Why We Can't Save Money – And How to Fix It

Hey there, real quick, before we jump into the episode, listen, if your earnings treadmill hasn't set you free yet, running faster won't either. Listen, hustle without principles just going to burn you out. So here's what I want for you. I want you to join me for my money machine experience. Live it is three free trainings. Deep dive into how to escape the treadmill and build a money machine that actually works for you. All right, grab your spot here by going to moneymachinelive.com and I'll see you in the free training. If you've ever felt like saving money is impossible, like there's always something pulling you to spend or life keeps getting in the way, this episode is for you. I'm gonna uncover exactly why most people can't seem to save and the hidden traps that are keeping them stuck. And more importantly, the powerful steps to change it so you can start building real financial freedom.

If you're not saving money, then you're not building freedom, you're not building wealth. Yet most people struggle to save. Why? Because the system's rigged to keep you broke. Your habits may be working against you, or no one has ever showed you the power of small, consistent savings and what it could do for you. So listen to this. 57% of Americans can't cover $1,000 emergency without going into debt. And 63% of them say that they're living paycheck to paycheck. And almost 50%, even with salaries over 100,000, are still living paycheck to paycheck. So in this video, I'm going to show you exactly why savings seems to be so hard, how it's costing you your financial freedom, and the simple, actionable steps to take to fix it, no matter where you're starting from. All right, so let's just talk about why this is happening first so we can solve it. Because when we understand what's going on and why the system is set up this way, then maybe, just maybe, we can take back control. Actually, I know we can. All right, so the first thing is to understand that the system isn't built for you to save. We are barraged each and every moment, each and every moment of the day by so many marketing messages. Whether you're on social media, whether you're on the Internet, Whether you're watching TV, the average person sees 10,000 ads a day.

