We are in the middle of America Saves Week – an annual celebration and call to action for everyday Americans to commit to saving successfully. This year’s theme is “A Financially Confident You” and each day focuses on a different theme of saving.
To celebrate, we created an event called “CentsAble Chat LIVE” where personal finance experts came together to share their ideas and strategies for each of the savings’ themes. A big thank you to Bobbi Rebell, Author of “Launching Financial Grown-ups,” JanaLee Pickett, Founder of HopeOnADime.com and Paul Vasey, Creator of CashCrunchGames.com for their time and expertise! You can watch the entire video here, but since the savings theme for today is saving for major milestones, let’s focus on that.
Some of the major milestones we may experience include buying your first home, getting married, having children, going to college and retirement. During our discussion, we talked about the fact that, even though many generations have experienced the same milestones, so they’re really nothing new, they seem to hit us over the head, when it comes time to pay for them, because no one ever talks about planning for the financial aspect of these major milestones that can be very expensive to pay for. So, I started this part of the conversation by asking JanaLee Pickett – how do we begin to save for these milestones, especially when we have no concept of what they might cost?
JanaLee Pickett: Well, I think everybody can do a little research and get kind of an idea of how much those things are going to cost. You know a wedding doesn’t have to be thousands and thousands of dollars, you know. You can be frugal with some of these things. For school, you can look into getting scholarships and those kinds of things. And there’s ways to fund things without having to have this big looming number in front of us that we’re trying to save up for. But I think a little bit of research could go a long way for helping people know a kind of a target to shoot for some of these things.
Bobbi Olson: Definitely. And I think that’s a good, great way to strategize right? Because even if you don’t have the money today, that still kind of gives you a feeling of control that you can move towards this goal at least just by looking into what it is you’re going to need, then you can start figuring out later how to get it, but at least, like you said, you’ve started some research to figure out what it is that you’re actually trying to accomplish, how much you’re going to need for that.
And Bobbi, I wanted to ask you because you’re a CFP, because I get this question all the time, like I want to save for a car so that I can pay cash or I’m saving up for the down payment of my home, but it’s going to take me forever if I’ve got $200 per month to save, let’s say, and I’m saving for a down payment of a home here in Southern California. But at the same time they tell you don’t put it in the market because the market can be very volatile. So what do you do to grow that faster and still keep it safe in a shorter amount of time?
Bobbi Rebell: Yeah, you just wave a magic wand. Yeah, these are tough. Look, there’s no simple answer, and that’s unfortunate. I think there’s ways to accelerate your savings, you know, and it’s depends how important it is to shorten that timeline. You can do extreme things. So we talked about my daughter and what she did. Well, what she did was she eliminated housing costs and food costs. Not everyone can do that. But maybe some people can, believe it or not, if you really think out of the box. And again, this is about priorities, about options. Not everyone has the option, but we now have a lot of options with remote work. We have options, because a lot of the stigma of moving in with relatives is gone, certainly for younger people. So, in her case she eliminated 90% of what her overhead would be. She still had to pay if she went out with her friends, but she was curtailing that as well. But by eliminating housing and basically food, utility, that kind of stuff by moving in with relatives for a defined period of time – and I’ll tell you, when she did this she had an excel spreadsheet where she knew exactly how much she could save each week, and what her target date was to get her target down payment to buy that sort of minimum size apartment. And, by the way, very much a starter apartment, you know. Sometimes people say, Oh, I don’t know if I’m gonna want to move up. I don’t want to get a tiny little starter home. Get the starter home. Please. You know, if you’ve got kids, get into the school district, anyway, you can. But really think about that. There’s no shame in moving it with a relative, if it can work for a defined period of time, or maybe it’s, you know, some kind of a shared housing. Think about the big things you can do. Yes, you can do the latte factor little things, too, to accelerate your savings. But also think about, is there a big sacrifice I can make for a defined period of time that’s going to pump that up.
