Our corporate tagline is Keeping Life Current. It guides our approach to financial life planning and plays on current planning. The river theme relates to the reality of life where it seems we are always up against the current. Life is full of obstacles and we need to navigate around them. This is critical thinking in financial life planning.
With so many things out of our control in life, it’s smart to focus in on the things that we can do that can help us move toward our goals. How much we save, or our savings rate, is a factor in our finances that we actually have a lot of control over. It might not feel like it, but I’d challenge you to accept this as true: you have control over your savings. Even if you don’t completely believe it yet, let’s just pretend for a moment.
Now, look in your own life to see places where you actually choose not to save.
What do you spend on that you don’t need? When do you opt for the more expensive option when there’s a cheaper alternative? How often do you convince yourself you deserve a purchase and spend money because it just feels good or because it’s simply what you want?
None of these things are inherently bad. But it doesn’t work to say “I can’t save money” or “I have no control over my money” when you choose to shop at a high end food store instead of a least expensive discount supermarket. That’s just one example, of course. But you and I both know how much more money it costs to be a customer at the boutique shop versus the bargain shop.
Choose To Have A Major Impact
Imagine the impact of making little decisions like that in every area of life. Think about the little moments where you spend more than you have to, or spend when you don’t need to spend at all. All those little spends and purchases add up. But you can do something about it. You can take back control of your cash flow.
It’s not about not spending. It’s about being mindful on what you choose to spend on, and making the choice to save when you can. The truth is, most of us are fortunate enough to have wiggle room in our spending choices.
Are there exceptions? Of course. I don’t mean to say that there aren’t major societal and cultural factors in play that unfairly impact individuals or groups. I don’t believe you can just pull yourself up by your bootstraps in every single case.
But I’m not talking about every single case right now. I’m talking to the people with the disposable income to buy what they want and who choose to spend in a way that hampers their own ability to save.
Taking Control Of Your Savings
We can have more control over our savings by making smarter decisions about how and when we use our money.
Take a young couple who choose to save 30% of their income even when it’s tough? Even when it means making sacrifices and not spending on what, in the moment, might be fun to do? Because it helps them get to their goal of building financial resources much faster than if they saved 10 or even 20%. Is it possible, certainly. Are some people too conservative, sure. Can most people do it? Yes, if they dig down enough and they want it.
It is a choice. We could spend this money instead. We could settle for being just okay, and you’ll probably be fine if you save less. In my mind, building your savings is just a fancy way of saying gaining financial freedom. It’s getting to live the life you want, which is key to financial life planning. It’s having options and choice and flexibility.
That’s what we want — and making the choice to believe we control how much we can save is what we need to do to get to where we want to be.
If you want financial freedom, you need to save more than 20% to get you there. Otherwise you’ll likely have to rely more on factors that you can’t actually control to reach your goals — like the financial markets. We don’t want to rely so much on being forced to invest aggressively to achieve goals. Rather than ramping up the risk in an investment portfolio to try and get a higher return (to make up for years of not saving enough), a good savings rate helps make it possible to create a more moderate investment strategy.
No matter what markets do, having a significant savings target will get you to a place where we can rely more on our own finances and less on our income from work. As for you? Well, the exact rate that’s right for you will depend on your specific circumstances and vision for your life.
That’s where a financial life planner can help you design not just a savings plan but an investment strategy to match so you can get to your goals, confidently knowing you’re doing the right stuff to get there.
A good baseline for savings starts at 20%.The industry planning norm is 10% But if your young, with no dependents, you should all be aiming for that minimum if we want to create a robust savings strategy. It’s up to you. It’s your choice. How much you save is within your control. Make the most of the opportunity to create and grow financial resources for yourself. It will be hard but is achievable. Focus on Keeping Life Current.