Motivation is what gets you started. Habit is what keeps you going.— Jim Rohn
The first time I “really” realised I needed to save money was in my thirties. Far too late, but not too late. I often set myself a New Year’s resolution of saving £1,000. I normally got close to achieving it, then some small “emergency” popped up, or what I thought was an emergency at the time, but really was more like a “want” and I had to spend what I’d saved. The £1,000 felt like the other end of the galaxy. No matter what I did, I couldn’t achieve it. The problem was, the things I was doing to save, were not correct. Some of the things I did were:
- Not saving automatically – the money I should have contributed every month, £83.33, was not coming directly out of my bank account (standing order) as soon as I got paid. I needed to move the money manually, and if there was money to move, I didn’t do it, as I often found something else to spend it on.
- Not paying myself first – As I was not saving automatically, I didn’t pay myself first. Paying yourself first means as soon as you get paid, before you pay the mortgage/rent, electricity, gas, etc, you pay money into your savings. I never wanted to be without money during the month, so I held off until the end of the month, and told myself I’d move the money then. But or course, at the end of the month there was no money left to move. If I had paid myself first, I would have simply readjusted my spending through the month to compensate.
- Not having an emergency fund – By not having money saved in an emergency fund, when an emergency hit, I had to use what I’d saved of the £1,000, meaning I never got to save that £1,000 by the end of the year.
By not utilising the three above best practices, I set myself up to fail. The problem was I simply didn’t know about the three things above. I was financially naive. I realised I’d had this New Year’s resolution for the last four years and had never achieved it. Somehow, without realising it fully, I began searching YouTube and started finding ways to become better at saving money.
The first video I discovered was from Brian Tracy called The Absolute Best Ways To Save Money. In this video he suggested saving 10% of your net salary (salary you get in your bank account after tax, pensions, healthcare, etc). 10%! Jesus, I couldn’t believe it. Where was I going to be able to save 10%? The man must be a raving lunatic.
Note: 10% really is the industry standard. It’s the minimum the financial industry says you need to save. Most people say more than 10%. In the FIRE (Financially Independent Retire Early) community they say save 50%+.
Anyway, back to Brian Tracy. He’s saying save 10%. That just couldn’t be done. Then he said, if you can’t save 10%, then start with 1%. Now that is a number I could… probably, make. Brian Tracy said, if you can only save 1% then just save 1%. It’s not the amount that you’ll be saving that changes your life, it’s the habit that you form.
Immediately after watching the video I watched it again, to make sure I didn’t misunderstand. Then, straight after that, I put a reminder in my iPhone calendar to save 1% of my net salary as soon as I got paid. I was going to pay myself first!
So profound was this knowledge, I told several people, quickly, of my plan. Note: often a bad thing to spread the word about your financial goals. One person actually laughed and asked what I’d do with the 1% of money saved. I ignored the cretin. I had this 1% rule so fixed in my mind that as pay day approached, I watched the video again several times. Brian Tracy turned into Micky and I was Rocky. Every time he mentioned in the video I should save 1% I got more charged up. I was going to do it.
Then, on the morning of the 26th of that month, my standard pay day date, I woke before 5 o’clock, opened my mobile banking app and moved 1% of my net salary into my ISA. It felt amazing. The money was gone, tucked into an ISA: safe, secure, tax-free, and all mine.
I must have looked at that ISA balance 200 times that month. And when the end of the month came, and I realised I’d not spent it, and the following day I was going to do it again, I knew I’d somehow, through sheer YouTube serving content luck, stumbled onto the domino video, the spark plug video, the starter pistol video. There was no turning back. The next day, when I got paid, I once again moved 1% into my ISA. Same happened the following month. And the one after that. I did this for 6 months. There was little showing in that ISA, but that didn’t matter. The habit was formed.
In the video, Brian Tracy said once the habit is formed, we should increase our percentage contributions and raise them, even by a percentage. Still completely financially naive, I thought that going to 2% was impossible. I continued Googling, looking at videos on YouTube and stumbling across podcasts. Once I found some podcasts and heard that all the experts I was listening to: Warren Shute, Pete Matthew, Andy Hart, were saying the same as Brian, that 10% is the minimum, then I knew I had to take the leap and increase my percentage contributions, and that’s what I did.
I’m happy to say I’ve completely passed the 10% mark a long time ago and continuing to increase my contributions’ percentages on a regular basis. My goal is to be like the FIRE blogger The Escape Artist and save 50%+. Let’s see.
Note: The Escape Artist’s blog is amazing. Treat yourself and read every post he’s done. He’ll open your eyes and make you laugh.