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Understanding Money with Eoin McGee | Episode 12 Savings — Transcript

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0:00[Music]
0:04you're very welcome to understanding
0:07money I'm om mgee if this is your first
0:09listen I really appreciate you tuning in
0:11or listening in and hopefully by the end
0:13of it I'll convince you to hit the
0:15follow button if you're a regular
0:16listener I appreciate you even more
0:19today is all about saving and I'm
0:22talking about savings habits the rules
0:25how you become a good saver first thing
0:29to identify or accept or realize
0:31whatever way you want to beat yourself
0:33up is there's no such thing as I'm a bad
0:37saver you're either a saver or you're
0:39not it's a habit okay so you either
0:42create the habit or you don't have the
0:43habit and you need to start it and
0:45everybody should try and start it and
0:49you do need to sit back and decide what
0:52is it what's the purpose what's the
0:54reason there's three different pots of
0:56savings that I talk about okay the first
0:59pot is is short-term stuff that you're
1:01saving for stuff that might come up this
1:03week or this month or next month or in
1:05the next couple of months or then you've
1:08kind of even longer stuff where we're
1:10it's not long term yet but it's still in
1:12the short term from a financial planning
1:14perspective that might actually happen
1:15in the first five years whether you're
1:17saving the fir for next week next month
1:19or next year if you're going to spend
1:21the money in the next five years it
1:22belongs in your bank account that's
1:23where you're going to save bank account
1:24credit jion on pus you can play around
1:26with the rates it doesn't matter if it's
1:28beyond 5 years we going to invest it go
1:30back and listen to the investment
1:31episode if you missed that one we're
1:32going to invest it and we're going to
1:33talk listen to that and you'll
1:35understand how to invest it and then if
1:37it's long long term then it's pension
1:39stuff we've done one on pensions too you
1:40can go back and listen to that but the
1:43first thing you need to realize is you
1:44need to get yourself into a habit if
1:46you're not a saver right now just start
1:50and what I mean by that is is just start
1:52the Habit off as small as you possibly
1:55want to it doesn't matter how big the
1:57saving it's about creating the Habit at
1:59this stage if you're not a saver it
2:00doesn't matter how much you save on a
2:02month-to-month basis and what I'd like
2:04you to do is to pick an amount right now
2:06that you say to yourself next month or
2:08next week or whenever I get paid next
2:10I'm going to save x amount and I don't
2:13care if it's a euro in fact start at a
2:15Euro if you want to because we're just
2:16trying to create the habit I wanted to
2:18pick an amount that's so small that you
2:20would be mortified if at the end of the
2:23month you hadn't saved your €1 or your
2:26five anything right get the Habit
2:28started off and then turn up the volume
2:31on it each month a Euro this month two
2:33EUR the next month 4 the next month 8
2:36EUR the next month but just get the
2:39Habit started the important thing that
2:41you have to do is that you have to keep
2:44increasing it until you find your
2:45pressure point so there's actually
2:47there's a great story and no frogs get
2:49killed in this right but there's a great
2:51story about if you have a pot of water
2:55and it's on the hob and it's cold and
2:58you put a frog into it and the Frog
3:00starts swimming around and it can't get
3:01out okay and you turn the heat up on it
3:04a little bit the Frog will keep swimming
3:05around and you turn it up and turn it up
3:07and turn it up to the point where the
3:09froger keep swimming around until the
3:10water boils and then the frog dies right
3:13as opposed to if you put the pot on you
3:15turn it up to full heat it's boiling you
3:16throw the frog in the frog is going to
3:18try and jump out it's the same with your
3:20Sav I promise no frogs diet but I it's
3:22the same with your savings if you jump
3:24in okay I can't save and I'm crap at
3:26saving I'm going to start a saving habit
3:28and you jump in I'm going to save sick
3:290% of my wages next month you're just
3:31going to jump out straight away again
3:33the same way the Frog would it's just
3:34went too far too fast start really low
3:38and turn it up very very slowly until
3:41the Habit is created but also make sure
3:44you help yourself by making the saving
3:46the decision to save make that decision
3:48once don't make it every month automate
3:51it say right the only time you should be
3:53interfering with your savings is when
3:55you're increasing it or you're
3:56decreasing because you overshot the
3:57runway but you need to automate it is I
4:00get paid on the first of the month on
4:01the second of the month I have a
4:04standing order or direct debit going
4:06from my current account out to my
4:07savings or out to my credit junion or
4:09out to wherever I'm saving and make sure
4:11that you're not having to sit down once
4:13a month and make a conscious decision to
4:16move the money over and to manually do
4:18it because every month you'll come up
4:19with an excuse says to why it needs to
4:21be a different amount this month or why
4:22I can't save this month at all and
4:24you're making it really hard in yourself
4:26to make where you're going to have to
4:27make 12 savings decisions every year
4:29instead of making one at the start of
4:30the year making it automated and it just
4:32shoots out and it happens
4:34automatically the other consideration to
4:36make is you have to do your savings at
4:39the start of the month once you get paid
4:42well doesn't matter if it's the start of
4:43the whenever you get paid immediately
4:45after that like within 24 hours make the
