Everyone talks about the Debt Snowball, a term invented (?) or at least popularized by Dave Ramsey of Get-Out-Of-Debt-with-Total-Money-Makeover fame. Many of the get-out-of-debt bloggers attribute their success to Ramsey's methods. Like most things involving numbers, the snowball can work in reverse: once you are out of debt, you can begin a savings snowball.
An amusing essay on the Savings Snowball is provided by Amy Dacyczyn in the first of her Tightwad Gazette tomes. I read her books from time to time not so much for inspiration as for comfort. I love the timeless principles of frugality. And I love that with frugality, you can start small.
Amy D. thinks so too. For her snowball essay, she contrasts two families: the profligate Smucksters and the frugal Albrights. Each family has $100 left at the end of the year. The Smucksters go out to dinner, buy a Nintendo, whatever. So they have nothing.
The Albrights put their money into savings or into purchases that yield future savings. First year: $50 to savings, $50 to cloth diapers. Then they start bulk purchasing grocery items on sale. And so on.
As they go, they are buying CDs, more fuel-efficient cars, sewing machine, chain saw, etc. Some of their savings are a little bogus, like using the sewing machine to make handcrafted items that you can sell for $900. Good luck with that idea! Still, the point is a good one.
At the end of year 5, the Smucksters remain at Square One, while the Albrights have amassed $11,000.
I know that everyone urges saving on the big stuff these days (or increasing your income), but I am a believer in the power of little choices. So I guess Amy D. remains my role model. Plus, she's a very good writer.
Amy would tell you to check her book out of the library, by the way. You can also check out Dave Ramsey (but watch out for his assumption that your investments will earn, on average, 12%/year).
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5 comments:
I agree on the power of little choices! I was just discussing this with my sister, who is about to lose her house to foreclosure. By not spending $35/mo on campus parking for the last 4 yrs, I'm $1700 richer (plus, the extra 10min walk is good). And no 3x/wk Starbucks habit = $450 saved/yr.
I am convinced we save a lot of money with little choices. But honestly, my sister just can't seem to cut the small stuff out. So she has to cut her $2000+/mo housing payment, and lose the house in the process.
The personal finance experts should diversify their advice and acknowledge more widely that little choices make all the difference to some of us.
Great tip. Two of my Grandkids are young marrieds, all 4 people working but not for huge wages. I suggested they figure what the new payroll tax break amounts to for them and put that in savings by PAYROLL DEDUCTION. Open a seperate small account if possible. Credit Unions are good for that with little required to open an account. If you don't see it it is not so likely you will spend it. Besides, if/when the tax is then raised you won't have to cut back on what you are used to. Yes, a small amount but a beginning.
Darla
12%- where?
I was doing the Dave Ramsey course(missed some for family stuff) but his 12% has me about rolling in the floor! also seems like everyone and their dog tries to make money with crafts..some make it and some don't. I like the tightwad book too but unfortunately someone once again stole the library's copies - will have to make a point of buying my own one of these days though I keep hoping she'll come out with an update.
@Mom, Phd--I totally agree! Little choices are sure things. In my experience, the big things don't always work out. Sorry for the late response. Out of town, overwhelmed,computer in the shop, ergh.
@Darla--Great advice! They could even direct the 2% to a Roth IRA--or something special.
@Duchesse--I know. I was incredulous when I read that. I wonder if he's changed the amount in the more recent editions of his book.
@Suzy--I think DR is great overall. Why don't you ask your library to reorder the Tightwad books? I would bet that a lot of others would thank you.
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