2726: Make Saving as Much Fun as Spending by Julie Grandstaff with Women Who Money on Personal Financial Goals

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[00:00:39] This is Optimal Health Daily, making saving as much fun as spending by Julie Grandstaff with women

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[00:01:19] Make saving as much fun as spending by Julie Grandstaff with women who money.com.

[00:01:28] Several years ago, I had the pleasure of presenting a budgeting workshop for a great group of people

[00:01:34] at my old company. There were lots of good questions. However, one in particular kept me thinking

[00:01:41] after I left. In hindsight, I wish I'd answered it better. So here it goes. The question was,

[00:01:49] spending is really fun. How do you make budgeting fun? Of course, the question isn't really about

[00:01:56] the act of making a budget, but more about the act of controlling spending with an eye toward

[00:02:03] increasing saving. In other words, how do you make saving fun? The fact that spending is fun is

[00:02:11] among the reasons so many Americans save so little. The Federal Reserve reports that the

[00:02:17] average American is currently saving around 7% of their after tax income. If that were your savings

[00:02:23] rate, it would take you more than 14 years to save a single year's worth of your income,

[00:02:30] making it a challenge to retire with your current lifestyle. So, how do you make saving fun?

[00:02:37] My answer at the time was to use myself as an example. I declared how I love seeing my savings

[00:02:44] going up in value, which made me sound like the nerdy bean counter I am. What was left out was

[00:02:51] why that made me happy? It made me happy because with every rise in the value of our savings,

[00:02:58] the closer my husband, Jeff and I came to realize our goal of leaving work in our 50s.

[00:03:05] I knew we were getting closer because we had very specific financial goals. It turns out

[00:03:12] achieving goals is a direct path to happiness. Psychological research shows, quote,

[00:03:18] the successful pursuit of meaningful goals, plays an important role in the development and

[00:03:24] maintenance of our psychological well-being and quote. In addition, the achievement of goals

[00:03:31] is a self-reinforcing motivator. The more progress we make on our goals, the more we're motivated

[00:03:37] to take more actions that help move us further toward what we desire. Think about a time when

[00:03:44] you completed a project. You were jazzed weren't you? It was an accomplishment and you had worked

[00:03:52] hard for it, maybe you even celebrated. Projects are relatively short-term in nature and very

[00:03:59] the problem with saving for a distant future, a time when you'll no longer be working for pay

[00:04:05] is that it's well-distant and not very tangible. It's hard to quantify how much you need to save

[00:04:13] making the visualization of a savings goal a little blurry. There's a lot to consider like where

[00:04:20] and how you want to live, whether you'll be healthy and more. So many close their eyes, hold their

[00:04:27] path and hope for the best instead of making goals and plans. For a crass donation like this,

[00:04:33] by the way, has been shown to undermine happiness. The secret to making savings as much or more

[00:04:41] fun than spending is to cut through all of these complicating details and set tangible short

[00:04:47] and long-term savings goals. Your longer term goal is how much you need to have saved before

[00:04:54] you can reasonably stop working. Your short term goal is how much you need to save each year

[00:05:00] to make your long-term retirement number. Create your goals. Here are three steps to help you get

[00:05:08] started. Number one, ballpark your long term goal. If you don't have specific plans for your post-work

[00:05:16] lifestyle, a safest assumption is that you wouldn't want to be forced to live on less than you do now.

[00:05:22] As you figure out what you want and determine a retirement number, keep in mind that you can always

[00:05:28] adjust your goals. To keep your same lifestyle when you stop working, you'll need to accumulate

[00:05:34] roughly 25 times what you're currently spending if you intend to stop working at a traditional

[00:05:40] retirement age. Looking at it from a different direction, you'll be able to spend about $330 per month

[00:05:48] for every $100,000 you have saved. Number two, break the long term goal into shorter term steps.

