Treat Your Savings Like a Plant and Watch It Grow

Your savings account, your IRA, your 401k and your savings in general should be treated the way a farmer treats his crops.  Farming is the perfect analogy when it comes to developing healthy savings, because it takes time, dedication, patience, persistence, discipline and sacrifice to make crops and savings grow to maturity.

Here are a few tips on how to farm your savings: (for more subscribe to my feed)

1. Early to Bed, Early to Rise Makes an Account Healthy, Wealthy and Wise

Start your savings yesterday, if not sooner!  The earlier you start putting money away, the better.  Don’t think that you can just start when you’re 40, the older you get the harder it is to save.  Just like the later you plant crops, the less your harvest will be.  The older you get, marriage, kids, buying a house, medical bills, etc. pile up.

2. “We Don’t Eat the Sweetest Corn”

An old pastor told me a story once about a farmer who used all the tallest ears of corn (tallest = best) as the seeds for the following year’s crops.  This farmer never ate the best corn, and so his crops were the best.  Translation?  The first part of your check goes to savings; make putting money away THE priority.  Not getting dinner, not buying a nice shirt, not even buying season tickets.

3. You’re Going to Have to Sacrifice

If you insist upon eating out every other night, you might be eating cat food when you’re 70.  Keep in mind that no one who is poor and old intends on being that way, they find themselves there by lack of foresight.  This means limiting your restaurant trips, cutting down on Starbucks, washing your own car, buying socks at Marshalls and so on.  Look for easy places to cut back though, this will make sacrificing easier.

4. “Through discipline, the repetition, you become free.” - Pete Carrol

Okay, Carrol’s a football coach, but farmers wake up and do the same thing over and over and over.  Each little thing has a purpose, a reason, and even if they aren’t “feeling it” they do what is necessary to make sure their corn, soy beans, wheat or whatever is harvested on time.  Saving isn’t something you do once in a while, it’s not a “feeling” it’s a discipline.

5. Oil and Water Don’t Mix

Banks may give you savings and check accounts together, but they are vastly different animals.  Money should flow in and out of checking accounts like a river in order to cover bills, food, utilities and all your other needs.  Savings accounts should be lakes, money should only go in.  Barring medical tragedy or ransom demands, your savings account should only grow, never shrink.

6. You Reap What you Sew

Okay, that’s more Biblical than farming, but true in both.  Sew/plant/save once in a while without learning about the market, then don’t expect much when you’re older.

7. Know Your Soil

Seeds are planted in dirt, good dirt brings good crops, bad dirt brings bad crops.  Know your market, know stocks, bonds, interest rates, inflation, and taxation rules; if you know your soil then you’ll know what seeds to plant when.  Corn is brutal on soil, so planting corn constantly, season after season will eventually wear down the dirt’s natural nutrients and minerals.  Similarly, the stock market is brutal on money and your nerves.  Living and dying by stocks will wear you out, and unless you have millions, and really hundreds of millions, your life will be hell.  Know when to buy, when to sell, when to diversify, and so on.  Take courses, buy books and read them, ask your financial planner for advice, read the business section on Monday, Wednesday and Friday every week to get a sense of the market.

8. Don’t Eat Your Seed

Your money isn’t what empowers you to buy food; in fact if you read the fine print, all your money represents is debt.  Treat your money like you would a seed, that it should be planted in order to bring forth food.  Plant your dollars in places where it will grow, savings accounts with high interest rates (HSBC, E-Trade, WaMu, ING), in stocks that will yield long term growth, in mutual funds that will bring back a conservative but trustworthy return on your investment and in bonds that are government backed.