You can’t spend what you ain’t got: Why You Need to Automate Your Savings

Muddy Waters
Photo credit: kevin dooley via / CC BY

You can’t spend what you ain’t got – this line is part of a song by McKinley Morganfield, aka bluesman Muddy Waters (You Can’t Lose What You Never Had)

In reality, people today do spend what they don’t have and get buried in debt. But I seriously doubt Mr. Morganfield had an AMEX or Visa in his pocket when he left Mississippi for Chicago.

Folks, automating your savings is an absolutely essential step for building wealth and, Muddy Waters’ nugget of wisdom provides the compelling reason why.

Not spending what ‘you ain’t got’ is just a different riff on the oft-mentioned “Pay Yourself First”. Your savings must get taken care of first, not last, assuming there would be anything left to save after all the spending is done. The money saved becomes money ‘you ain’t got’ for spending.

What steps can you take to automate your savings?

  • Contribute to a retirement plan at work such as a 401k, 403b or 457. This is especially important if your employer offers a matching contribution. Typically, the contribution gets taken out of your paycheck, so while your take-home pay is reduced, you never ‘see’ the deduction.
  • If you have direct deposit for your paycheck, sometime you can specify more than one destination bank account. This allows you divert a portion of your take home pay directly to a savings account. Again, it’s money you don’t see.
  • Set up a regular transfer from your checking account to savings account, IRA, SEP or mutual fund. While, it’s a good discipline to schedule regular savings, it is money that you do see at least briefly in your checking account.

Another variation on a theme is the ‘envelope method’: set aside a specific amount of money for savings and various expense categories (groceries, gas, entertainment, etc.) When the money for a given category is gone, it’s gone.

Cheers, Paul

PS Here’s a YouTube link to Muddy Water’s  You Can’t Lose What You Never Have

© 2016 Paul J Reimold









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