The other thing you could do is another extreme, not always fun, but take on a way to get more income, right? You may have your job. You may feel burned out at the end of the day, but as someone that and I didn’t have a financial constraint at the time, I want to be clear. I’m in a double income family. I had a lot of financial backing, but I was a full-time TV anchor at Thompson Reuters and I had 3 young children at home, a husband and a dog, and I chose to write a book while this was happening. And that was an unpaid second job, but let’s just pretend it was something with income that could have accelerated. We do have a capacity to have 2 jobs sometimes, again, not always fun in that period, but people would say to me, you’re doing this to get off the hamster wheel right? Cause reporting and anchoring, that was a lot with the family, and I kept saying, I want a better lifestyle, so I basically made it 10 times worse for a defined period. But I figured out a way. I figured out, okay, I’m working more hours than required. I’m working twelve-hour days. They’re only paying me for 8. I was just kind of really eager. I wanted to be on the call to London in the morning. I wanted to be on the call to Tokyo at night. I didn’t have to be. I let go. I did a good enough job. I did a really good job. I was never slacking at work, but I went for the A, not the a plus plus anymore. And it was okay. I dropped my son off at the earliest possible moments to the child care and I created a two-hour window every morning in which I could do extra work, and then on the weekends I made sure everything was in order, but I went and did chunks of time. I mean Saturday night you could find me at whole foods under the fluorescent lights on the Formica tables, writing this book. So think about the hours in your day. With remote work, there are opportunities to create those extra income streams, maybe in customer service, maybe doing some kind of freelance projects, maybe some consulting that can be done off hours, but there’s so many options now that we went through this period where we respect remote work, where we have technology that we can leverage that you can do things outside of your normal job to bring in that extra income and put that in a separate fund.
Bobbi Olson: So is there ever a time that you would suggest to somebody using any kind of investment vehicle, whether it be a stock or a mutual fund, or whatever or a bond or anything like that, to accelerate a short term so savings goal like a wedding, or a down payment?
Bobbi Rebell: Yeah, well, Cds are a great option these days. CDs can pay very well, and you absolutely should shop around because they’re not a standard rate like an I-bond, if it was something that the five-year goal, or at least depending on the math at least 15 months, and I bonds, are a separate conversation that people can look up, but there are very safe options in the form of Ibonds and CDs that will pay really respectable rates of return these days. So I think that’s a relatively new option with inflation, which we don’t love Inflation, but we do love the fact that we can now have safe investments. Be careful, obviously, if you’re in a savings vehicle up to the limits of insurance and that kind of stuff. But I think there’s some new options that could be very compelling investments.
Bobbi Olson: And those are available to your lower income people or people that don’t have a lot of money to save right?
Bobbi Rebell: Yeah, you can get a CD and you can do it for 3 months, 6 months a year, whatever it may be. So if you know your wedding date, and of course you have to watch when you have to put down the deposits for certain things, of course, but if your wedding is 2 years away, you could absolutely do a one year CD, sure.
Paul Vasey: Just don’t lose sight of the actual day. Rather than thinking about the detail on the napkin that no one cares about. Actually think about the day, and why you’re there, and why everybody else is there. It’s not one upmanship on the Joneses, is it? I mean, that’s where it starts to get silly, and that’s where a lot of people fall into the trap. Oh, in the one up, which I always say it’s a great day, and it’s not only the last day, but then you don’t remember half of it, anyway.
Bobbi Rebell: No. Having been married twice, you don’t generally enjoy your actual wedding day, enjoy the marriage. I will tell you one of my favorite centerpieces, ever at a wedding, and the wedding was in a barn – and they’re still married by the way – they made little wedding cakes where the centerpieces and they were homemade – and it had, you know, like a little bride and groom, and that was the centerpiece, and that was dessert. So they saved all the money you would do on all the desserts and all the center pieces, and all the flower rah, rah, and it was so fun, and then we just sliced it up ourselves. I mean, there’s so many things that don’t matter, or that you can make better just by doing it in a more affordable but endearing way.