All with one message. Buy now, worry later. Buy now, pay later. You know, here's the thing. One. One client of mine, John, he realized that his subscriptions, his Takeout and his online purchases were draining $400 a month. When he tracked it, he found that there were leaks in his financial system that he didn't even notice. He. It got normalized in his life. And if you look at your life, this may be the case. Now, let me be really clear. I am not one that says, I want you to go into deprivation mode. I don't think that you can live a rich life through deprivation. But I do want you to be disciplined, and I do want you to be intentional. I do want you to be conscious, and I do want you to be aware. Because if you are spending intentionally conscious, aware, then I'm good with it because you'll be very conscious of the cost and the benefits instead of making emotional decisions. So the first step, really, in this whole process is to recognize that there's a system of influence out there that is impacting our spending. Y', all, I have said it before. I've got a $900 coffee maker down there over there, because I saw it on Instagram and I thought, this is cool. I can order my coffee from an app on my phone and have it made downstairs. Okay, that was an emotional momentary purchase. Now, I didn't go into debt. I can afford it, okay? But that's the example. I'm not exempt. The fact is, is that the. The marketers, they know how to. How to pull our emotional strings. And if they can get us to make emotional financial choices based on living in that moment, the tendency is to overextend ourselves, to overspend. It's why they give us payments. It's why they give us pay later. Hey, don't worry about it. You don't have to pay for it for 60 days or we'll six months free. Those kinds of things are a mechanism to get us to jump into a game that maybe we weren't intending to play. That's why when we talk about this is is I want you to work from a plan, not to restrict you, but to guide you in, in the process. So the first thing is to realize that there's a system that isn't built for us to save. It is built for us to spend, to be consumers. And. And when we're aware of that system, we can rec when it's happening, okay? And like I said, it's all of us. I don't care whether you make a lot of money, you make a little money, all of us are getting bombarded with it, okay? Including myself. Number two, there's something that I call lifestyle creep. It's called lifestyle inflation. And that is when you earn more, you tend to spend more. As income rises, spending grows to match it. And so what happens is that when someone gets a raise or they get a new project, instead of taking a slice of that to save and taking and putting it away for the future, we upgrade our car, we upgrade our home, we upgrade our habits. Okay? So there. And I'm not saying not to do that. In fact, I actually tell my clients it's important for you to celebrate the successes, but just not with all of it. Okay? And so you think about this. I had two clients that came in. There are two different clients, Sarah and Alex. Sarah got a $40,000 raise and she spent it all at 40 years old. She had nothing, but she had a heck of a time spending the 40k. Okay? Then there was Alex. Alex take took 20% of his raises, all his raises, and invested it over 10 years, and he ended up with over $170,000 saved. Now, mind you, all he took was 20%. So he was celebrating doing things with 80% of it still. So he still had the celebration, he still had the enjoyment, but he took a slice of it to use for his financial future. So one of the things that I want you to think about is that when you get additional money in your life or you get a large project to take a slice of it to make sure you celebrate, you gotta have joy. I tell when we do our money machine master plans, or when I work with clients, I ask them to give me three to four sustainable joy points to put into the plan. Like my wife and I, we love to travel, okay? And we don't do it cheaply, okay? We, this is our way to create experiences for us that create memories and, and connection and deepen our relationships, to share in different cultures and to do that. This is a sustainable joy coffee machine, okay? We're using it. So is it a sustainable joy? I don't know, but it was a momentary pleasure that I purchased. Okay? So what we need to do is make sure that we have sustainable joy points along the way so you enjoy the journey on the way to the destination of financial freedom. Because if all you do is deprive yourself on the journey, if you don't enjoy the journey to financial freedom, you will not enjoy the destination. So what I want people to do is when you get a raise or when you get additional money or you get a windfall, take a slice of it to celebrate, take the rest of it to invest and do that. Now, number three is Emotional spending, okay? Now, emotional spending is a combination of a few things. One, the emotions that get involved, the marketers know this, okay? They talk about retail therapy. It's a real thing. It's a real thing. There is something about spending money on someone else or on yourself that for the moment makes you feel good. It fills the emotional gaps. Stress, boredom, validation, whatever it is, okay? There is some underlying element to that. Now, if that's the case and we find ourselves in a situation where stress causes you to shop or stress causes you to eat, or we are having a knee jerk emotional response to some stimulus, we just need to examine it, we need to look at and say, can I disconnect the trigger to make that happen? Because here's what I have noticed when, in all the years, in the decades I've done this. When our emotions get involved in our money decisions, typically the money decisions are not good ones because we, we haven't thought them through. We're making an emotional response, an emotional decision to spend. Now, to help with that, there's a couple things to think about. One is that we put in place what we call in my book, building your money machine. I talk about it called a cash resource plan. Now, some people will say, oh, you want us to budget? No, I don't. Budget is like diet, okay? Again, I don't want deprivation. But what I do want you to do is to be very deliberate with what you do with every single dollar. I look at a cash resource plan, or even a budget, if you want to call it that, as a permission to spend, to give you the guideposts, it's not to tell you you can't. It's not to tell you that, to restrict you, but it is to get you consciously aware of what you are trying to accomplish and give you the map to make it happen. When we create a plan for our clients that we literally map it out, they're investing their spending, their income. Does Social Security come in? Do they have a pension? Are they going to get in here? Everything. We build it out, we stress test it, we, we plan scenarios so they can see the pathway to achieve their result, to achieve their goal, okay? And now they can use that as the guide to, for their spending. So when something comes up, you say, gosh, does it fit the plan? Does it move me closer to what I'm trying to accomplish? And if the answer is no, I have a choice, okay? I'm never going to tell you not to spend. I'm simply going to tell you to make sure you understand the Impact of it. So if it doesn't move the plan forward and you want to go ahead with it, what is going to change in the plan or what is gonna change in your vision or how are you gonna make it so it doesn't impact the plan? In other words, make more money to cover it. That's why we do planning. It's not to restrict you, it's to guide you. It's to give you permission. And done right, that's what it does. It frees you to do the things you wanna do without guilt, without shame, without any of it. Here's the thing. I had another client that I worked with. Her name.

