Knowing how to make money doesn’t mean you know how to save it, as is evidenced by a startling statistic reported on by Polly Mosendz at Bloomberg: According to a new survey of 7,052 people by the financial-services site GoBankingRates, nearly half of people earning between $100,000 and $149,999 have under $1,000 in their savings accounts — with, quite gasp-worthy, 18 percent having nothing squirreled away. For people making over $150,000 Mosendz reports, 29 percent are at less than $1,000, and another 6 percent don’t have anything saved. Excuse me, but what the hell is going on here? What would account for such lacking accounts?
With no place else to turn, I spoke with Megan Ford, M.S., LMFT (licensed marriage and family therapist), a practicing financial therapist at the University of Georgia, and the current president of the Financial Therapy Association. She said there’s at least three forces at work here.
Ours is a spendy culture.
Societal expectations are powerful things, Ford says, and in the U.S., it’s expected that as you earn more, your lifestyle should swell accordingly. “It’s a broader overladen exception of the challenge of keeping up with those around us and having this projection of ‘Look at how great I’m doing,’” she says. If you can’t Instagram or Facebook or Snapchat your material progress, it might as well not exist. Because of this, many people spend close to what they earn — meaning there’s nothing leftover to save, even though behavioral economics shows pretty clearly that after a certain threshold — $75,000 a year, according to a seminal study — the quality of life gains with added income start to level off. There also aren’t that many models out there that say otherwise. Aside from Lil Dicky, Fetty Wap, and Rich Homie Quan’s superlative “Save Dat Money,” which features the couplet “Coppin’ sweaters in the summer when the sale on them (I’m hot) / The fuck you rappers bragging bout? You overpaying for it,” there’s little on offer from pop culture about having an orientation toward one’s financial future.
There’s a ton of shame around money.
“Many people are still very shamed by talking about money, and feel uncomfortable, even within intimate relationships,” Ford says, and she sees it in her own practice. “I’m always surprised by how little couples know, even right before entering into marriage — they don’t even know how much the other makes as their annual salary just a couple months before their wedding date.” And because it’s such a taboo, it’s not communicated well within families, in romantic relationships, and among friends.
That shame asserts itself not just interpersonally, but intrapersonally. Avoidance coping — where you just drive something that makes you feel uncomfortable from your mind rather than face it — is all over the place with finances. “Many of us who end up being high earners, our society doesn’t do a good job of educating us about finances and financial management,” she says, so a certain amount of people don’t know the first thing about personal finance, which is an acquired skill. “They don’t know where they should start or where to get started, and when you lack that financial literacy, psychologically you tend to avoid it,” she says. “If you don’t have a solid plan or someone helping out, you just end up letting it pass you you by.”
And the state of student loans is insane.
Last year, the national student debt level reached an absurd $1.2 trillion. If you’re going deeper into the six figures, there’s a good chance you pursued some sort of advanced degree, whether that’s an M.B.A. or M.D. or a J.D. If you were taking out loans to finance that education, it takes a lot of financial savviness to navigate all the student-loans options. You could end up with an inability to save as a result. “At my clinic we’ve been able to see that walk through the door,” she says, of people with that issue, who might not be aware of loan forgiveness, company repayment programs, and other resources. It’s another form of avoidance. “They’re letting that pass them by and paying what they pay and sacrificing the savings they might have otherwise,” she says.
So what can you do?
If you would like to become more financially empowered, Ford recommends a two-pronged approach, since personal finance is a matter of emotional, relational, systemic, and behavioral factors , as well as the quantitative skill of dealing with the numbers. “There’s no way you can divorce those things,” she says.
To that end, you might want to do a little self-reflection. Channel some of your childhood experiences around money: What were the financial behaviors that were modeled for you? Did you learn financial strategies from the people that raised you? What’s your overall money history like? Are there traumas impeding your ability to recognize finances? What is the value of saving to you? What has prevented you from taking action in the past? These are the questions that need to be asked, she says. It might also be helpful to reframe saving: Think of it as paying your future self, funding your future, or a sort of quantitative self-care. And have patience: As with learning any skill, there will be bumps along the road.
Then there’s the actual mechanics of learning how to save money. On a theoretical level, William Bernstein’s “If You Can” is a great primer on mutual funds and other financial instruments, and it’s free. In the day-to-day, auto-deposits are an ally; Ford recommends that as soon as you get a raise, increase your auto-deposit so that you don’t fall victim to lifestyle creep — where you, over time, spend more and more without realizing it. “Those are small incremental changes that happen over time, and when that happens, we’re not really cognizant that we just ate up that extra $50 that our raise allows us to have a month,” she says. So make it easy: Pay your future self first, automatically.