4:47saving contribution there and then make
4:50sure you get it out of your current
4:51account you get it in if you don't do
4:53that what happens is some people will do
4:56it the opposite way around what they'll
4:57say is right I'm going to get paid I'm
4:59going to be really good for the whole
5:01month and just before I get paid again
5:03whatever's left in my bank account I'm
5:04going to save that now that's akin to
5:07going on a calorie controlled diet and
5:11not eating healthily or not eating
5:13enough throughout the day and then at
5:15the end of it you go all day you're
5:18starving all day and at the end of the
5:20day you pick up a Big Mac you smell it
5:22and you put it away for later that's
5:25cruel and that's what you're doing with
5:27your savings you're saying I'm going to
5:28be really really good all the month long
5:30I'm not going to spend it I'm going to
5:31deprive myself of enjoyment in life and
5:34then whatever's left over I'm going to
5:35save it and that's my reward I'm going
5:36to put it away for later that's
5:38miserable do your savings at the start
5:40of the month and then spend guilt-free
5:42for the rest of the month it's much
5:43easier and you have a much better chance
5:45of success but you also need to think
5:47about the relationship you have with
5:48your savings like I give you an example
5:51you if you're particularly if you're in
5:53a couple but it's just as important if
5:55you're an individual saving but
5:56particularly let me use the couple as an
5:58example of how it's it's really really
6:00important to create an emotional
6:02attachment with our savings and we
6:04create an emotional attachment with our
6:05savings by naming it I hate the word
6:08rainy day right I give perfect example
6:10of this you're sitting at home it's
6:12Thursday evening your partner arrives in
6:14and let's just say male female partner
6:16you're the female he's the male and
6:18you're sitting there and your Fe your
6:19male partner arrives in and he says JZ
6:21that was a really tough day at work come
6:24on we go out for dinner and you say we
6:27have no money we're not going out for
6:28dinner we do we a rainy day fund let's
6:30just go dip into the rainy day fund it's
6:32raining I've had a miserable day we'll
6:33have a few points and something to eat
6:36all right okay let's go now rewind that
6:39a little bit and imagine you're sitting
6:41on the couch he arrives in and he says
6:44oh that was a crap day at work come on
6:46we go go for dinner and a few points we
6:48have no money we do let's just take it
6:50out of our weekend weekend away in goway
6:53next May fun see the difference he's
6:57less likely to suggest he's going to to
6:59damage next May's weekend away with you
7:02when there's a name attached to us then
7:03when it's called a rainy day fund create
7:05that emotional attachment and it's the
7:08same for you as an individual if you
7:10have a goal make sure like most bank
7:12accounts most most of the apps in
7:14particular will allow you to name to put
7:16a nickname on the account use that so
7:18the next time you're thinking about
7:19dipping into it you'll think twice about
7:21dipping into it it's very powerful when
7:24it's something emotional like a weekend
7:26away together that you're both looking
7:27forward to but if you're saving
7:29something else like for Little Johnny's
7:31college fund you're also less likely to
7:33dip into it because little Johnny W go
7:34in education if you do so name those
7:37thing name those savings get an
7:39emotional attachment to it but also be
7:41realistic like saving can be hard you
7:43are depriving yourself of certain
7:45enjoyments in life because you are
7:47saving that's the sacrifice that's what
7:48saving is about you're you're delaying
7:50gratification today for further
7:52gratification of the future that's what
7:54savings The Habit is all about but be
7:57realistic about it so that see example
7:59examp if someone saving or a couple is
8:00saving for a deposit for a house you
8:02both need to be on the same page you
8:04need to say right we're trying to save
8:0620 grand and we can save ,000 EUR a
8:08month and I'm making the numbers up
8:09right save ,000 Euros a month that means
8:11it's going to take us 20 months to to
8:13get there I would much prefer for you
8:16guys to say let's do it over 24 months
8:19let's do it over two years let's save
8:21the, EUR a month that's our Big Goal
8:23we're going to name that deposit for our
8:25house I know 24 Grand might get you that
8:27far right that's 24 grand for our house
8:30that's towards our deposit we've named
8:32that we know it you know what we're
8:34going to do it's going to take us two
8:35years of sacrifice deprivation all those
8:39things where you're not going to live
8:41your life to the fullest because of this
8:43future goal and rather than doing it in
8:4620 months do it in 24 months and you
8:47know what to do decide between the two
8:49of you and communicate or if it's just
8:50you and your own communicate with
8:51yourself every Tre months maybe or every
8:54six months dip into it and give yourself
8:56a a reward if we save consistently for
8:59three months or if we save consistently
9:00for 6 months or whatever it is that
9:01works for you we're going to dip into
9:03our savings and we're going to go for
9:04our weekend away and goway or whatever
9:06it is if you want to be really clean
9:08about it what you would be doing is
9:10you'd be putting a certain amount into
9:11the regular savings that the the
9:13long-term goal is about and you'd be
9:14building a different pot for the rewards
9:17so that when he does come in on a
9:19Thursday evening and really does need to
9:21go out for something to eat a few points
9:23if that's what de-stresses them but then
9:26you have this other little pot here that
9:28you're going to dip into
9:29and you're both okay with that when it
9:32comes to saving and particularly