[00:05:58] Of course, that's a significant number and so seemingly out of reach that it may be

[00:06:03] demotivating. So like any big goal, it helps to break it down into smaller goals.

[00:06:10] Set a goal for how much you want to put into savings each year. It may be hard to change your spending

[00:06:16] by very much in the short term. Things like debt payments or daycare costs may take more work to change,

[00:06:24] but you can start small and save more later as you make more changes to decrease expenses

[00:06:30] and grow your income. And number three, build milestones for measuring your progress.

[00:06:38] Set another goal for your total savings balance for the end of the year. Your total savings

[00:06:43] balance is dependent partially on what you contribute and partially on how much your savings

[00:06:49] earned. You don't have to have a crystal ball about the stock market. Choose a reasonable growth rate

[00:06:55] like 5% which would line up with investments where at least half is invested in the stock market.

[00:07:02] Of course, your assets won't earn that every year. Some years will be better and some worse,

[00:07:08] but it gives you something specific to measure your progress against.

[00:07:13] Tracking. My husband and I created a spreadsheet that showed a specific target balance we

[00:07:19] hoped to achieve through savings and reasonable investment returns each year. We made an annual date

[00:07:26] to check our progress. Did we contribute what we planned to contribute during the year?

[00:07:32] Because we could control the savings part, the answer was yes. Was our balance what we expected?

[00:07:39] We couldn't control the investment returns, so this answer wasn't always yes,

[00:07:44] but it usually was. For the few years when the answer was no, we chose to save more in the

[00:07:51] following year to close the gap between our actual balance and target balance.

[00:07:57] We always celebrated our success even if the victory was simply to have saved what we had promised

[00:08:04] ourselves we would. Final thoughts. With these three steps, you have a ballpark understanding

[00:08:11] of the end game, a short-term actionable goal for how much you'll save this year,

[00:08:17] an annual benchmarks for which there are known corrective actions. Your goals are specific,

[00:08:24] short-term and tangible. This is a recipe for getting the same thrill from saving as you would when

[00:08:31] complete a project. That makes achieving your saving schools at least as much fun as spending,

[00:08:38] and the glow will last much longer. You just listen to the post titled,

[00:08:47] make saving as much fun as spending by Julie Grandstaff with women who money.com.

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[00:10:08] I find budgeting fun because I like to gamify it. The object of the game is to meet or come in

[00:10:16] under the budget I developed, and when that happens, it's extremely satisfying. It feels like I won the game.

[00:10:22] When it doesn't happen, it doesn't necessarily feel like I lost. It's more comparable to

[00:10:29] shooting a basketball and missing. It's not catastrophic but I do want to pick up that basketball

[00:10:35] and try again. And perhaps I'll analyze why I didn't make the basket. Was I standing way too far away?

[00:10:43] Did I throw it too hard? Do I need to work on my form? I do think it's fun to save money and

[00:10:49] invest. But these activities are mostly automated. Every now and then I'll look at how my net worth

[00:10:55] is growing, but I don't find this nearly as fun as engaging with my budget, monitoring my spending

[00:11:02] and figuring out new ways to be resourceful. I wholeheartedly agree that tracking your spending

[00:11:09] and savings rate is a big part of making this whole process fun. I have a spreadsheet where I check

[00:11:16] in every month on my budget. I reconcile with my bank account so I can ensure my numbers are accurate,

[00:11:23] and I calculate my savings rate. The things we measure are the things we improve. It's only

[00:11:29] through clear tracking of the numbers that we have any idea if we're getting better or worse.

[00:11:36] For me, this tracking makes me feel competitive with myself, and creates almost a reset for me to

[00:11:43] try again. When I meet or come in under budget, it motivates me to do that again next month.

[00:11:50] And when I don't, the start of a new month feels like a clean slate to start again with renewed

[00:11:57] determination. And that should do it for today, have a happy rest of your day, and I'll see you

[00:12:03] on the Thursday show tomorrow, where your optimal life awaits.