December 2020 Financial Minute: Saving Strategies
“Not Spending is Not Saving”
- G. Christopher Cutkelvin
Intentional Savings
By G. Christopher Cutkelvin
The importance of creating a personal financial systems and intentional saving plan is a “REALITY” which hit me as soon as I got a “real” job. Prior to this job my main financial focus was just getting through the month, living in a constant financial mindset of scarcity. As a college student I paid $289 a month for rent, I made about $800 monthly, and I never intentionally built a personal financial system prior to graduating college.
As I started my first “real” job, making more than $800 a month, I always had money left over. This excess provided me the environment to falsely create a myth in my mind that I was saving money. At this time my cash flow was really good. In addition to my standard monthly income, I was also receiving performance bonuses and other incentivized prizes, all of which contributed to my financial “excess” mindset. It wasn’t until I bought my first house (purely off of excess cash and not strategy) and started a state job (getting paid once a month, with no performance bonuses) did I realize that “not spending is not saving”.
Both the financial mindsets, excess and scarcity, created barriers which turns my focus away from intentionally saving and creating a personal financial system for myself. As I have learned more about finances, I realized I wasn’t alone in having these mindsets. In fact, most Americans have never take the time to think about or develop what their personal financial system. According to the Federal Reserve 39% of Americans do not have more than $400 on hand to cover an emergency. Furthermore, according to a Business Insider article (August 2020), the average (not the median) single American, under 35 only has $9,600 across all of their liquid accounts. When you start to look at savings by race (According to 2016 research done by the Federal Reserve), members of the White community average $51,400 across their accounts compared to only $8,400 by members of the Black community. It is important to note that there are many variables that contribute to these national reporting respondents and the educational background of these respondents were not reported. These statistics are only the tip of the ice berg when we it comes to equity gaps in the areas of personal finances and savings.
As a higher education educator, I constantly hear my students tell me that they cannot save or invest because they do not have any money. As a former college student, at an HBCU, I completely understand. Sneaking into the cafeteria on catfish Fridays to grab a plate of food was the only savings I did in college; however, I also spent a lot of money at Ralston’s and Specs. In addition to my personal experience, I also witnessed a lot of my classmates spend their refund checks on Prada shoes and Jordan shoes, along with other non-interest gaining purchases. I often reflect on how far $50 or $100 a month would have gone in a high interest yielding savings account or mutual fund over 10 years. I also reflect on how I wish I was informed that savings has to be intentional and a learned habit. I truly believe (and I tell this to my sister often) if you are not learning how to save when you are broke, the same habits will follow you when you start making money.
Creating saving habits is not easy; It takes skill, failure, experience, and self-reflection to start to understand your spending habits and build a personal financial system. Today is the perfect day to start to explore strategies and habits to create a personal financial system. A plethora of saving strategies and saving challenges exist for you to choose from, the only bad choice is the saving plan or challenge you do not start.
Below you will find some resources to creating intentional saving habits:
https://www.businessinsider.com/personal-finance/average-american-savings
https://www.federalreserve.gov/econres/scfindex.htm
