Saving money is hard.
But it’s almost never impossible.
That’s according to self-made millionaire David Bach, author of “The Automatic Millionaire.”
In an interview with personal finance site Grow, he was asked how he responds to the common protest, “I just don’t have enough money to save.”
Bach told Grow’s Jennifer Barrett:
People say, if I make more money, then I’ll save. Or they say, I can’t afford to save. [But] it’s about saying, over and over again: You can’t afford not to.
You don’t go from not running to running a marathon. You work your way up. Savings is very similar. You probably do have enough money. You just have a Latte Factor. It’s not really about giving up coffees or something [else], but looking at where your money is going and realising, I may actually have enough to save.
There’s an enormous disconnect between people’s values and how they spend their money. It’s about getting total clarity around your values and making sure the way you spend and invest aligns with that.
Bach himself saves 20% of his gross income, but it wasn’t always that way. He started saving 1% of his income in his mid-20s, gradually increasing it to the 20% he puts aside today.
In order to “never need to worry about money again,” he says, it’s smart to save an hour’s worth of your income per day. For example, if you make $50,000 annually and you work a full-time job, 40 hours a week, you’ll be paid for about 2,080 hours of work in a year, equaling roughly $25 per hour. Bank that much each day, and Bach says you’ll be set.
Then, automate your accounts so a portion of your paycheck moves into your 401(k) plan or savings account before you even see it. This takes the effort out of manually saving and ensures that your money will grow exponentially over time thanks to compound interest.
Tanza Loudenback contributed reporting.