Wednesday, April 18, 2012

one penny at a time: the habit of saving money

It comes as a sweet (and by "sweet" I mean "cruel") coincidence that the third lesson of the Law of Success, the Habit of Saving Money, comes just as taxes have been filed. Let's just say that of all the lessons, this is the one I need to master. Hell, forget master. This is the one I need to pass. And I presume many of us are in the same boat.

The most fascinating part of reading this chapter (remember, this course was published in 1928), was seeing Hill's recommended savings:
"A family consisting of two persons, whose income is $100.00 a month, should manage to set aside at least $10 or $12 a month for the savings account. The cost of shelter, or rent, should not exceed $25 or $30 a month. Food costs should average about $25 to $30. Clothing should be kept within an expenditure or $15 to $20 a month. Recreation and incidentals should be kept down to about $8 to $10 a month."
Apparently there was no Whole Foods back in 1928. Or HMOs. Or gas that cost more than a latte. Or lattes that cost more than an ounce of crack (and delivering the same effect, presumably). Or smart phones, e-readers, cable tv, internet, or Apple. A college education wasn't the norm, nor was it the same cost as, say, a one-bedroom house.

I tried to re-do the math, taking 21st century expenditures into account. I tried to imagine what Hill would recommend. Not an easy task. Many of these things are vital to our existence. But somewhere along the way, the basic need of "clothing" turned into the basic need for "shoes-with-a-heel-that-could-impale-someone's-heart-if-used-as-a-weapon." The basic need for "food" turned into an option between healthier organic food that requires a personal loan every time you buy it, and cheap food so chemically concocted it will outlive the cockroaches during post-apocalypse. "Shelter" included HBO, Netflix, and a package deal with Cable Satan that went up by $50 bucks two weeks after signing.

Of course, there are the guys that tell you to "pay yourself first," to put your latte money into a piggybank and open an IRA at the end of the year, to get rid of all those extravagances and get back in touch with nature and public libraries and (gasp) talking to your loved ones in person, things that don't cost a dime but provide ample pleasure. And this is good advice. Even Hill's advice is both timely and simple: "First, quit the habit of buying on credit, and follow this by gradually paying off the debts you have already incurred." Put another way, "The main prerequisite is a willingness to subordinate the present to the future [italics mine], by eliminating unnecessary expenditures for luxuries."

But I wonder, is this really easier said than done? Is it a reality that what we earn simply can't cover what we need? Or have we become conditioned to believe that what we want and what we need are the same things?

Nevertheless, we've got to save one penny at a time. Not just from a personal perspective, but from a business perspective as well. As writers, we are self-employed. For those who self-publish, we are sole proprietors. We are in business. All business requires working capital. And, according to Hill, "the saving of even a small amount of money places one in a position where, oftentimes, this small sum may enable one to take advantage of business opportunities which lead directly and quite rapidly to financial independence." He's not wrong. An investment in a stock photo, an ISBN, and galley copies of books was the beginning of my self-publishing career. The mistake I made was that I dumped this on an already staggering credit card balance. Fortunately, the opportunity to self-publish became very profitable, but it was a long time before I was able to pay down that debt, and even then I made the mistake of not putting extra aside, both for my business and my savings. It's a tough lesson to learn, because with it comes a sense of embarrassment and shame, not to mention a fear of poverty, of losing everything you worked so hard to get.

But here's what we've got going for us. These lessons, these laws of success, are synergistic. They don't work apart from each other, but are finely woven together. The person who puts all these lessons into practice, makes them habits or principles to live by, will have the mindset to succeed in any financial condition. In other words, truly successful people can lose their fortunes and make them back again. Take Steve Jobs, for example. When Apple, the company he founded, ousted him, rather than curl up into a ball he founded a new company, Pixar. Ok, so Jobs wasn't exactly penniless when he did so. But I would be willing to bet my royalties that even if he was, he still would've made Pixar the company it is today. A definite chief aim, combined with self-confidence, a collaborative alliance with others, combined with the habit of savings and perseverance (and learning from one's mistakes, among other things), can ultimately succeed.

But we've got to start. We've got to make saving a habit, not an afterthought. We have to put it at the top of our list and not at the bottom. We've got to take it off the top of our paycheck, and not what's left over, if anything. We can start small. Pennies a day. 5% of our gross pay. 1% of our gross pay. We can give up one thing each month and put it towards our writing business.

Before we can apply organized effort to our definite chief aim (whatever that may be), we have to make the habit of saving our first definite chief aim, and put that into action. This is my greatest challenge. Whattya say we commit to it together.


Elspeth Antonelli said...

Self-discipline. It all comes down to that. Writing, saving, etc. I am so monumentally screwed. Irony blows.

Elisa said...

Doesn't it, though? And me too. Am monumentally screwed, that is. (I just love that I hear Toby's voice when either of us say that.)

Elspeth Antonelli said...

And I love it too. We need more pie.

Fenny said...

The first step is actually knowing what your income and outgoings *really* are. So few people understand the numbers and just keep spending.

Being naturally "careful" means that I can sometime splash out on the fun things in life. But the rest of the time, I'm completely skint!

And pie is fine, so long as it's home made ;-)

Elspeth Antonelli said...

Worry not, Fenny dear. Bring me ingredients and homemade pie you shall have. I make an excellent crust.

Fenny said...

Just don't put too much sugar in it!

Elisa said...

You are so right, Fenny, about both the income and outgoings, and the pie. :)