It's very common to hear the phrase "I can't save." In fact, various studies show that during a year in which the Argentine economy grew, like in 2017, only 301% of Argentines managed to save, and in 2018, a year of economic crisis, this figure dropped to 241% of Argentines. But of course, considering that during those years the poverty rate averaged 301% of Argentines, and assuming that no one in that situation was able to save (I'm sure that's not the case), we can affirm that more than 401% of Argentines in the middle and/or upper classes are unable to save. This is undoubtedly very worrying.
As we can see, this is not due to an economic situation, it is rather a question of habits. These habits are customs, or "habits" that we sometimes have, that prevent us from saving. In my humble opinion, there are no excuses for not saving, unless we are in a very difficult situation, for example, joblessness. But in a typical family, where there are usually at least two people who work, it's hard to find excuses. Now we'll list at least a few of them, so you can't say you can't save anymore.
1) Throw away things we don't use
Throwing away the trash every day when you leave the house is a habit for everyone. Of course, getting rid of things that no longer work properly or are of no use is the right thing to do. But there's no shame in giving these objects a second life. Many things are cosmetically damaged but still serve their purpose. Why not give them some decoration?
We can give them a second chance by posting an ad online. There are many things we'd never imagine we could sell.
For example, I recently moved and did a major renovation… I ended up with a ton of things I didn't know where to put them. Among them was a bidet… light blue, over 30 years old… who puts a bidet in their house these days? Who would put in a bidet that's pretty ugly, to top it all off? Incredibly, I found its boyfriend. I posted it, and after a while, without asking any questions, I saw someone buy it. When he took it back, the buyer told me he had the same bathroom set in his house, but it recently broke. He was looking for a bidet exactly like the one he had… and he just found it.
Don't stop looking around your house for things you no longer use, post them, and sell them... remember that your needs aren't the same as other people's; perhaps our surplus will become someone else's need.
2) Continue paying for services manually
Have you ever had to pay penalty interest? Those late payment penalties are the most ridiculous expenses imaginable. And that's precisely why we often get caught short or forget to pay these taxes or services.
A simple way to avoid this is by automating this process. We can do this by signing up for automatic debit, for example, from our savings account or credit card. This even allows us to defer payment for a little over a month, making sure to choose the correct due date*. Of course, this doesn't mean we shouldn't monitor our bills, as we saw in my previous book. But since almost all services unfortunately have the "claim whenever you want, but pay now" philosophy, it's still not a good idea to cancel an automatic payment even if we've been overcharged. We'll likely need to be vigilant so that we can be compensated the following month.
*It's interesting that we can adjust the expiration date on our credit card. This allows us to better organize our monthly expenses. For example, if we get paid from the 1st to the 5th of each month, it might be a good idea to set our card's expiration date in the second week, for example, from the 7th to the 14th. Since we just got paid, we can set aside that money and not use it for any other purpose.
3) Think in terms of money and not the work it takes to pay for things
When we go shopping, we usually swipe our credit card and don't give it much thought. However, it's an interesting exercise to consider how long I worked to be able to do so and see if it's worthwhile to shop or save that money. This method consists of dividing our salary by the number of hours we work per month. From there, we get our hourly rate.
When we're about to buy a new pair of sneakers, a new pair of pants, or something similar, divide the price by our hourly value. And then we'll know how many hours we'll have to work to get it. We might be in for a surprise. We might have to work a whole week to get that thing we love so much... Is it really worth it?
4) Incorrectly choosing the means of transport
If you had to choose your preferred form of transportation, which would you choose? Surely, most people would choose their own car, or if not, a taxi or something similar. But when you analyze the costs and time, you end up realizing that you might be missing something. For example, using a car on certain trips, especially if you travel alone, can cost five times more than taking public transportation. Sometimes, you have to add to this the fact that in many cities there are no public parking spaces—you have to pay for parking meters or a parking garage—even more money.
Even so, traveling by public transport has its drawbacks. Sudden stops, poor service frequencies, or having to transfer between several buses can be quite stressful. And that's not even mentioning when we have to travel standing still, jammed together (and even in the summer).
Nowadays, I have no doubt in stating that the best means of transportation is the bicycle. In certain countries, like the Netherlands, more than a third of trips are made by this means. The reasons for my conviction are several and they appeal to a very wide audience. Cost of travel: zero. Emissions of greenhouse gases, carbon dioxide, and anything else harmful: zero. Parking problems? Almost zero. In most places, we can bring our bike in, or if we're hesitant to tie it up on the street, the parking lots charge very little (in Argentina, there's a law that stipulates that it must be 10% of the cost of the car).
If you find arriving sweaty a problem, many companies have added showers to their workplaces so you can shower and change. And if this is also a problem, you can try an electric bike. They have good range, and you can pedal directly without pedaling or do so more gently. You'll still go faster than on a conventional bike. Personally, I highly recommend it; if I'm riding alone, it's hard to imagine myself using any other mode of transportation (as long as the weather is good).
