Step by Step. Inch by Inch

I apologize for writing the same article again and again, but it is so important to take that first step to financial freedom. According to multiple surveys, 69% of Americans have less than $1,000 in total savings. 34% report that they have no savings at all. Let us assume that someone with no savings at all, needs to replace the tires on their car to pass state inspection. What are their options if they can’t tap a family member for a loan? A high interest credit card? A title loan? A payday loan? A lack of an emergency fund is a disaster just waiting to happen.

Pay yourself first. The consensus of experts recommends skimming ten percent right off the top of your take home pay, before you spend a penny. Put that money in savings. That is pretty ambitious for someone overwhelmed with credit card debt and student loans, but don’t tell yourself what you can’t do. That won’t solve your problems. Tell yourself what you can do. Can you throw a dollar or two in a jar every night? $1.50 X 365 = $547.50, more than enough to buy a new set of tires for an average midsized car.

Automation is easier. Set up a savings account or a money market account connected to your checking account. Weekly or monthly, every time you are paid, auto debit a predetermined amount into that emergency fund. Let’s say you take home $600 a week. Chances are you could afford to pay yourself 5% and not miss that money—at least not most weeks. $600 X 0.05 = $30, dinner out for two at a typical mid-priced family restaurant with nonalcoholic beverages. You can afford it. $30 X 52 = $1,560. Add that to the money you threw in the jar in the first example and your emergency fund would be $2,107.50 after a year.

Slowly I turned. Step by step. Inch by inch.

I don’t remember with certainty when I passed the six months’ living expenses in cash mark, but it was sometime after ten years of marriage, but before the fifteen-year mark. Hey! Life happens! My wife went to grad school. I went back to get my engineering degree. Twice, during those early years, we dropped below or close to $1,000. Even back then, when $1,000 would equal $3,700 in today’s money, I considered having less than $1,000 an emergency. When it happened, we cut expenses to the bone until we recovered. Fortunately, I was raised with a third generation terror of debt. Borrowing money to buy a car or go to school simply never occurred to me. I was about 35 years old before we finally got our first credit card. By then, living without a credit card was just too difficult and debit cards didn’t even exist back in those days.

As the savings habit becomes an ingrained part of your life, you will find that your definition of an emergency will change. Recently, I bought a new set of tires for our older car. They cost $300. There was a time when such an expense would have caused me considerable pain, requiring a significant reordering of our priorities, and the probability of an argument with my wife. As time passes, you will find that you have factored such “known unknowns” into the size of your checking account balance. In those days, I would grumble, annoyed that my balance was below the preferred number, even though I knew my checking account would be healed by next month. Finally, the day will come when a new set of tires, barely merits a shrug of the shoulders.

It won’t happen overnight. Don’t beat yourself up. Just put something aside every month. Little by little. Step by step. Inch by inch. You will get there. May it happen sooner than you believe possible.