5 Tips to Build a FAT Savings Account in Your 20’s

“Rich people don’t work for money, they have money work for them.”

This is something that is mentioned in just about every book on investing or wealth creation out there and it’s 100% true. But that’s easy to say when you have money to start with. Before jumping headfirst into the stock market or any other business venture, it’s important to first build financial habits that will help you grow your savings account.

I often hear people say “if my boss would just give me a raise then I could start saving” or “I can’t save right now because ________” I used to say shit like that too to help me rationalize why I wasn’t saving that much. It doesn’t matter how much money you make. I know that sounds like bullshit, but it’s true. You’re nuts if you think there aren’t surgeons out there who make $300,000 a year and live close to paycheck to paycheck.  Think about saving in terms of percentages instead of dollar amounts.

For example:

Joe makes $100,000 a year and ends up saving $10,000

Bertha makes $50,000 a year manages to save $7,500.

That means that Joe is saving 10% of his income while big Bertha is saving 15%. Even though Joe saves more money than Bertha, he’s actually worse at accumulating wealth. Good on ya Berthy.

I’ll give a personal example to show you how I fell into the spending trap. Two years out of college, I was doing well in my field and got a raise to 100k a year. I had never made that kind of money in my life. It started off with little shit like eating out way too much… actually, I shouldn’t even say eating out because what I really mean is ordering Uber Eats so my fat ass wouldn’t even have to leave my house. I had it down to a science. I would start my commute in LA traffic, toss on a podcast, and time my order perfectly so that the Uber Eats dude would be pulling up to my apartment right as I got home from work. I would sign up for dumb ass subscriptions I didn’t need and have amazon prime packages at my doorstep weekly, all because I could. I ended up doing a deep dive through my finances and found out I had spent $70,000 in a year. No kids. No mortgage. Virtually no responsibilities outside of work. I spent the majority of my salary (after taxes) and had nothing to show for it. Don’t fall into this trap.

The steps listed below will help you to start changing your mindset when it comes to saving your money.

1.  Auto deposits

This should be a no brainer but it shocks me how many people don’t do this. Any bank will allow you to set up automatic transfers from you checking to your savings. Set an automatic transfer for every two weeks (or whatever frequency you get paid) so that a predetermined amount goes right from your checking into your savings.

STOP USING YOUR CHECKING ACCOUNT TO STORE ALL OF YOUR MONEY.

Promise yourself that your savings account will not be touched unless you have an emergency or you plan to buy assets with that money. Also, yeah I know you are already contributing to a 401k. This is in addition to that.

If you have $10,000 in your checking account, you will convince yourself that you have no problem affording that $300 watch you want. “I got ten racks to blow I’m gooooooooddd” While if you only had $3000, you would really think about that purchase because spending too much could impact your bills and your rent.

This is the classic pay yourself first mentality. Be fucking selfish about it. See your life as a business. You’re the owner. If you owned a business and it ran into cash problems: Are you going to cut your own salary first? Or are you going to look for ways to cut the costs of goods?

If the company you work for had cash flow issues… would you want them to cut your salary to help keep the business afloat? Or would you want them to lay off Steve from accounting?

Deuces Steve ✌️

2.   Ease your way into it

If you’ve never paid yourself first, don’t get all hyped after this blog and try to save half your paychecks. It’s going to stress you out and you are probably going to fail miserably. You’ll do it for the first couple months and then its gonna stress you the hell out and you will give up. Start with 5%. Maybe 10% if your feeling bold.

Paycheck is 1500 biweekly? Save 75

Easy.

Okay, now try 100 a check.

I get it. Life’s expensive. But life being expensive is not an excuse not to save. Just because saving $75 a check doesn’t seem worth it, doesn’t mean you shouldn’t do it. Start slow and work your way up. In my opinion, if you can get to a 1/3 of your monthly paycheck, you’ve made it.  I realize that this isn’t possible for everyone, but do what you can.

3. Focus of recurring purchases

When you start getting up there in percentages you may start to notice some cash flow issues. Remember, as I mentioned before, this doesn’t mean stop paying yourself.

This is when you gotta take a deep dive into that credit card statement and find out what you are spending your hard earned cash on. When I say recurring purchases, I don’t just mean your netflix, hulu, spotify, amazon prime, tinder plus, and whatever else subscriptions. I mean that burrito you get everyday or that trip to the 7/11 across the street from work that has the spicy beef jerky and those little rainbow fruit belt candies that surprisingly go really well with the berry prickly pear and mango pineapple frappuccino from the starbs that’s conveniently located next the 7/11. It’s this kind of stuff that can do dirty things to a bank account when left unsupervised.

Most bank apps these days can give you a breakdown of your spending and you can even set budgets for each category. If your bank doesn’t offer this, just download the app Mint (Hey mint exec reading this: first ad is free) We are creatures of habit. At first it’s going to be hard to stop buying certain things everyday, but pretty soon you won’t be able to imagine spending $15  a day on coffee and snacks.

4. Pretend you didn’t get a raise

This one is big. Once you master the first three, don’t let getting a raise at work change any of the things you have been doing. This is the easiest way to get stuck in the rat race. You will get used to making 50k a year and living paycheck to paycheck. You crush your powerpoint presentation at work and they bump you up to 60k and the process starts all over again.

If you were living off 50k a year and you get a raise, then all that money just goes back into savings. I never understood how someone can make 50k a year and live perfectly fine, not saving money, but still living fine and then get a raise to 75k a year and still not be saving. The best part is, they always make excuses why their circumstances are different and cost of living went up. No bro, you got a raise and thought you could afford that beamer and now you are back where you started. Which brings me to my next tip…

5. Bad debt goes first

I mean I guess first off, don’t get into bad debt. When I say bad debt, I don’t mean your school loans. That’s a necessary evil that got you where you are now. When I say bad debt, I mean anything above 5% interest that you probably could have lived without. The worst of all is credit card debt.  The average credit card interest for 2019 was 21% hahaha. If you promised me I could make 21% a year on any investment I make for the rest of my life, I would be wildly rich when I’m 50.

But okay don’t be so hard on yourself. You got yourself into absolutely crippling credit card debt. You went to a financial adviser and they threw up all over their desk when they looked at your bank statements. This is now your main focus.

Start dumping all this money your saving into your bad debt first. There’s no point in trying to build a saving account if you have the magical powers of compound interest working against you in the wrong direction. Chip away at it and promise yourself that you’ll never get back into this position again.

Good luck. I just want you to know that I believe in you.

State of the Market

Before I start getting into the nitty gritty I just want to address where we are at in the stock market. Stocks took a fat dookie this morning because of the Modelovirus out in China.

This is what we like to call an event. Stocks have been a god damn money machine for the past 18 months so everyone is kinda on edge about the crash. If you own companies, the most important thing to ask yourself is, “has the long term outlook of my company actually changed?” It probably hasn’t… unless this becomes a full on plague, I doubt this is really going to affect the bottom line of most companies 3 years from now.

People on Wall Street have more mood swings than an angsty teenage girl. Either the god damn word is on fire or nothing can go wrong.

My recommendation is to stop checking the markets unless you are shopping for a new stock. Some companies may have gone on sale today but keep in mind that everything is still trading above fair value for the most part.

Crush up a Xanax in your coffee this morning, and just chill out.

RIP Kobe