“Where is the Life we have lost in living?
Where is the wisdom we have lost in knowledge?
Where is the knowledge we have lost in information?”
Reading these beautiful words from T.S. Eliot, I am struck by how well they describe our current relationship with money. With so many personal finance books, magazines, shows and blogs presenting information, we women should feel confident in the knowledge that our finances are in order, right?
After a 15-year career in the institutional financial services world, I’ve spent the past few years traveling the country teaching, writing, and speaking about the basics of personal finance for women. The overriding sentiment I’m encountering is… OVERWHELM. There is so much financial information out there, but some how it feels sadly cut off from the process of life and living.
For years I’ve said the three most powerful words in personal finance are “Start Saving Now.” From a purely left brain perspective this remains true. A dollar you save and invest in your 20s will have nearly five times the power of a dollar you invest in your 40s, assuming a 7% return across all time periods. Invest $1,000 a year starting at age 20, earning 7% and at age 65 you’ll have $285,000. Invest that same $1,000 a year starting at age 40 and also earning 7% and at age 65 you’ll have just $63,000.
Key point – you end up with 4.5 times MORE money by starting to save the $1,000 a year in your 20s.
Those numbers are powerful. But they are often not enough to inspire action. My hunch is that it is because these numbers do not touch our souls. Even for those who like math, those figures can seem oddly devoid of joy and life energy. An equation that results in “more” – but doesn’t tells more WHAT.
Enter “MoneyZen.” Let’s start with the notion that money is energy. We earn money in exchange for our time spent working. So when we spend it we are spending our life’s energy (for more on this concept, read Your Money Or Your Life). Taken further, if we are all connected to a greater source (God, unified field, etc) then money is part of this collective whole as well. Which gives it a spiritual quality that responds to gentleness and reflection.
Now let’s go back to saving. How much should you strive to save? My current thinking, inspired by Elizabeth & Amelia Warren’s All Your Worth is that a healthy allocation for your after-tax income looks like this: 20% savings, 30% wants, 50% needs. Of that 20% savings, roughly half goes for retirement and the remainder for nearer term needs.
By WHY are you saving? I have come to view saving as process of honoring the energy that connects us all. Putting some money aside is a form of self-care. It goes beyond simply creating an emergency fund and preparing for some well deserved rest in retirement. I’ve come to view saving as a physical manifestation of respect for the way you’ve spent your life’s energy. By saving you are saying you want to lengthen the time over which you will experience the joy that arises from your earnings. By saving you are also trusting in the future, having the confidence to both enjoy yourself today while also setting some energy aside for additional joy down the road.
So how do you get started saving? By spending less than you earn.
There are many programs and tools available to help you do this (ranging from Mint.com to the old fashioned pen, paper, and excel method that I use). But the real financial force comes from having the quiet wisdom that stems from understanding why at the most basic and human level you are saving to begin with.
How do you spend less than you earn? By harnessing the quiet wisdom of saving.