B-1. The Challenges in regard to accumulating a $10K starter emergency fund
While the procedure for saving money is simple, the psychological aspect makes saving $10K hard. Stated upfront: you are going to dislike having to save money while friends and family spend freely. While you will definitely miss out on some fun and exciting events, you do not need to become an anti-social hermit or to evaluate everything on a purely transactional basis. While money isn’t everything, you will need to have some in order to live a decent life. Being rich does not have to be your goal as there are millions of people who have lived great lives, raised children, led organizations, made significant contributions yet never became rich. While becoming rich may be the goal of some people, that doesn’t mean that those who do not pursue riches have somehow failed or are dumb. In fact, and contrary to popular opinion, making a difference in the lives of others is also a valid measure of success.
B-2. You will need a written spending plan
You will need to create a budget (spending plan), track your expenditures, and then hold yourself accountable. You will need to set priorities and then spend accordingly. You will need to think about earning and saving money every day without getting obsessed or fanatical about it. There’s a difference between focused, deliberate financial decision making and an unnecessary, ‘starving artist’ tightwad approach. Obviously, the save $100 at a time process is not a get rich quick scheme. It is a slow process so setting small milestones may help you to stay motivated. You will need to develop financial discipline and display patience. It will not be fun. You will face setbacks and emergencies will undoubtedly occur well prior to your reaching the $10K goal. You will frequently want to quit saving money, but think about how much better off you could be decades in the future if you just keep focused on saving the $10K during your 20’s.
B-3. You will have to hold yourself accountable because no one else will
Goofing off with low ambition friends; playing with money, blowing cash every weekend; spending thousands of dollars to impress people (snob appeal); signing for high interest loans to buy things that you can’t afford by embracing the feeling called, ‘I deserve it’ as justification; splurging while socializing with friends, family and coworkers because you are embarrassed to admit that you can’t afford expensive products and events—those are childish things and you will need to avoid doing those things or quit doing those things if you ever want to win with money. Either you decide to control money or it (namely debt) will consume you; therefore, establish a monthly, written budget and try your best to stick to it (individual accountability). It is unlikely that a government agency, a long lost billionaire uncle, or a knight in shining armor will come in to rescue you or to bail you out of bad financial decisions. After decades of observations, it is readily apparent that young adults who hustle: 1) acquire sufficient and relevant in-demand education, 2) maximize job skills training courses, 3) work more than 40 hours a week, 4) aggressively save money, 5) avoid unnecessary debt, 6) minimize wasteful spending and 7) invest for the future, that if pursued starting in their 20’s, tend to be more successful for decades to come. You can be next!
B-4. I have decades before I retire so don’t I deserve to spend freely while I am young?
We know that many people do not believe in this philosophy so you will see them buying expensive things without having any funds available for emergencies. In fact, many people believe that, ‘Things will always go well for me because I am a good person or that nothing bad has ever happened to me’ so they get surprised when contingencies arise and they then begin asking friends and family to loan them money. That’s why we recommend that the $10 grand you save only to be used for your own bona-fide emergencies, not for broke roommates, not for free spending friends, not for spend-happy family members, not for hotel rooms, not to relax on the beach, not for fun, not for vacations, not for entertainment events, and not for gifts or loans to others. Be aware that friends and family are going to laugh at you and make jokes about you when you don’t spend money like they do. Broke people will complain, whine and blame the government, high prices, and taxes for their financial struggles yet they will party every weekend, attend expensive sporting events and concerts, eat out nearly every day, and frequently take trips out of town. That’s why you will need to develop a thick skin, refrain from arguing with them, and avoid trying to defend yourself. Remember that your reward will be the $10K in the bank while they will still be broke. While you may feel justified when you have $10 grand packed away, please don’t gloat or boast as $10K is not that much money when compared to billionaires. Also, you may have to dip into your emergency fund just as soon as you arrive at the goal. Then, you will need to replenish it because most people never reach the point where they are immune from financial emergencies. Do not misunderstand what we are saying. There is nothing wrong with spending money and having fun, sometimes—it just doesn’t make sense to do that before you have saved enough money to handle priorities such as financial emergencies or to resort to going into debt (loans, credit cards) in order to do so. Believe me, if you hustle to get control of your finances during your 20’s, you will still have plenty of time to have fun using cash (not debt) and you will be proud of yourself for taking the initiative to make your life better long-term such as in retirement. In other words, cover yourself as an independent, responsible adult by saving enough money to handle emergencies first, then have fun using cash instead of debt. Stated explicitly, you will need to minimize debt, whether it be student loan debt and/or credit card debt if you want to get ahead. Understand that we do not believe in reneging on existing financial obligations in order to save money. That’s why we emphasize getting current with your existing bills first and avoid creating new financial obligations. If your day job is only funding your current lifestyle with nothing going toward savings, investments or your future, then you will need to hustle up some more work (develop a strong work ethic) or you will never get ahead. Once you sacrifice and save $10K, people are going to ask you for money, but don’t let others make you feel guilty for not bailing them out! In fact, they are free to hustle and make the same sacrifices you made to save the $10K. You may lose friends as a result of not enabling them. If so, you can always make new friends who are also focused on getting ahead instead of hanging with broke friends who wallow in being a victim. Bottom line: if you want to get ahead, then you are going to have to establish a degree of separation from those who just want you to stay broke like them.
B-5. I don’t know anyone who has ever saved $10K during their 20’s so can I really do that?
I realize that there are naysayers who will claim that someone who starts aggressively saving in their 20’s will need decades to save $10K. We say, challenge yourself to prove them wrong, but we caution you against initiating a discussion with family and friends regarding the pursuit of this goal. Why? Because there are financial naysayers in every family and among every group of friends. Additionally, we recommend that you do not boast about your money or salary because until you become the world’s richest person, others will have more. Yes, you will sacrifice some fun things, but understand that you will be happier and confident when you know that you can handle a financial emergency without stressing. Stated another way, avoid getting swept up in the consumption lifestyle or overpaying for so-called ‘wow-factor’ products and services as that just leads to unnecessary debt. Also, be aware that most things that involve money and the word, ‘convenience’ are usually a waste of money. Unfortunately, you must resist the temptation to overspend if you ever want to get ahead.
Learn more at Overton Leadership Associates blog titled, ‘Young adults: Got a full-time job? Time to start using the power of 100: Part C’