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Jenni and I are working through Financial Peace University this fall and I thought I would do a companion series following the main principles and lessons from our classes. This particular article is based off of the lesson: Super Saving. If you haven’t taken Financial Peace University, I would highly recommend and encourage you check it out as it has completely changed how we handle our money and has allowed us to make a huge turn around in our finances as well as other parts of our marriage as well.
What do you expect to be your greatest challenge as you get started with FPU?
I remember the first time that we decided to go through FPU and see about taking charge with our money. I met with our church coordinator and thought it would be a perfect way for my wife and I to get on the same page about money and start working together. It was really interesting the way that our financial story has completely changed since that moment!
However, the biggest challenge that we had was not about getting started on a budget, but rather, focusing on one thing at a time. I thought that by doing everything at once, we would somehow be able to get everything funded and wouldn’t have to worry about finances since we were going to be achieving all of our financial goals at the same time. But, what I would soon find out through FPU was that that was the exact opposite of what I was supposed to do and was just making us basically tread water because our plan was not sustainable for the long term.
What is Super Saving all about, and why should it matter?
From the FPU Workbook:
In Super Saving, Dave blasts through the hype and reveals the reasons why you should save money, how to be prepared for emergencies, and how to build genuine wealth–without luck or the lottery! More than that, Dave will truly get you excited about saving. Impossible? Not when you start Super Saving!
Super Saving is intense! It’s not easy to do. It takes time, patience and discipline. It’s a muscle that must be exercised over time so that it can be built up and if you don’t use it, you will end up atrophying.
When you learn to save your baby emergency fund of $1,000, your whole world will change. At least I know it did for us! After having our initial $1,000 in the bank, we relaxed a little bit because we knew we had a little bit of cushion. Not anything like we have today, but a true start to feeling independent instead of reliant on credit cards. It was empowering! It made me feel like if I could save that up, there was no reason that I couldn’t save up for other things.
The other side to finally having saved our intial $1,000 was that we started looking at needs, wants and emergencies completely different. Instead of seeing something that we wanted to purchase and just going out and getting it because we wanted it, we learned to stop, think about the purchase and finally save up and pay cash for it. This has been a remarkable discovery in how well we plan for our expenses these days. It has also taught us a well needed lesson in contentment as when you are saving up to pay for something, you have to learn to be content with what you have until you reach the point of wanting to purchase the new shiny.
Emergencies no longer were a crisis moment for us as we started stepping back from the situation more and looking at it from a new perspective. Instead of worrying about the expense, we started trying to find ways to cash flow the emergency instead of having to pull from our baby emergency fund. This taught us how to think outside the box during tough times and use the emergency fund as a last resort.
Working through all of this taught us to build a proper foundation too. Because we were laying this foundation of having cash savings, focusting on getting rid of debt, and then starting to invest after we had built up some margin, we are paving the way for us not to have to touch our investment money if emergencies happen and this allows us to let the magic of dividends and compound interest work for us instead of against us.
The last thing that saving $1,000 taught us was that by using a budget to live on less than you make and saving the difference, you are able to truly build wealth, but only if you stay on course. When we made saving a priority, it’s amazing the things we were willing to cut back, give up, or sacrifice in order to make our goals happen.
Saving Basics
Saving must become a priority
Savings has to be first on your list of things to do or you won’t do it because something else will always come up and take priority over it. I still struggle with this as I list out by bills first and then save what’s left over. However, since getting our emergency fund completely funded, we have been forced to set a dollar amount to invest out of each paycheck, forcing us to save that money. I think if I were to go through and do it all over again, I would try to aim for a savings goal every month first and try to cut to get to that goal. This is still something that we struggle with.
You must pay yourself first
This goes hand in hand with the first point. By paying yourself first (after your tithe, of course), you, in effect, force yourself to save. Dave Ramsey often says “Your biggest wealth building tool is your income.” If you aren’t taking control of your income and putting some of it away each paycheck, you are robbing your future self each paycheck.
Give, save, and then pay bills
We have done well with the giving portion of this as we tithe on our income no matter what. We are currently working to start putting a percentage, no matter what, into savings or investments. By doing this, we are able to keep our lifestyle in check and it’s a great reminder that our money is finite and that we need to be content with what we have and patient for what we want.
Saving money is about emotion and contentment
Personal finance is such a roller coaster. You can be heading up the hill with angst and anxiety when you are worried about how you are going to make your budget work when things are tight. You can be just going over the top of the hill where you get to see the awesome view of the park when life slows down just before you go over when you are just completing a baby step like paying off debt or finishing up your emergency fund. Or you could be enjoying the ride down that drop as you see things working and just get to enjoy the ride as you see your goals truly pan out. But, of course there is always the unexpected corkscrew turn or loop de loop that comes up when you have emergencies come up and set you back. Understanding how you react when this stuff happens is huge and will work for or against you if you don’t know how to control yourself.
When focusing on saving, the more content you are with what you have, the more you will be willing to sacrifice and not splurge to buy the newest shiny out there. As we have been on our financial journey the last four years, there have been many times where we had to make sure that we were reminding ourselves about our goals and learn to be content with what we have instead of setting ourselves back and giving in to buying something we don’t really need at this stage.
