How to Save More Money

One of the most important and most difficult parts of my job as a CERTIFIED FINANCIAL PLANNER™ professional is getting people to diligently save money each month. A brilliant financial plan, tax-loss harvesting, diversified portfolios… I can do all of these for clients. But none of these things matter very much if they are not saving money.

Clearly, the United States has much room for improvement in this area, since:

  • The average individual is only saving about 8% of his/her after-tax income.
  • Only 55% of families report they are saving any money at all.
  • 44% of families carry credit card debt.

After learning these statistics, I became obsessed with the challenge of helping people save more money. 

As I often do, before going around telling others to do something (in this case, save more money), I first looked inward. I am, after all, pretty good at saving money. Maybe I have learned a trick or two that I can share with others. What is it about me that makes me good at saving money?

It took me far longer than I originally guessed to come up with a satisfactory answer. But this exercise proved exceedingly valuable to me both as an individual investor and a financial advisor

It was valuable as an individual investor because I now have a level clarity and understanding about my relationship with money that I didn’t have before. This has given me peace of mind and allowed me to increase my own savings rate even more. And it was valuable to me as a financial advisor because I discovered a framework that others can use to hopefully achieve similar results.

This post details the journey I went on to discover why I am good at saving money, the answer I finally came up with, and a framework you can use to hopefully do the same. Let’s get to it.

My Journey

Financial Literacy

In trying to answer why I was good at saving money, I started by looking at the specific actions I have taken/am currently engaging in:

  • Opened a 529 account
  • Contribute to my 401(k)
  • Pay my full credit card balance every month

I know, based on my training as a financial advisor, that these are smart actions for my personal situation. These actions are also things I recommend regularly to clients, talk about in the news, and write informative articles on. In other words, I give my financial knowledge to others.

I realized that sometimes they take action, and sometimes they don’t. This is understandable, as I too don’t always act on advice from others, even when I know they are right. For example, I don’t exercise as often as I should. This was an interesting insight.

It was interesting because you could argue that the technical knowledge I have obtained from my job as a financial advisor is the reason I am good at saving money. I don’t doubt at all that it is valuable. The subject matter expertise gained from my career has definitely helped me, and I am thankful for it. But my habit of saving money predates me becoming a financial advisor. I remember setting aside 100% of my birthday money for years so I could buy a car when I turned 16. I was pretty good at saving money even before I knew what a financial advisor was. So advanced subject matter expertise alone doesn’t explain differences in savings behavior.

You can also argue that my exposure to financial literacy at an early age, both through my parents and my schools, predisposed me to being good at saving money, and perhaps even to my particular career choice as a financial advisor. I don’t deny that this education has helped me make a habit of saving money. It certainly has, and I am grateful for it. But I know many of my classmates also had an allowance from their parents, and went through the same exercises of balancing a fake checkbook and buying stocks with fake money in school. Yet lots of these folks haven’t been as diligent about saving money as I have. So differences financial literacy aren’t enough to explain differences in savings behavior either.

It became apparent to me that knowledge, simply knowing which action(s) to take/not take, doesn’t always translate into action itself. Most people know that fast food isn’t healthy, wearing your seat belt is safer than not, and saving money is good for your financial future. Yet many fail to use this knowledge So I had to keep digging for my answer as to why I’m good at saving money.

Above-Average Income

I then turned my attention to my income level. I am fortunate enough to have an above-average income, and I am blessed to have a talented and hardworking wife who can say the same. You could argue this is why we are so good at saving money. I don’t entirely deny this either. It certainly is easier to save money when you have more coming in, and I’m blessed to have had the opportunities I did. 

But there are many others who have similar or far greater incomes than we do, and yet don’t save as much money as us. Just look at the countless athletes and other celebrities whose financial misfortunes we hear about far too often. I have worked with clients with incomes 10x mine who haven’t saved a penny. 

I was also making smart financial decisions even when I had a below-average income. So it appeared to me that earning a higher-than-average income doesn’t necessarily lead to good savings habits either. My search for an answer continued.