Was Mary. She said, I realized that when I got stressed, I would shop. When work got tough, I would take a long lunch, I would shop. And what happened is we spent some time understanding and disconnecting that trigger for her. And so every time she wanted to shop, we would actually transfer some money into a savings account and with an attachment to it of a goal. And that goal was a vacation that she hadn't taken. And so what she was doing is to realize, I got stress. Let me put money instead of spending on stuff that has momentary pleasures, then goes away. Let me create something that actually is meaningful for me, which was a vacation. Let's put money away for that. And what she did, literally within six months, she was able to take that vacation that she wouldn't have otherwise done. And we broke the habit of stress spending.

In the process. And we create a joy point for her. And now at the same time, a portion that she was putting towards the vacation, there was a portion that was being put towards her financial freedom too. All right, so when you notice that you have emotional spending, it's time to start to understand how can I put intentional habits. Remember, wealth creation is about behaviors, habits and decisions. It's not about the money. Okay? And there's data to show that 10,000 millionaires were studied. 79%. Almost 8 out of 10 of them were first generation. Meaning that. Meaning that they made it, they created it in their lifetime. Listen, 8 out of 10 became millionaires in their own lifetime by their own hands. It wasn't gifted, it wasn't inherited. It wasn't one. Those are good odds. 30% of them, 30% of them never made much more than $100,000. So it wasn't that they made these magnificent sums. It's what they did with it that mattered. That's a behavior game, That's a habit game, that's a choice game. And putting this in place will allow you to build it. No matter where you start, age, stage, or circumstance. There's some simple processes, simple principles to follow. And when you follow them, you will get there. Because wealth is a math equation. It is a learnable skill. Okay, number four is debt, the cost of debt. Too often we are buying things on credit and debt steals from our financial future. If you're paying 20% to a credit card in interest because you're carrying a balance, that is money you will never get back. Worse, it is money that isn't working for you. The subtitle of my book is how to get your money to work harder for you than you did for it. Well, in order for it to work hard for you, we got to keep it in your world. We've got to invest it for you. Imagine what it would be like is if instead of paying 20% to a credit card company because you wanted to buy a big screen TV that you couldn't afford to pay in cash or pay it off at the end of the month, you took that money and invested it and made 10, 12% on it. Now all of a sudden, Instead of spending 20%, you're making 10 or 12%. And now at some point it pays for you to get the big screen TV instead of the other way around. Okay, it's important for us to understand that because if you think about it, a credit card balance, let's say at 20 as $6,000, credit card balance at say 22%, which is relatively low because right now there's credit card companies that are charging 29%, almost 30%. That would cost you $13,000 in interest alone over 30 years if you just paid the minimum payments. Okay, which is the problem when we start to pay the. Play the payment game, which is what happens when we're starting to look at things through the eyes of debt and through the eyes of, of payments. Okay, $13,000 in interest by paying the, the minimum payments. It takes 30 years. Instead of doing that. And if you turned around and said, if I paid it off and I took $200 a month and redirected to savings instead, in 30 years I'm going to have, I'm going to have 120,000 or more in my, in my account. Okay, we got to play the math game. We got to understand it. So tackling debt is the, is really, if you're sitting with balances and carrying consumer debt, and I'm not talking about mortgage, but consumer debt for consumables, your lifestyle, we got to get it Paid off because it is eroding your ability to save. It's eroding your ability to build wealth. Okay, so what is the real cost of not saving? Why is this so important? Why am I so passionate about it? And what do you need to do? I think that here's a couple things that happen. One, if you're not saving, that means you probably don't have what we call a peace of mind fund. Other people will call it an emergency fund. What does that mean? That means that if something happens, something unexpected happens, the only way to take care of it is debt. In other words, to dig a deeper hole, which is harder to get out of. And that cycle continues. Okay? The other thing that happens with no savings is that, frankly, you're not in a position to retire. You're probably going to have to work longer because when you retire, inevitably your income, if you didn't do it correctly, your income will go down. Now, in my world, I want my income to go up when I retire. I want the money machine. It's the whole purpose of the money machine to generate enough income to support the lifestyle that I envisioned without my efforts, okay? And that's what we, we've built and what we've done with, with our clients. So, so without savings, in all likelihood, you're not in a position to retire because anything will teeter you over the edge. Okay? Without, without savings, you're. There's no way you're investing, okay? And when you don't invest, you lose time, you lose compound growth, and you lose the greatest wealth lever you have, and that's time. Think about this. If you save $500 a month at a 7% return, which is conservative, okay? At a 7% return, $500 a month in 10 years will become 120,000. In 30 years will become 609,000. In 40 years, it'll be 1.3 million. That's 500amonth. That's 6,000 a year. At 7%, imagine what it would be like if you hit more, more average returns of 9%. Okay? Time.

