Three Very Bad Reasons for Not Saving Money

I was talking to my uncle, who is not exactly Donald Trump. He earns a pay rate that is not indistinguishable from minimum wage, lives in an apartment that requires rent by the week, and spends a little too much time in the bottle. I love him anyway, even if I can only take so much of him. But during those moments when we do have a chance to talk about his future, we sometimes discuss his financial planning, or lack thereof.

My uncle tends to give really good excuses for not saving money, and sometimes even a lie or two. They are loveable lies, not the kind that would make you stop talking to him. What is most interesting, however, is that my uncle sounds a lot like many other Americans I’ve spoken with when it comes to finding creative reasons for not saving money. “Broke-as-a-joke-itis” is a disease that is plaguing America (the richest country in the world) and causing nearly all of us to think that we are too broke to save. Most of us aren’t saving anything, for we are learning our investment philosophies from Paris Hilton and Vh-1.

I will only break it down for you with one quick fact: During my Research Scholar Visit with The Center for European Economic Research, I found that Germans pay more in taxes than Americans, earn far less than Americans, but save five times more than Americans. So, when it comes to saving, we really suck. Here are some of my uncle’s excuses for not saving. They might not be much different from your own:

“I don’t make enough money to save”

This is probably the silliest excuse for not saving, but one of the most popular. What if your income suddenly dropped 20%? You would find a way to survive, or you’d find a way to make more money. Either way, you would not die. So, all of us have enough money to save if that is what we really want to do. I recommend an immediate financial amputation: cutting your disposable income right now and putting the residual in your savings account. I promise you won’t die, starve, or go insane. What is also funny is that for most of us, if we were earning 20% more than we earn right now, we would still say that we don’t have enough money to save. That’s like increasing the level of the water in a pool every time you grow a couple of inches. You will always be struggling to swim.

“I save whatever’s leftover”

Some of us pay all of our bills, spend like we want to, and then save almost by accident. I have 3 words for those who try to save whatever is leftover after all their spending is done: wrong, wrong, wrong. The fact is that if you wait until you are done paying for everything else before you start saving, you will always run out of money right before the saving begins. Saving should not be something you do with your extra money, it should be something you do with your priority funds. The extra money is what you use for spending on items that are not necessary for your survival. Going through life without savings is like having no health or auto insurance, so saving is one of the most essential tasks in your life.

“I save through my home ownership or retirement plan”

Home ownership and retirement plans are important’ but they are not what we call “liquid assets”. Think of it like this: if you are on the street dying of thirst, would you rather have a glass of cold water or a big block of ice? What if it’s cold outside and you can’t melt the ice to drink from it? You might die of thirst right in front of a big block of frozen liquid. That’s what its like to have a highly illiquid asset as your primary source of saving: you can’t get it on short notice when you need it.

If you were to take a drink from the block of ice in the middle of winter, you might have to pay someone with a blow torch to unfreeze it for you. That’s no different from someone paying interest on a home equity loan in order to get cash for emergencies. Whenever you translate wealth from one form into another, you are always going to pay.

When it comes to saving, Nike said it best: Just do it damnit. Ok, they didn’t say the last part, but you get the point. The fact is that if you are always looking for excuses not to save, they will always be available to you. But when you are truly committed, your whole life will change. Take that step today.

Dr. Boyce Watkins is a Finance Professor at Syracuse University and author of “Financial Lovemaking 101: Merging Assets with your partner in ways that feel good”. He is a regular guest in national media, including CNN, FOX, BET and USA Today. For more information, please visit http://www.boycewatkins.com.