treat savings as a debt to yourself to encourage snowflaking success

May 8th, 2008

Treat Savings as a Debt to Yourself to Encourage Snowflaking Success

When I was a kid, I was a saver. In fact, I saved almost every penny I was given from the time I was old enough for people to give me money directly versus giving it to my parents for me. By the time I was 16 I had saved enough money to put a $6000 downpayment on my very first car. Even after that, I continued to be a saver, but somewhere, somehow, in between then and graduating from college, the saving instinct waned and the spending instinct took over.

But I think that my saving instinct is beginning to recover, in the path of paying down debt. Even though I’m not saving the majority of the money we bring in, I’m using it to reduce our debt, and carefully counting my pennies and snowflaking them to make bigger and bigger dents in our debtload. But now, as we’re shifting our focus to a combination of saving and debt repayment, I find myself feeling a little nervous. I understand how to pay down debt. I can see debt freedom as my goal and shoot towards it. After 10 months of trying to keep focus on debt repayment and nothing else, it feels rather frightening to take my eyes off that and shift our priorities, even though it is necessary.

For those of us who have learned to pay down debt with single-minded intensity, the challenge now is to be able to shift that intensity from debt repayment to saving money. With debt, there is a finite goal – the elimination of the debt. With savings, the goal may be more nebulous. We want to be prepared for an emergency. We want to be able to retire. We want to be able to have some fun. We want our children to go to college. Whatever your savings goals are, they may feel more abstract and nebulous and not concrete, and that may be the roadblock to becoming an effective saver.

The key to turning savings into a snowflaking target is to define concrete goals you want to meet. Just like debt reduction, saving happens in baby steps. Don’t be afraid to be wrong about the amount you need to save. You can always revise your goals – I’ve revised my debt reduction goals at least a dozen times at this point. The point is to make a goal. Make savings a concrete goal to aim for. Set a goal for how much you will contribute to retirement per year. Maybe it is a percentage of your salary, or maybe it is a exact number. Then make a plan for how to do that.

Or maybe your goal is an adequate emergency fund. Decide on a number to aim for, and then snowflake to that goal just like saving is a debt to yourself. With a firm number in time, the process becomes exactly the same as it was for debt repayment. You can always shift that number upwards in the future – the point it to set yourself a specific goal to shoot for now. 6 months expenses is nebulous – $8000 is concrete. Calculate out a numerical value for your savings goal – and then go for it. Snowflaking works for any concrete goal – the important part is to know what you’re aiming for so you know when you get there.

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10 Responses to “Treat Savings as a Debt to Yourself to Encourage Snowflaking Success”

  1. Very true.

    I think the biggest problem with shifting the focus from debt repayment to saving money has to do with the perceived consequences. Not paying off your debt has an immediate sanction, in the form of interest payments, not to mention the fact that it’s hanging over your head. Not saving, on the other hand, doesn’t penalize you now, although the cost is just as steep (missing out on the power of compounding is enough) but you don’t really feel it. It’s nebulous, as you put it.

    The best thing to do is to not only put numbers on your savings goals, but to try and calculate the cost of not saving. If, for instance, you plan to save $100 per month for investment purposes, use one of the calculators available on the internet to calculate how much that $100 will turn into in 5, 10, and 20 years. That will provide excellent incentive.

  2. I can’t wait to be able to save more. I have more than a year of debt left. Sigh. I get so frustrated.

  3. I totally agree. It’s a difficult mindset to get into because with debt, you HAVE to pay it off, but with savings there isn’t that same urgency. It’s very easy to put off for later. But I have done the snowflaking method, too. Each week, I have $15 automatically transferred from my checking account to one of my high-yield savings accounts (which I’m actually using as a travel fund right now). It’s enough to not hurt me week-to-week, but it’s enough that it definitely add up over time. Every little bit counts, especially when there is interest! If everybody just put $10 or $20 or even $50 in a savings account every month, they would be so much better off in the long run.

  4. That’s really awesome that you were able to save that much as a kid! Did your parents instill that in you, or do you feel like you just came into that naturally?

  5. paidtwice Says:

    May 8th, 2008 at 2:33 pm

    My parents are basically the anti-savers. Not that they don’t believe in it, but they aren’t very good at it. they have gotten better.

    my mom says I was born with a hoarding instinct. lol. which is true… I am just working on rediscovering it in relation to money. Other stuff… I still hoard just fine ;)

  6. Another tactic that can help (given our how psychology effects many people) is to put money for savings in a separate pot from money you will spend. It is easier for many to have $50 with each paycheck automatically go into some account and just accept that money isn’t available. On the other hand having it go in the same account that has funds for the new car, the vacation next year, a new TV… and $50 a paycheck for long term saving… It gets very easy when the new TV is being bought to just see the whole account as available for the purchase…

  7. Good point. I find that as long as I have a savings goal in mind, the snowflaking will follow. I was never a big fan of setting goals. Until I tried it. And it worked. At this point, the thought of compounding interest seems just as powerful as the threat of finance charges in my mind.

  8. This is great advice. I just answered a question about that over at my blog…


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