Is important. The real cost of not saving is the stress it has on you and your inability to build the wealth and build the money machine that you need. Savings isn't just about money. It's about buying your freedom. It's about giving you choice. It's about giving you options. It's about you having peace of mind. And starting early is important. Okay? That's, that's the challenge. Now what are the steps? Let's just talk about some steps. I Want to give you some actionable steps to take that, that bring this through. So I'm going to give you seven steps here to, to work through. The first step is I want you to track you're spending. Now, y', all, I get it. You say, I don't want to face it. Here's the thing. And I, I've told people this before. You know, you can stick your head in the sand, but if a train is coming and it hits you, it's still gonna hurt whether you saw it or not, okay? I'd rather you track it, understand where you're at, your current reality, so you are aware of it. Not beating yourself up, but you're aware of it. So we can change it, okay? So whether you're going to do it in a spreadsheet or you're going to do it in an app like Ynab, you know, you need a budget or, or just a patent, I don't care. But start to track your spending.

So you understand where your money goes. This is how you're going to find the leaks. But here's the important thing, okay? When you track your spending, I want you to track the spending. I want you to track the reason you spent it. I want you to track the emotions around it. And if there was a trigger that got it driven so. Because then we can tie it to, oh, that was an emotional spend. This was survival. This was, you know, rent, it was food. It was, you know, not to strip it away, but to understand it. Because with that understanding, now we have more information to then look at and say, how do I cut 10% of this out? How do I cut a piece of it out and take that and move it towards savings, automatically putting it into a high yield savings account. What do I, what can I do? But until we look at where the leaks might be, we have no ability to do that. So step one is to track it all, okay? And the emotions, the feelings, and the trigger around it, okay? Step two is to pay yourself first. This is something that you hear, has been said for decades, but people don't do it now. Here's why. Think about this. There's a reason they give you these things. Credit cards. It's not so you have credit, okay?

It's to remove the friction from the buying decision.

We can buy things really easily. Buy now, pay later. Tap your phone, okay? Just, just tap a card. It's easy. They know. Marketers know if we take and make it easier for people to buy, they will buy more.

