.00. When I did a complete 180 and realized I no longer wanted to spend all my money on that Game Boy anymore, haha… A) Because it took me forever and a day to save up! And B) because it was a LOT harder to spend my own money I found out than my parents’ ;) It’s funny how that happens, isn’t it?
Now eventually I got my hands on that coveted little system ($30.00 used at a yard sale, WITH games!), but the point is I had to cross that tipping point first if I ever wanted to save a large enough chunk at any point in my life. And to *hold on to it* too for that matter! I didn’t magically wake up one day and start saving just because I wanted to – every time I tried that I failed over and over again. I had to somehow get to a decent amount number in my account FIRST to then lock me into the game and keep me from gong backwards again. And that number only increased as my years of age did ;)
I’m not sure if this helps any of you or not right now, but it popped into my head this morning so I thought I’d share it on the off chance it does… Sometimes I find going back to the basics refreshing! Who doesn’t like the power of momentum??
Anyone else have some stories on saving that really helps you pile it up? Maybe you do it naked, or while hiding in an igloo or something? ;)
(Awesome b&w photo by Naíra Dias)
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I wish our story was about saving right now, but its more about paying down debt. Upon marriage, us two spoiled kids got into a bit of hefty credit card debt, which we did not realize was a problem until last year. We were typically able to pay it off each year but for some reason, last year, we weren’t able to (over spending of course, but that did not hit us until it was way to late). So we decided we would make drastic changes to our spending and cut out all things unnecessary. We did little things like stopped using our Keurig (which meant trips to costco to buy kcups and a bunch of other stuff we probably did not need). Instead, we busted out our old coffee maker pre-keurig days and started using that. We tapped a good friend of ours who works at starbucks to give us free lbs of coffee when available. We stopped going to target, just because we were bored. It always ended up in us spending $100 for who knows what. We stopped eating out (as much) and used it as a treat. We stopped treating people to so many meals and coffees. It was always our mentality that they made less than us and we would be happy to treat them, but now we were in a big financial mess we could no longer do that….. we made these changes, among MANY others…. but we didn’t see much dents in our debt… and it was so discouraging. I felt like we were living so frugally and wanted to give up and just say screw it. In the midst of all this, we also kept putting a little bit away into a small emergency fund, just in case (hey, all the PF websites say to do it, so we did)… and boy did that help! they money is not much in the eyes of most people, but it has helped us continue to get out of debt. Recently, we had a revelation that in the past 4 months since we started to cut out many things, we have cut out over $5k in credit card debt. Our debt amount still seems huge, but we paid off 25% of it… and now we are more motivated then ever….. when it was at $1k paid off, it seemed like nothing…. even $4k seemed like nothing, but for some reason, that $5k (25%) seems like SO much more and we are ready to keep chugging along!
YUP! THERE YOU GO!! It all starts adding up and then you hit that “tipping point” where you’re at now – congrats! And I love that statement, “We stopped going to target, just because we were bored.” hahaha… I did the EXACT same thing back in the day. As soon as I gave up “shopping entertainment” as I call it, I started saving $200-$300/mo off the bat. But more importantly I broke the habit. 4 years going strong now – woo!
I definitely agree that there’s a tipping point where you can really start to see the work pay off. For us right now, we’re watching our net worth climb each month by more than our savings simply because we’ve managed to save and those savings are earning returns, and then those returns are earning returns! It’s really an amazing thing.
Compounding is sexy.com!
Oh, I remember trying to save for a Nintendo and I started and stopped SO many times. I can’t remember the price tag now, but at that age I remember thinking I had to win the lottery to be able to afford it. Finally, after reaching the tipping point of having about half the cash saved I realized that I did not want to spend it on something like a Nintendo. I remember it being so difficult to want to save when I was starting from nothing, but after I hit that $50-100 mark I realized how hard (in my teenage mind at least) I had worked on saving that money that I did not want to blow it on a Nintendo.
YUP! Priorities start changing like that, huh? And now – as adults – the same applies, only to cars and homes/etc! Big money, big money….
I never had an allowance, so I didn’t buy a gameboy until many years later. I purchased two (2nd gen, or 3rd or who knows haha) for Mr. FBS (my then boyfriend) and I. Saving for me, is so much easier now that I am debt free. There really isn’t a tipping point, I just automate whatever I want (savings or IRA) and ignore it. That seems to be the easiest, otherwise I run too many scenarios through my head of where the money could go.
Did you have a tipping point while knocking away debt at all? I’m a lot more encouraged to continue killing our mortgage than I was the first 6 months of our pay off challenge, that’s for sure. Even though it’s on pause right now w/ moving stuff.