Building wealth is not evil or wrong. Money is amoral.
Some people have a hard time with this one. I, for one, haven’t ever really thought of wealthy people as being evil though. I think the bigger problem that people have is that they are jealous or envious about what others have accomplished. But, one of the best things about our country is that we all have an opportunity to serve and create for others and be rewarded based upon our actions. By doing this, everyone is incentivised to do well. Going through Dave Ramsey’s The Legacy Journey class dove into this much deeper and it’s amazing how much of a magnifier money really is.
“Making money is much harder to do if, deep down, you suspect it to be a morally reprehesnible activity.” ~Rabbi Daniel Lapin
This quote can really limit you if you don’t believe in what you are doing. If you don’t think that building wealth is an important activity in your life, than you will have a hard time going against your core value system.
“The only difference between saving and hoarding is attitude.” ~Larry Burkett
This point is incredible and can be the difference between a disease and a goal! If you put money up on a pedestal to be worshipped, you have missed the point of what wealth brings to the table. By looking ahead and seeing a need, you are saving to meet that need so that when it comes time to pay for it, you don’t have to take out debt to pay for it. Don’t just save for the sake of saving, that would be hoarding. Save for a purpose. Whether it be to give more generously, to change your family tree, or to make sure that you can retire with dignity, always do it with the right attitude.
There is a great article talking about this done by Larry Burkett that I would encourage you to take a look at.
It is the Christian’s spiritual duty to take dominion over money. If we don’t, we surrender God’s resources to the enemy!
“In the house of the wise are stores of choice food and oil, but a foolish man devours all he has.” ~Proverbs 21:20
Why Save?
There are three main reasons to save:
- Emergencies
- Purchases
- Wealth building
Emergencies
There is a very high probability that within the next 10 years, you or your family are going to have an event that might set you back $5,000 or more. So, if we know this is going to happen, we should definitely be setting aside some money so that we can take care of those emergencies when they happen.
Here are some articles I’ve done on the need for an emergency fund:
- How To Cash Flow Emergencies With No Emergency Fund – I wrote this article because I wanted to give people ideas on how to take care of emergencies when you are still working on your Debt Snowball and only have $1,000 in your emergency fund.
- Emergency Fund 101: Why You Need One – This is basically an overview of the whole emergency fund concept.
- Baby Step 3: Fully Funded Emergency Fund Update – This is just an update post that I wrote about our journey to fully funding our 6 month emergency fund.
Purchases
The second reason to save is for purchases. When you have a goal set, you are more likely to sacrifice deeper the more you make that goal a priority in your life. There are many things that are big purchases in our lives: cars, wedding, vacations, new technology, furniture, down payment on a house, and I’m sure that you could add many more to the list.
The principle here according to Financial Peace University: “Instead of borrowing to purchase, pay cash by using a sinking fund approach.”
One definition of maturity is learning to delay pleasure. Children do what feels good; adults devise a plan and follow it. ~Dave Ramsey
So, the next time you are looking to buy something, try saving up to purchase it rather than using debt to accumulate it. I have found that the purchase is much more gratifying when I make the purchase. Or, if I don’t make the purchase, it’s becuase I’ve forced myself to wait and I realized that I really didn’t even need it and found that it would have been an unwise purchase in the first place. Don’t let debt rob you of your joy and happiness when making purchases.
Wealth Building
Reason number three for saving money is to build wealth. The good news is that wealth building is very simple in concept; simply spend less than you make and save the rest. It’s when we don’t have a plan for our money that we get in the way of our greatest wealth building tool, our income!
Unfortunately, we happen to live in a world where most people want instant gratification and aren’t willing to take the time to grow over time, slowly but surely. We have to remember that building wealth is a marathon, not a sprint. We can’t expect to hit the lottery, receive a huge windfall like inheritance, or expect the government to take care of us. We have to do it ourselves. That’s why discipline is a key to building wealth.
Have you taken Financial Peace University yet? Do you habitually save for emergencies, purchases, and building wealth?
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Steven Goodwin
Owner/Blogger/Consultant at MyFamilyOnABudget
Steve Goodwin, a stay-at-home dad of two girls is passionate about finances and is helping others just like you get out of debt and build wealth handling money God's way. His goal is to inspire people like you to gain control of their finances by destroying debt and building wealth using their cash flow.
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This class sounds like something I really need to take. I too struggle with focusing on one debt at a time and still do not see the benefits of it.
I can not wait until I get the liberating feeling of having an emergency fund!
Shirria @GDTH recently posted…Our house, making it a home!
Hi Shirria, thanks for stopping by and reading! Yes, I would recommend the class to anyone looking to get a better handle on their finances. You get to surround yourself with others of the same mindset as well. Keep going, you can do it, one baby step at a time.
And emergency fund really does reduce stress levels. Emergencies become inconveniences instead of times of insecurity and fights.
I also like how you mentioned saving for emergencies, purchases, and wealth building. We took this class in 2010 and 2011. It has made the world of a difference as we paid off $36,000 in debt. We are now hosting or facilitating a class at our church this fall!
Steven great post as always love reading your articles.
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