But we need to do that. With our investing, here's what we actually need to do. We need to put friction in the buying. In other words, for those people that have spending challenges, I tell them to literally remove all credit cards from all your apps. So it's not in Amazon, it's not in, in any of those apps. So you can just go in and easily buy now. Unless you're like me, who memorizes their credit card numbers. I'm a numbers nerd, y'. All. So I memorize my credit number so I can just put them in. But unless you're like me, that means that every time you want to purchase, you gotta go grab the credit card and put it in. I want to create as much friction in the buying process as possible, but I want to remove as much friction in the investing and savings process as possible. So what does that mean? That means that as part of paying yourself first, I want you to automate savings. That means that every time money comes in, a portion of it, whether it's $20, $50, a hundred dollars, 5%, 2%, whatever it is, it automatically moves to a savings account. Automatically. And if you're an employee in a situation where your company has a 401k, it's even more automatic. That means that you say to your HR, I'm going to participate in the 401k, I want to participate at least to the tune of whatever the company is going to match. So if the company is matching 4%, you make sure that you put 4% away because it's free money and it's automatic. Out of sight, out of mind. So you put 4%, they'll match the 4%. If you put $1,000 in, they're going to give you 1,000 bucks. That's a hundred percent return any way you cut it. Okay, so we need to make it automatic. We need to make it frictionless to make it happen. So that's step two. Step three is to eliminate or control debt. We do not carry credit card debt balances. We just don't. It's too costly in a high interest rate environment. 20, 25, 29%, you can't get out from under it. So if you are carrying balances, then now is the time to take control of the credit card debt. Now what that means is twofold. One, stop digging. That means that you no longer keep going into debt every single month using a credit card to, to survive. That means that you have to get very critical about your spending to make it happen. Because it doesn't help for us to put you On a debt payment plan to get the debt pay down. But on the other side of it, you keep running up the debt on the credit card. That's like putting water in a, in a bucket with holes. It's just never going to fill up. So if you're continually using your credit cards to survive, that needs to stop.

Because you're just digging a deeper hole. Once we plug those holes, now we put you on a debt payment plan to get you out of that high interest debt, that destructive debt to make it happen. There's two primary methods. Snowball and avalanche. Snow. Snowball works from the smallest balance out and avalanche works from the highest interest. First perspective. I have a debt breakthrough calculator. It's totally free, short training on it. You can go to melabraham.com no, no debt to get access to it. Get your debt in there, get yourself, get your debt under control and stop digging the hole. Okay, that's step three. Step four is to audit your lifestyle. Now I know you hear the word audit and goes, ah, okay, but here's what I mean. Before.

You purchase something, I want you to ask, what's the trade off? So I tell a story in my book about Ethan who actually cuts my hair. And Ethan was telling me about a friend of his who just bought a $5,000 watch. And so I asked, well, does he make a lot of money? And he says, no, he's like me, he's 22 years old or whatever. He was in his youthful 20s. Okay. I said, well then why would he spend $5,000 on a watch? He says, well, his friends thought it was cool. I said, all right. I said, let me do some math for you. He spent $5,000 in his 20s, early 20s, on a watch to impress a bunch of dudes that probably may not be in his life in a handful of years. But had he invested the $5,000 at 8% by the time he's retirement age, it would go up 80 times. 8, 0. Meaning that that 5,000 would turn into 400,000. Now my point is this.

If he understood that spending 5,000 on a watch to impress a bunch of dudes that actually may not be in his life for something that he probably doesn't care about that much in a couple years is going to cost him $400,000 of a financial future, would he have made the same choice? And all I'm saying, remember I said at the beginning, I want you to be aware, conscious and intentional is to be aware of the trade off. A $5,000 purchase on something that really doesn't matter.

There'S a $400,000 trade off. Now, if you're a watch fanatic and you like it and you're not going into debt to do it, okay, you're making conscious, intentional choice, knowing that I'm foregoing 400,000 down the road to have this right now. But, you know, the trade off, most of the time we make our purchasing decisions without understanding the trade off because we haven't audited our lifestyle and we don't understand the mechanics of it. And so one of the ways to do this is I say, let's use a 48 hour rule. You want to buy something and you feel the tugs of emotion with it, put it in the cart, leave it alone for 48 hours. You still feel the tugs after 48 hours, then maybe we can go ahead and do it. But allow yourself the time for the emotions to dissipate so you make a properly informed choice rather than an emotionally driven choice. Okay, that leads me to step number five, and that is this. We actually got to build an emergency fund. You need the liquidity for safety. And. And I get it. I can hear people saying, you know, cash is trash, and you don't make money on cash and inflation, it eats it up. Realize that the purpose of an emergency fund isn't to make you money, is to save you from getting financially destroyed. It is for your safety first. So I just want you to start with one month. I call it a comfort fund. In my book, one month of expenses, give you some space to breathe. Because an emergency fund is not optional. It is a safety net. If, God forbid, something happens, a health problem, a relationship problem, a work problem, loss of job, all that stuff. Now, ultimately, I want you somewhere between nine and 18 months of it, depending on your age, stage, and circumstances. And I did a whole episode on why that is and how to do it. But it's important for you to do that because it's the thing that keeps you safe. Okay? So those are the five steps. Now there is something else to think about, and that is.