Concrete Financial Goals

Next, I focused on the financial goals I have set for myself. See I have a list of concrete financial goals that I want to achieve. These goals are things like:

  • Build a 6-month emergency fund
  • Retire by age 60
  • Organize my finances so they are easier to manage

These goals give me specific targets to strive towards. To me, this is much more motivating than a generic goal such as “I want to get rich.” 

Yet I have set specific goals for other areas of my life, and haven’t always found the same success. I’ve told myself to make my bed every morning, or floss every night. Those goals worked for a while, but once my initial motivation died off, I quickly fell short of achieving them. I also have helped many clients define financial goals of their own. It usually helps, but again, some follow through and some don’t.

I felt I was getting closer to the answer I was looking for, but still wasn’t completely satisfied.

A Purpose for my Money

Knowledge of which actions to take wasn’t the answer. Neither was income level or goal setting. What else might I be doing that is different from others who aren’t as good at saving? Finally, it dawned on me. It took some real introspection, but I believe I finally found out what makes me so good at saving; I have a clear purpose for my money. That purpose, for me, is self-reliance. 

On the surface, a purpose for my money may sound similar to a goal, which is something I already discarded in my search. But a goal and a purpose are two very different things. Let me explain.

Growing up I was the oldest child. I have a younger brother and a younger sister. That meant I often was responsible for helping to take care of them, as many older siblings do. But more subtly, it also meant I felt a desire to take care of myself, so that my parents didn’t have to worry about me.

My father was in the Army for over 20 years. While I was growing up, he deployed overseas twice. Once while I was in middle school for about 12 months, and again during high school for about 18 months. My mom raised us during those times, and shouldered a lot of responsibility, all while never complaining. This only made my desire to be self-sufficient even stronger. I never wanted to be a “problem child” and instead wanted to be as easy-going as possible. 

When I finally graduated from college, my family was dealing with and overcoming some issues including an arrest, an unplanned pregnancy, rehab, and a divorce. I could see just how much stress everyone was under, and I made a promise to myself that I wouldn’t add any hassle to an already difficult time. I would not be a burden on anyone else. I would be self-reliant. 

Self-reliance has been a driving purpose for me, even before I could comprehend the nature of money. When I was little, it meant not needing help with my homework. As I grew older, it also meant staying out of trouble. And now that I see the importance of money, almost every financial decision I make is with the purpose of becoming self-reliant as quickly as possible. This is the reason I am good at saving money. My desire for self-reliance is greater than the temporary pleasure of spending money. 

I had my answer.

Building a Framework

Simon Sinek Your Finances

Once I understood why it was I am good at saving money, I began organizing my findings into an intuitive and scalable framework that I could apply to others, and not just benefit from myself. It didn’t take me long to realize that I had just Simon Sinek’d myself. I had “found my Why.” For those not familiar with his viral TED video that has garnered over 10 million views, I’ll explain.

Most of the most successful individuals and businesses throughout history have a clear Why. Why they do what they do. This is different from, and in fact the total opposite of how most of us think and communicate. Most of us start with What we do, not Why.

If we apply this framework to saving money, it looks like this. Most people will say something to the effect of “I should save money.” This is focusing on What they should do. Instead, here’s how I think of it:

  1. I want to become self-reliant so I won’t be a burden on others (Why).
  2. Building an emergency fund will prevent me from needing to ask others for money, even if something unexpected occurs (How).
  3. I should save money each month towards an emergency fund (What).

This is much more powerful than just saying “I should save money.”

Push vs Pull

What makes finding your Why so powerful? To me it comes down to the concept of push vs. pull.

Saving money is difficult. Human beings, through millions of years of evolution, are hardwired to crave immediate gratification. This is one reason so few of us save money on a regular basis. Even if we take the important step of setting concrete goals, those goals are still something we must push ourselves towards and work day in and day out to achieve. This constant pushing can be draining on our will power. I analogize this to salmon swimming upstream, against the water’s current. It is a constant, uphill battle.