Paul Vasey: And ironically, that’s more memorable than actually, the run of the mill country club with flowers on a table and blah blah blah, isn’t it? You know, and an ice sculpture, it’s just it’s more memorable. Yeah, we had pies and Ps and line dancing. And it was really, it’s still talked about.
Bobbi Rebell: Yes, and buy flowers in season. That’s my number one wedding Tip. But ask the florists. The florist will say, what do you want? And then they’ll tell you what it’s gonna cost to import them at that season, and whatever. No, what is available, and in season? Go with that! it’ll be great.
Paul Vasey: The other thing is, I mean, what Bobbi was saying is absolutely right. You can have a side gig, and you can earn extra money because you’ll find the energy, cause once you start getting used to that money, and then you know it’s ticking off that goal as you’re adding to it, and then finding the vehicles to help it grow, that’s motivation in itself. But on the other side of you also got the behavior where, hey, I bought a purse today, or a bag today was 60% off, and I saved a $100. But you went out and spent an extra amount that you weren’t gonna spend, which means it’s been taken away from somewhere else. So you know that money that you bought on that should have gone somewhere else if you really were gonna spend something, you know. And then the other thing is like parents, they don’t know how to say no to the children, and that is one of the biggest ways to reduce all your money very, very quickly, and there’s such an easy way to fix that.
All right so get monopoly money. Figure out your household income. You can make up the money and you put it in piles. This is your rent. This is a car payment. This is this, you wanna go on vacation this is my, our savings. This is your allowance. So they know where all the money has gone right? So when they ask you, can I have an ipod? Can I have this? Can I have that? Well, where’s it gonna come from? What pile of money is it gonna come from? There’s your get-out clause of no, because it’s already been put in a pile of money, and if you want to go on vacation, alright, we won’t go there then. If you want that’s going, that’s where it’s coming from. They’ll go. No, we want to go on vacation. We’ll do without. But then, when they start saying, Well, you know, if we want this well, where can we cut costs? Oh, the power! Turn your lights off! Then next minute lights are off, so it’s a win win, you know. It’s using that money has been allocated. But the point is now they’re working with you because they know where the money is going and how much is coming in, and it’s just such a simple way then. And it’s allowing you to say no, which means that you can start building. So when you say, hey, we need this new car, we need to raise this much money. This is where the money is going into. The kids will go, I don’t want that, because we want the new car, don’t we? And they’re helping you with all that as well. So that’s just a real quick way of actually helping which will then allow, like what Bobbi was saying with bringing into financial vehicles.
JanaLee Pickett: To take that even a step further, I like the idea of empowering the kids and telling them, sure you want that ipod? Let’s start saving your allowance for you to buy that for yourself and teaching them that principle, and how to make that happen for themselves in their own lives, and that’s very empowering for young children to say I can do this, myself, and I can pay for it myself, and they take care of it better, cause they know how hard it was to get.
Paul Vasey: Did you all have pride ever with your allowance when you say when you were able to buy your parents, a cup of tea or coffee, or a burger, you took them out for the first time ever for dinner, because you actually had money, do you remember those days? How proud were you because you’d actually save that money and able to give back! I mean, that’s another thing, isn’t it? Exactly what you’re saying, JanaLee, it’s actually getting them to realize and build up their own savings.
That was the perfect way to wrap up our conversation on saving for major milestones, especially given the fact that this year’s theme for America Saves Week is “A Financially Confident You.”
Thanks again to Bobbi Rebell, Author of “Launching Financial Grownups” JanaLee Pickett, Founder of HopeOnADime.com and Paul Vasey, Creator of CashCrunchGames.com for all the great ideas and strategies to save for major milestones!
Watch the entire video for ideas on “saving automatically,” “saving for the unexpected,” “paying down debt is saving” and “saving at any age And if you have questions about your budget, savings, paying off debt, anything money related, you can join us on the next edition of CentsAble chat LIVE and ask your questions in person! If you’d like to participate, send me an email at firstname.lastname@example.org.