You cannot look at money, you cannot look at savings, you cannot look at finances without looking at the mindset around it. And savings isn't about deprivation. Like I said early on, it's about freedom. And I want you to start to shift that mindset to look at it and say, the more I save, the more I invest. I am actually investing in my ability to choose my life down the road.

Here's an example. My wife and I, we do a couple of big Vacations. I already said that. We love to travel. We went to Vienna and Budapest. We had this wonderful time and wonderful vacation. And then we had an opportunity, and that opportunity was to join a couple of dear, dear friends of ours for a trip to Tuscany in Italy. It was literally within 45 days of our Vienna trip. And I looked at her and I said, it's once in a lifetime. And we made a choice because we could. Because we could. And I want you to have that choice, that you have the peace of mind and you have the choice. I think freedom is about choice. Okay, so imagine this for a moment, that there's a weight that's lifted off of you, that when you say that hand, that allows you to handle the curveballs, that. That allows you to also not only handle the curveballs, but allows you to navigate your life, to navigate the path to financial freedom step by step. It starts with this mindset shift. It starts with taking the steps one step at a time. It may start with $5. It may start with $10. It may not start with a lot, but you gain money, momentum, and it grows. So here's what I'm going to ask you to do. If this, any of this resonates with you, I want you to pick at least one of the steps, just one, to start today. Whether it's tracking your spending or automating savings or cutting an expense, freedom starts with the first dollar you save. It is the path to doing it. Okay? So the other thing I'd love to hear so I can support you is what do you think your biggest savings challenge is? Share one of them in the comments. Let me know how you did in a week, in a month. Keep me informed. Keep me in this loop. Because the reason I have this show, the reason I speak around the world and around the country, the reason I wrote my book, the reason I do the coaching, is because I'm in a season of service in my life. And I truly believe that financial freedom is your birthright. And whether or not the society or the world wants to demonize conversations around money and say money's taboo, I don't. Money is a tool to have a life of choice, and I want to give that tool to you. It isn't complicated. It doesn't need to be complicated. It's simple. When you understand the principles, you understand the skills, and all skills are learnable. It's like tying your shoes. At one point, we couldn't do it. We do pretty good now. Money, wealth is a learnable skill. I want to give that to you. And I want to be on this journey with you. My crusade is to light the path to financial freedom for a million families. And I want one of those families to be you. All right. All right, y'. All, I hope that you found this of value and if you did, do me a favor, let me know. Subscribe. Subscribe the channel to the show. If you haven't done so, share it out, spread the message. Because we all deserve to have a life of choice. All right? A freedom based life. All right. Until I see you on your road to financial freedom, as I always say, always, always strive live a life that outlives you. See you in the next one. Thank you for listening to the Affluent Entrepreneur show with me, your host, Mel Abraham. If you want to achieve financial liberation to create an affluent lifestyle, join me in the affluent entrepreneur Facebook group now by going to melabraham.com group and I'll see you there.

And that's it for this episode of building your money machine where we help you learn how to master your money, eliminate financial stress, and live a life of choice. If you found this valuable or helpful to you, here's what I'd love for you to do. If you do me a favor, go to Apple, Apple podcast or wherever you're listening to this podcast and rate and review the show. It helps us tremendously to keep us at the top of the list so we can continue to get this information and this message out to people. Because I truly believe that financial freedom is your birthright and I want to help each and every one of you claim it. Thanks so much.