But when you have a clear Why, things get easier. Your Why pulls you towards it and provides added momentum for you. If your Why is strong enough, saving money becomes your default and you must almost force yourself to spend money! I analogize this to a surfer catching a wave in to shore. Once you get going, it’s hard to stop.

Tips for Finding Your Why

If you agree that finding your Why is so powerful, and can help you save more money, a logical next question is “how do I find my Why?” I have a couple of thoughts here.

First, I don’t believe there is a single Why that is better than all the others. I believe the best Why for you is the one that pulls you the strongest. That is likely to be different from person to person, and that’s okay. Some examples might be:

  • I want to leave a lasting legacy long after I am gone (Why). I will do this by donating 25% of my assets to charities upon my death (How). I will open and fund a donor advised fund with my most highly-appreciated investments (What).
  • I want my children to have even more opportunities than I did (Why). I will do this by funding 100% of their college costs (How). I will work with a financial advisor to project the total estimated cost of college and calculate how much I should save per month to fund that (What).
  • I don’t want to be a burden on the ones I love if I become incapacitated (Why). I will accomplish this by keeping my important information organized and easily accessible for my attorney-in-fact (How). I will signup for a password manager to do this (What).

Second, I am not convinced you need only 1 Why. I don’t see why someone couldn’t have multiple Why’s that are important to them and pull them towards saving more money. However, I do believe that having too many Why’s can lead to lack of focus. So keep the Why’s as few as possible.

Third, I believe your Why can change over time. In fact. I think this is likely to happen. I foresee my Why of self-reliance expanding when I have a child. And what about when I reach self-reliance? Then what? Just quit saving money? No way. When that happens, it will be time to find my next Why. My next thing to pull me.

So as you embark on the journey to find your Why(s), don’t stress too hard about finding the one and only correct Why. If you come across multiple Whys, just roll with it. And if you need to change your Why later, that’s okay too. I believe some Why is better than no Why.

Message to Advisors

It would be easy for financial advisors who read this article to assume they must begin implementing this process and help their prospects and clients by starting with their respective Why’s. If I had my way, this is exactly what we would do. But we don’t live in a financial planning utopia. 

We can not run out and begin playing psychiatrist with every new client, insisting they devote hours to finding their Why. This is simply too big an ask for where most investors are on their financial journey. As Simon Sinek says, most of us “go from the clearest things to the fuzziest.” By this he means most people start with What and later, if ever, get to the Why. This is because the What is easy, but the Why is extremely difficult.

Often times clients are looking for quick wins. This is why so many financial advisors, educators and other experts often offer rules of thumb or catchy phrases. Things like “always max out your employer match,” “save 15% of your salary” or “Roth accounts are better for young people.” These are, of course, oversimplifications. But these rules-of-thumb can help prove your competence, give general benchmarks to strive for and give clients badly-needed momentum. Recognize also that educating your clients on What they should be doing is still providing value, since many people will walk into your office not even knowing What to do in the first place.

Just don’t kid yourself into thinking providing What is all you can do. If you/your clients only focus on What, you will eventually hit a roadblock. The What can only get you so far. To break through to the next level of saving or planning, you must eventually get to the How. Eventually even the How will plateau, and to continue advancing, you’ll need to get to the Why.

Of course, the sooner you can convince your client to get to their Why, the better. And ideally you could start with Why for every new client. But providing some quick wins is often necessary to convince your client to continue.

Conclusion

There are many factors that help people save money. Financial literacy helps. So does earning a good income and setting concrete goals. But none of these can fully explain why some people are so good at saving money while the majority of us are so bad.

Finding a powerful Why, a purpose for your money, is the best answer I can come up with as to how to help others increase their savings. Without a powerful Why, you must constantly push yourself to save money. But once you find your Why, it pulls you so hard that saving money becomes your default.

There isn’t a single Why that is better than all the others. You may have multiple Why’s. Your Why’s may even change over time. That’s okay.

Lastly, while finding your Why is incredibly powerful, it can also be difficult. If you want to increase your savings, it’s okay to start by finding some quick wins instead of finding your Why. But you will likely hit a plateau where you need to save more, but can’t find out how. Finding your Why can help you break that plateau.

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