9:34long-term saving you need to communicate
9:37you have to talk to each other or you
9:39have to talk to yourself and lay out
9:41realistically what needs to be done and
9:44realistically what's achievable and
9:47realistically how you're going to be
9:48able to live your life when you're
9:50making these sacrifices and how much
9:51sacrifice do you want to make there are
9:53people out there who are able to save
9:55lots and lots of money and live their
9:57life to the fullest if you're one of
9:58them you can still learn from what I'm
10:00talking about the emotional attachment
10:01will make you have better decisions make
10:04better decisions around your finances
10:06there are also lots of people out there
10:07who really struggle with this and really
10:09find it hard to get savings we're going
10:11to wrap up this episode now because
10:13really savings I think it's simple it's
10:15a habit either do it or you don't do it
10:17make a choice am I going to be a Savor
10:18or am I not going to be a Savor not
10:20saving means you're not a Savor and
10:21that's a choice you've made and I'm
10:23asking you just to change your choice do
10:24a tiny bit do it regularly do it
10:26repeatedly do it over long periods of
10:28time and it's going to make a massive
10:29difference I'll never forget the time a
10:32woman approached me on the street and
10:34she said I read your book on and for the
10:38first time in my life I've got
10:41savings and I had never been able to
10:43save before and I took your advice and I
10:46changed it and I applied it to me and it
10:48was the bit that got her was the fact
10:51that I had said do a tiny amount any
10:53amount and I asked her do you mind me
10:55asking how much savings have you got and
10:58she said I've been saved saing for 12
10:59weeks I've been saving 5 a week and I
11:02have 60 quid and that 60 quid meant more
11:05to her than the six grand or the 60
11:09Grand or the 600 Grand because for her
11:11it was the first time in her life that
11:13she felt she was getting ahead
11:15financially the mats doesn't matter here
11:17it's the Habit it's the feeling of
11:20actually taking control that makes a
11:21difference when it comes to savings
11:23there are times it's going to go wrong
11:25like the big mistakes I see people
11:27making are that they go too heavy they
11:29save more than they can possibly afford
11:31to live their life with what's left over
11:33they do it at the end of the month or
11:34just before they get paid again they
11:36save what's left in their Bank against
11:37that's a big mistake do it at the start
11:39of the month get it right from the start
11:41and live your life guilt-free they have
11:44unrealistic expectations and then they
11:45feel like a failure is one of the bigs
11:48and then what's the point in Saving sure
11:49I have to keep dipping into it all the
11:50time because life keeps happening life
11:53will happen stuff will happen you will
11:54have to dip into it you will fall off
11:56the wagon and you'll need to get back
11:58onto it it again but the point is it's
12:01not it's not about how many times you
12:03fail I this is very cliche but I'm going
12:05to pull it out of the bag anyway it's
12:06not about how many times you fail it's
12:08how many times you get back up again and
12:10if you just consistently repeatedly do
12:12the right things you will get the
12:14results you need remember about the
12:16emotional attachment you have to have an
12:18emotional attachment to savings and if
12:20you're doing this as part of a couple
12:21you absolutely need to be on the same
12:23page you are not getting away with this
12:25going oneand and in fact if one of you
12:27go off and do all the saving all by
12:29yourself the the resentment will start
12:32to build up and you will feel like hold
12:34on a second I'm doing all the heavy
12:35lifting there here and they're they're
12:37off living their best life and they're
12:39going to get all the reward at the end
12:40of
12:41it savings isn't that hard once you get
12:44it started getting started with savings
12:46is very very difficult if you are one of
12:50those peoples who's struggling sometimes
12:52these little challenges can help like
12:54the the whole idea of starting with €
12:57EUR this month and two EUR next next
12:59month or next week or whatever it is and
13:00increasing the volume that's a perfect
13:02way of starting but the point is is that
13:04you start really small and you building
13:06up the challenge might be you know what
13:08I'm going to do I might do three days of
13:09no spending at all and or two days of no
13:12spending or no spend days try those
13:15things some of those things work really
13:16really well for people I've watched
13:18people who get great joy in the fact
13:20that they haven't spent any money all
13:22day today not a penny has come out of
13:24their bank account and they haven't gone
13:25in and bought anything and it really
13:27gets you to concent and focus on where
13:30your money is
13:31going but savings challenges no spend
13:35days trying to get some other reward
13:38because like giving yourself a little
13:40reward because the bigger goal is
13:41getting better these are all tools that
13:43you need to drag on and you need to find
13:45what works best for you saving and
13:47getting the Habit together is a habit
13:49for life if you create it now you will
13:51have it for life and you know what when
13:53Financial surprises happen when life
13:55happens you'll have somewhere to go
13:57other than the credit card
13:59get your savings habit started it's not
14:02that hard once you put a bit of work
14:04into it and you don't put too much
14:05pressure on
14:06yourself this has been understanding
14:09money this has been the savings episode
14:11I'm om McGee I appreciate you listening
14:13and we appreciate the follows
14:16[Music]
14:20more

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