I had the same epiphany as a child. I saved up money for something and then decided I liked the way those coins and dollars looked in my see-through piggy bank. From that point on I became a solid saver. It seemed to take so long for the money to add up and by the time it finally did I couldn’t convince myself to spend it so quickly. It’s funny how the goal of saving for things becomes the goal to save a certain amount.
Yeah! That is funny, actually :)
Obviously you can’t be a PF blogger if you are not a saver, it goes hand in hand buddy. I had similar goals like you J. as a kid, but the difference is I would spend it on Nintendo games and other random stuff. The real game for me back then was to save money, so I didn’t mind to much spending it for something worthwhile. Comic books were a big killer to my piggy bank back in 7th grade.
I never got into comics much, but those I knew who were were always dropping money! I guess it’s similar to my baseball cards though – we all have something.
I completely agree with you that there is a tipping point with saving and just about everything else in life. It’s easy to get motivation to start, but it’s hard to get that motivation to keep going until you’ve reached that tipping point.
It’s also interesting that the tipping point and momentum seems to start flowing in your favor at some level of savings. There’s something about the power of compound interest and DRIP’s where it all starts to feel automatic.
Yup! Same with paying off debt too – which is even MORE motivational I would venture to guess, yeah? Hmm… actually I wonder about that… I think you just helped come up with a new blog post, thx man! :)
For me, it was earlier this year when I started getting really aggressive about paying off my credit card debt. The highest interest rate card (22%!#*^!) had a $5000 balance. I paid it off by the end of February and I was hooked!
It got my real interested in finding ways to be frugal and send even more money toward paying off debt.
WOWWW 22%??? That is insane!! So glad you paid off that bitch, jeez… Disgusting.
We all have that first story of a prized possession! For me, it was an electric guitar. Congratulations on your 401(k)!
Nice! Did you ever make rock stardom? :)
When I was 8 my allowance was 50pence a week (Im from Scotland) I saw a toy robot for £8.00 I wanted and my dad said if I saved the money I could have it. I saved so hard for it, did jobs for my family to get more money and eventually bought the toy. I was so proud of myself for achieving a goal! BUT
The toy was rubbish when I got it home, it broke very quickly and didn’t really work as advertised, it taught me 2 lessons:
1- You can buy anything as long as you save for it
2- Not everything is worth buying, so spend wisely!
Great lessons to learn while young! Love that you ended up going for it too :) The idea of owning a robot back in the day was awesome!
haha. I started with that same $1/wk allowance and also had to save for my Gameboy. Raised by a single mother with a single income for most of my childhood, if it wasn’t absolutely necessary, or for a good enough reason, she wasn’t going to buy it. So I had to save up for that gameboy.
I think being raised in that environment has engrained into me, “if I want it bad enough, I need to take care of it myself” (maybe not the healthiest of logics).
What drives me… I just need to want it bad enough, so I’ll make a plan and get it done.
Side note: I actually found my old gameboy when moving out of my parents house a few years ago and it still works! I think I’ll save it for my grandchildren… “this is what we used to play with, back in my day” :)
Yeah!! Cool!! By then people will be playing video games on their hands and skin, haha… or using glasses or something ridiculous :) You’ve got an antique!
I was fortunate (or unfortunate?) to grow up receiving absolutely $0 from my parents. I didn’t even get birthday money. It sucked at the time, but taught me that anything I want in life I have to get myself, which I have been doing ever since. I think the “tipping point” you talk about is more of a mental block than an actual amount of your savings. Once you change your mentally and financial habits, everything just falls into place.
Yup! Totally mental – which will be different or everyone. Just gotta get past it so it’s all on the up and up!
I also agree with your saving tactic. Here’s what I’m doing. At the start of the year, I listed all my goals and chunked them down into not-so-intimidating milestones. Every time I reached a certain milestone, I celebrate by erasing that milestone from my goal. It’s like finishing levels in video games. :)
HAH! Perfect. I like that :)
It’s better to save and be satisfied financially than to overspend, get into the debt shit and be sorry for a long time to come.
What I love are those awesome free 401K calculators – not the ones for oh in 20 years you’ll have X… the more immediate, important ones for that tipping point of “this is cool”. The ones where you put in: here’s my gross, here’s all my pre-tax takeouts, here’s all my taxes taken out… now, if I put X into my 401K how mich does it REALLY change my net?
I found I could jump a full 10% with a lot less taken out of my weekly net. It was great!
Awesome!! Calculators in general are pretty awesome, actually, haha… For us finance nerds at least :)