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Tuesday, December 2, 2008

Ask Dr Frugal: How do I Save Money

How Do I Save Money?

Another question from a college student. It seems so simple, but there are questions behind the questions.

So I said: “How much do you want to save?”
Answer: “I don’t know.”

“What do you want the money for?”
Answer: “I don’t know.”

“When might you need the money?”
Answer: “I don’t know.”

After some discussion, we discovered that she wanted an emergency fund (for car breakdowns and other unexpected expenses) and that she thought $1000 would be “awesome.”

So I said, “Well, each time you skip a fast-food meal and bring a lunch instead, you save $4-$6. In a year you could reach your goal.”

Then I said, “Each time you bring a lunch, you can count it as a small victory. Keep track of the number of times you do this.”

A listening bystander said, “Small victory! I never thought of it like that.”

These are good students! They have academic and professional goals. Yet they did not know how to set financial goals. They did not know how to break a big goal into small parts. They did not know how to see rewards along the way.

Now they do.

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