If you think you’re saving, you might be pretending
One of the questions I often get from people who have watched my TV show is, “Are those people for real?” That’s quickly followed by, “Don’t they know they have to save something?” Yes, the people on my show are very real; I took great pains to keep the “reality” in reality TV. And no, people don’t really think they have to save. Some think government benefits will be enough for retirement (that may be true if you’re comfortable living on about $18,000 a year). Others say they just can’t find the money to save.
Life is expensive. I know. But saving is important. Thirty or so years ago, we knew that, and we saved as much as 18 per cent of our income. Since then, our savings rates have plummeted. Now, on average, we’re saving about 5 per cent of our money. But that’s an average; some of us are saving nothing at all.
And then there are the folks who think that as long they’re stashing money away in registered retirement savings plans, tax-free savings accounts (TFSA) or Canada Savings Bonds, they’re doing fine. Never mind that the balances on their overdrafts, lines of credit or credit cards keep going up; they’ve got an automatic savings plan in place so they’re okie dokie.
What they are is delusional. To be saving, you must be net positive, meaning that you must be putting away more money than you’re taking on in debt.
If you sock away $10,000 in a TFSA this year but you rack up $6,000 on your line of credit, $3,500 on credit cards and $500 in overdraft, you’ve saved absolutely nothing.
Saving is the act of taking money out of your cash flow and putting it away for a date to be named later. Putting $50 a month away in savings and spending $50 on credit that you’re not paying off in full when the bill comes in is not saving. You’re pretending to save.
You know the story of the grasshopper and the ant. Grasshoppers don’t plan. Ants do. Grasshoppers love their toys. Ants love their freedom of choice. Grasshoppers compare themselves to others. Ants measure how close they are to reaching their goals. So are you a grasshopper or are you an ant?
If you answer “grasshopper,” all is not lost. Just because you’re not an ant doesn’t mean you’ll never be a saver. You’re just going to have to try harder to overcome your natural tendency to have a great time and not think about tomorrow.
If you want to become a saver, focus on making small, manageable changes that will stick. Don’t give up coffee completely. Just decide that you’re going to trim back your coffee habit by 30 per cent a week and send all the money you’re not spending on your caffeine habit to a high-interest savings account.
Like to hit the fast-food outlets or drive-thru windows? Every time you grab a burger or a coffee, drop a buck in a can you keep in your car. Hey, if you can find the money for the fast food, you can find the money to save, too.
Gail Vaz-Oxlade is the host of Til Debt Do Us Part and Prince$$. She blogs daily at gailvazoxlade.com. Follow her on Twitter @GailVazOxlade.