When I did a summer research visit with the Center for European Economic Research, one of my German colleagues came to me and asked: "What's wrong with Americans?" Taken aback by his statement, I said "Everything and nothing.....but you sound like a Euro-hater." Of course he didn't know what a "hater" was, but I do believe that some people around the world are jealous of American prosperity. At the same time, there is something to be said about the fact that we learn our financial habits by watching episodes of Vh-1 and "Lifestyles of the Blingingly Geto-fab" (Ok, that's not a real show, but you get the point). In other words, we stink when it comes to managing money, like a whole country full of MC Hammers.
The reason for my colleague's question came a peculiar fact that we unearthed during our research: Americans earn far more than Germans do, we pay far less in taxes than Germans do, but Germans SAVE FIVE TIMES MORE MONEY than Americans do. That led me to a moment of intense pause and reflection - like when Florida Evans suddenly realized that James was dead. I could no longer refer to my friend as a Eurohater....for his comments were right on point.
When I came back to the US, I listened with a more sensitive ear to my friends who swore that it was IMPOSSIBLE for them to save....they don't earn enough, their bills were too high, they will start saving when they get older, blah blah blah. All of these explanations are the reason for the pending retirement crisis in America (baby boomers are relatively broke, so get the spare bedroom ready), and the mortgage crisis (people defaulting on loans after buying a home big enough for King Tut and P Diddy).
Let's start with the basics for our financial tip of the week....ANYONE CAN SAVE. It's all about your personality and preferences. Essence Magazine, Black Enterprise and some other outlets reached out to me for financial secrets. I think they wanted some magical formula that only finance professors know about how to accumulate wealth. The first thing I told them was this: Saving and managing money is 95% psychological - make your mind right to get your money tight. The second thing I did was quote my grandmother, a woman who never went to college and never earned more than $20,000 a year, yet always remained financially independent, and has perfect credit to this day. She told me that "If you have the mind of a spender, you will always be broke. If you have the mind of a saver, you will always have money. When spenders get more income, they spend more. When savers get more income, they save more. A higher income only makes you a bigger version of what you already are inside." After sending thousands of students to Wall Street, learning tons of ridiculous theories and having far more education than any human being would ever want, I ended up going full circle and realizing that my grandmother's wisdom is one of my most cherished commodities.
So, here are my quick tips for those who want to start saving. Like Pookie in New Jack City - it's never too late to turn over a new leaf:
1) The actor Will Smith told me that when he gave his family his spare time, after spending all his time building his career, he always found that there was no time left. That was why he was divorced. He then realized that his family was a priority and that he should structure family time as a key part of his schedule. He is now happily married. Lesson: to be happily married to your finances, don't just save money that is leftover....there won't be any. Make savings the first bill you pay.
2) Find a way, today, to have 10% of your income automatically deducted from your paycheck and put into a special account. If your boss were to give you a 10% paycut, you would find a way to survive, so you can find a way to survive with 10% of your cash going into savings. Your financial security is the most important expense you have.
3) Try to put the money someplace where it is not convenient to get it. These are what they call "illiquid assets", or things that are tough to convert to cash. It's sort of like wanting to save a glass of water and freezing it into a block of ice. You can still get to the water if you're really thirsty, but it will be a pain in the butt to do so (why do you think they call money "liquidity"?). So, the water is there when you need it, but you can't just open the fridge and take a swig. Convenience and easy access are key enablers of compulsive activity (translation: if the temptation is right there in front of you, then you're really gonna wanna do it......That's how babies are born out of wedlock).
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