NOTE: Even though I recently had a bicycle accident, I didn't change a single comma of the text. Cycling remains an excellent way to save money.
5) Go after fashion brands
When it comes to purchasing, we tend to conclude that only brand-name products are good. However, this isn't necessarily the case. As we saw in previous chapters, this often indicates that they spend a lot more money on advertising, which is why they have to sell at a higher price. The quality may or may not be superior; we'll have to investigate, or even test it, to see if this is true.
6) “I can afford it”
Saying this phrase before buying something is like admitting you're making a mistake and doing it on purpose. It's often said when someone makes an unnecessary expense simply because they have the money to do so... it's what often happens to very rich people who light a cigar with a hundred-dollar bill. Does it really make sense to do something like this? Maintaining compulsive shopping habits can put us in serious trouble when circumstances change, as it demonstrates that saving is not our priority.
7) Wrong choice of foods
When you go to a restaurant or bar, you're paying much more than just a plate of food or drinks. You're paying for the rent, the waiters' salaries, the cost of the tables, the chairs, the washing of the tablecloths... so many other things that, logically, make it more expensive than eating at home. There, we already have our own rent, our own chairs... so we can save a lot of money by preparing our own food. A middle ground is to order it and have it delivered to our home—an excellent way to save money. Of course, we should see it as a treat, but if it's a constant occurrence, our saving habit is seriously jeopardized.
8) Alcohol
Warren Buffett says his friend and business partner, Charlie Munger, always talks about the three L's that can lead to bankruptcy. The first is liquor, of course, referring to any alcoholic beverage. Personally, I must admit that I didn't like it much as a teenager, so it wasn't that hard for me. Over the years, I've started to like it a little more, even so, I see it as an occasional thing.
Why am I talking about alcohol in an investment book? Because I'd like young people to read this book and not make the mistakes most people their age make. What's the first investment for many of us? Precisely, alcohol. They're going to have a good time with their friends, and they think the only way to do it is by drinking too much alcohol. What I find at least curious is that for many, saying they don't remember anything is synonymous with having a good time. What's the point of that? How can we know if we had a good time if we can't remember it?
In this case, the amount of money spent on alcohol is merely anecdotal. The real problem is the serious health problems that come with alcohol abuse, not to mention the risks involved when someone gets behind the wheel… it can lead to real tragedy, which unfortunately happens frequently.
9) Tobacco and Drugs
Many compare these two things to alcohol. The difference with the latter is that in reasonable quantities, it doesn't cause major damage or exorbitant costs. Do you know how much a heavy smoker who smokes two packs of 20 cigarettes a day can spend? Assuming an average price of $2 a pack, he'd be spending more than $70,000 in his lifetime! He could buy an apartment by saving that money!
And again, what you're doing in your favor, if you will, is just cancer on the stick, increasing your chances of suffering from this disease. In fact, the World Health Organization indicates that smoking kills 8.2 million people, 7 million of whom are smokers and the rest from passive smoking, that is, from the smoke generated by others. The same could be said about drugs. Many people die from overdoses; according to a United Nations report, the number reached 585,000 in a recent year.* So, this is the clearest way to save money.
*Fountain: https://www.france24.com/es/20190626-informe-onu-droga-muertos-causa
10) Bad friendships
Tell me who you hang out with, and I'll tell you who you are. If we have friends who encourage us to overspend, we'll overspend. Often, there's an unspoken competition between who has the latest thing or who buys the most expensive items, and this, of course, leads us to a vicious cycle from which we will undoubtedly emerge poorer.
11) Buy the latest technology
Many see having the latest things as a symbol of "status": the latest cell phone, the latest tablet, the latest laptop, the latest car, the latest sneakers... pursuing this race is utter nonsense. He doesn't need to pretend... or is he just pretending?
Try to give things a good lifespan. Buying the latest and greatest will only attract people who are attracted to these things. Are you interested in being with such superficial people, or do you prefer being with people who value you for who you really are?
One thing that can help us is to apply the one-week rule. Many times we see something we want and immediately buy it. But this makes us reflect and think: Do I really need it now? If I haven't had it until now, is it really that urgent? We can take a week for our resolve to strengthen or weaken, and then we can ask ourselves again if we really need it. Surely, there will be many purchases we end up not making, and this means saving significantly.
12) Choosing housing incorrectly
Many people extend their lifestyles during good times, buying expensive homes or renting expensive places, which incur many fixed expenses such as utilities, etc. These places likely have many amenities, such as a pool, gym, constant security, etc. As long as you can afford it, it's great. The problem arises when our circumstances change, or our business fails, or we get laid off... or we retire. Our income no longer allows us to afford these services, and we may not use them. That's why it's very important to keep our fixed expenses low and to put the surplus into savings.
Possibly, if we hire services separately, such as paying for a gym, we'll be able to do so whenever we can, and in the future, we'll be able to do without them. Many people, failing to plan ahead properly, resort to going into debt. Or worse, they invest in investments that aren't really investments.
This note is taken from the book Pocket Investor Two: Investing Like Those Who Know. You can buy it by clicking here.
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