Are you one of the young fabulous and broke (the title of a recent Suze Orman book)?
Or are you a middle-aged person concerned about the saving habits of a loved one who can fairly be described as one of the young fabulous and broke?
One of the questions that I am asked most frequently is: “How can I persuade my son (or daughter, or niece, or nephew) to save money?” There are a lot of middle-aged people today concerned about people they love who can fairly be described as young fabulous and broke. The problem with the advice you usually hear in response to this question is that it is patronizing. This article sets forth six non-patronizing tips for the young fabulous and broke.
The first non-patronizing tip for the young fabulous and broke is to try not to react too negatively to the patronizing advice often directed at you by well-meaning older people who want you to save more because they love you and want you to be happy.
Those of us who are getting up there is years have seen how people can get hurt by unexpected financial setbacks and it pains us to see the young fabulous and broke not putting something aside for a rainy day.
The conventional advice used to get young people to save really is patronizing. I always found it annoying when in my non-saving years someone would bring up one of those charts telling me how $1 would be worth $37 billion by the time I was age 142 if I had only been sharp enough to have invested it in mutual funds when I received it from grandma on my third birthday. You know what? Young people are smart in some ways and dumb in some ways, and middle-aged people are smart in some ways and dumb in some ways. One of the ways in which middle-aged people are dumb is the way in which they aim to persuade young people to save.
We say that dumb stuff for good reasons, though. You’re going to take a big hit one of these days. You won’t see it coming. One day for no good reason you will no longer have that paycheck you count on to finance all the good stuff going on in your life. You are going to feel hurt, and confused, and afraid rather than young fabulous and broke. This is the thing that we know that you don’t. You may know it in some theoretical sense, but we have seen it. It either has happened to us or to our friends. So we have a true edge on you on this one.
We are weak in the communication department, probably because we were not great savers ourselves when we were young. Our message often sounds patronizing (because it is) but the message is an important message and a well-intended one. So please try to filter out the patronizing jizz-jazz and tune in to the part of the message that really does make sense. You really do need to make more of an effort to save. It really does not make sense to remain too long in the ranks of the young fabulous and broke.
The second non-patronizing tip for the young fabulous and broke is to forget about trying to finance your old-age retirement.
The reason why the saving rate is so low is that most people associate saving money with financing an old-age retirement. Financing an old-age retirement is an important goal, of course. It also is a hard one to pull off. Thinking about it often generates fear but rarely generates effective action. People who associate saving with worrying (but not doing anything about) their old age often lose sight of all the reasons why they might enjoy attaining good measures of financial freedom earlier in life. It’s a mistake.
Highly effective savers generally are saving for some reason other than to finance an old-age retirement. They do end up being able to retire, of course. Money is fungible, so money saved for one purpose early in life can be put to a different purpose somewhere down the road. The key thing is not to let the idea of financing an old-age retirement be the primary goal driving your saving effort. That goal will not provide benefits for many years. So it provides little motivation. Focus on that goal, and you will not save effectively.
The third non-patronizing tip for the young fabulous and broke is to identify a saving goal that really turns you on.
If saving to finance an old-age retirement doesn’t work, what does? Here is a list of six saving options designed to have appeal to the young fabulous and broke:
1) Save to be free of “The Man,” to be able to walk away from any job that become unbearable to you;
2) Save to be able to stay home with your kids when you have them, or at least to stay home until they are ready to go off to school;
3) Save to be able to take a year-long sabbatical and travel the world long before you are old and gray;
4) Save to pay off your mortgage so that you really own your home and it can never be taken from you;
5) Save to be able to go into business for yourself; or
6) Save to be able to shift to a career that pays less but that provides more in the way of personal fulfillment.
Those are some ideas to get you started. The key is to identify a goal that means something special to you. That’s the sort of goal that will motivate you to really save and quickly leave the ranks of the young fabulous and broke. Once you get the hang of it, you will become better and better at it. Saving is like a lot of other things in life in that you become good at it not by reading about it or by thinking about it but by doing it.
The fourth non-patronizing tip for the young fabulous and broke is to make a budget.
You must have a budget. There are some money advisors who say that it is unrealistic to expect people to keep budgets because they are such a drag, but i say these money advisors are wrong. Budgets are essential. Just about all of the world’s great savers keep budgets. There’s a good reason. Budgets work.
You have probably heard people say that a young worker should think of himself or herself as a small company competing with other young workers/small companies for success in the New Economy, that you should think of yourself as You, Inc. How many companies do you know of that don’t keep budgets? There are none. That’s because without a budget a company doesn’t know what it is doing or where it is headed. When you don’t know what you are doing or where you are headed, it is real hard to get what you want out of life.
The purpose of a budget is not to tell you that you can’t do what you want. The purpose of a budget is to make it possible for you to do more of what you want. Like Linda Ronstadt did in her song “You’re No Good,” I’m gonna say it again. The purpose of a budget is not to tell you that you can’t do what you want. The purpose of a budget is to make it possible for you to do more of what you want.
The fifth non-patronizing tip for the young fabulous and broke is to think of your budget as your Life Plan.
There are things you want to do with your life. Your budget is your plan for becoming able to do them. Think of it that way, and keeping the budget won’t be a drag anymore.
It is normal and healthy for you to be bored by the idea of counting nickels and dimes and quarters and putting nice little numbers in nice little rows of spending categories and all that nonsense. It makes you feel like Ebeenezer Scrooge to be spending your time doing that junk. It makes you feel like a miser and misers are unlovable and you want to be loved. So your dislike of budgeting comes from a healthy place.
It’s a misguided understanding of what a budget is that is holding you back. A budget is a plan. That’s it. You can make it a plan to spend every cent you earn, if you like. If doing it that way gets you started keeping track of what you spend, that’s fine. The important thing is to gain the knowledge of where your money is going that comes only to those who keep budgets. So write a budget that calls for you to spend it all.
Just wait. You will change that budget down the road. Once you see where the money is going and how you could be having so much more fun if you were directing some of your earnings to saving, you will feel an impulse from within to make adjustments. The key is to begin keeping the budget. If you don’t keep a budget, you are likely going to remain in the ranks of the young fabulous and broke for a long time to come. Not good.
The sixth non-patronizing saving tip for the young fabulous and broke is to understand that saving permits you to spend more than you earn.
That’s what financial freedom means. How does somebody retire? By accumulating enough of the green stuff so that he can live off of the money generated by the green stuff rather than off the money he gets by showing up at an office or factory each morning. Retirement is not the only possible benefit of financial freedom. There are all sorts of possibilities that open up to you as you become gradually more financially free over the course of your life. Spend a few moments imagining a few possibilities.
Does the idea of being able to spend more than you earn appeal to you? Of course it does. It’s the powerful appeal of that concept that explains the great popularity of credit cards. Saving is a different way to do it. Saving is a way to do it without going into debt. Saving is a way to do it by making you rich rather than by making the credit card company rich.
Save. Get rich. Do the work you truly love. Live the life you really want to live. Escape wage slavery. Get out from under the thumb of “the Man.” Break free!
Do it while you’re still young enough to obtain the greastest possible benefits from doing so.