I know people, I am related to people, who believe that saving money is either a waste of time because life is too short or who actually think saving is wrong because you can't take it with you. Saving means you're greedy.
Call me greedy. All I know is, a savings account may be the difference between you living in your own place or living on the street.
I volunteer with a local university to provide financial counseling to people who have applied for government assistance programs. Last week, I met with a woman who was living in a shelter. She wasn't on drugs. She wasn't an alcoholic. She wasn't on the run from an abusive husband. She hadn't been involved with any scams or schemes that robbed her blind. She hadn't done anything "wrong" or had anything wrong done to her. She just hadn't saved a penny.
Like thousands of Americans, she lost her job recently. But when she lost it, there was nothing. She didn't have a savings account. She spent her paycheck as soon as she got it. There was nothing in checking. When the rent was due, she just didn't pay it. Before too long, she was evicted, her stuff was sitting in a kind friend's basement and she was living in a women's shelter, working part time in retail.
There was no cataclysm -- no earthquake, hurricane, divorce or death. She even knew the job loss was imminent. She just had NOTHING in reserve. Without me even asking, she told me that she never cooked at home and spent most of her money eating out. The take-out places she frequented knew her voice, her name and her regular orders. The Starbucks she went to would have her regular waiting for her at the same time every day. "Good afternoon Ms. So-and-So. Here's your latte!" She'd debit $4.35 and be back to do it again the next day. She had no credit card debt, but that was because she hadn't had a card in years -- she declared bankruptcy at 26 because of the debt she got herself into. She treated friends to expensive meals. She bought whatever. She shopped when she was bored. Now she was sitting in front of me, required by the shelter to save 30% of her income, hoping to get into an assistance program that would get her into her own apartment.
I didn't even know where to start.
I was talking about debt snowballs, she had no debt. I was talking about tax adjustments, her paycheck was so small that bumping allowances wasn't going to help her much. I talked about budgets and spending plans, she gave me a blank stare.
I had to go back to the basics. I had to remember where I was five years ago when I was deep in debt and didn't even know how much I owed who. I had to search my memories and dig up old feelings to access the lessons and anecdotes I could share with her. I told her my story. How I didn't want to know how to manage money because I didn't think I'd be good at it anyway.
She nodded and said "Yeah, every time I tried to balance my checkbook, I got it wrong anyway, so I gave up."
I told her how once I got behind on my cards, I thought it would be easy to pay it back because money was so abstract for me. "What's another $65? I already owe $1,000!"
She leaned forward and said "Yeah!"
Then I started talking about the moment when I turned it around. I looked at my money. I got all my credit card statements and added them up. And that's when I saw that I was $16,000. Suddenly, that seemed like an awful lot of money.
She said "See, that's the problem. I won't look!"
"The only way to get out of your situation," I told her, "is to figure out EXACTLY what your situation is. You may be making a fraction of what you used to make. You may be living in a shelter, but until you figure out precisely WHY you're living like this, even if you get out of this, you'll learn nothing and be right back here in no time. You need to shock yourself with the truth that you've been ignoring."
We started with the latte factor. I asked her how much she spend tn coffee in a month. She had no idea. I added up her $4.35 lattes for a month. Then showed her the total for a year. Her eyes widened. "I could own a car for that money."
"Can't drive coffee can you?" I asked.
"But coffee drives me!" she said.
"Well, find a new driver."
I had to make baby steps with this woman. First, open a savings account NOT linked to your debit card. Ask your bank to debit the 30% and arrange it with them to keep you away from that money.
Next, figure out how much money you have available each month. Subtract your recurring bills (cell phone and transportation was all she had) from your net income AFTER savings is taken out. Next, for one week, keep track of every penny -- movie tickets, coffee, cigarettes, sandwiches, change dropped in a Salvation Army bucket -- EVERY penny.
She looked at me like I was crazy. But really, she just didn't believe she could do anything differently. I told her she just had to start. She'd try, she'd screw up, she'd try again, get discouraged, chuck the whole thing, get mad, try again, screw up and try again. It was ok. It was part of the process. And then the process would become part of who she was.
I told her that I could eyeball a grocery cart and know how much it would ring up. I asked clerks for the receipt if I paid 50 cents for gum. I told her I saved $16,000 -- six month living expenses -- without hardly trying. I just figured out the total I needed, determined a time frame and set up an automatic savings plan. I wasn't good with money, still am not, but I'm not bad. And I'll never go back to what I was doing before.
I didn't save before because it seemed so difficult and a little silly. I could be dead next week,why sock away so much cash and not touch it! But that's how you think when you just don't want to face responsibility. Responsible people recognize that a savings account won't save them from danger or protect them from calamity, but they also know that their job is to prepare to manage whatever they can when misfortune hits.
She thanked me and asked to come back in a month. I really hope she does. I'd love to see what she managed to do in that time. And I'd be happy to help lay out each baby step until she can walk on her own.