It turns out that many people are new gardeners these days. While they have been social distancing, many have planted gardens with hopes of receiving beautiful flowers, or fresh fruit and vegetables. As some know, and others will soon find out, a garden will reap great rewards with a little effort, determination, and consistency. One of the great things about gardening is that most of the work is done at the beginning; planning what to plant, preparing the soil, and then planting the seed or starter plant. Then with a little assistance from nature, and periodic maintenance, the hard work will earn results. Why not take the same principles to grow a “money tree”?
Sure it sounds a little cliché, but there are similarities between gardening and investing. Both require and initial investment in planning/effort/money/time to get things started, and the determination to protect and maintain your investment as it grows. The savings, like the garden, will be under constant attack from those “weeds” that pop-up threatening to drain the life from your investment. Some gardeners raise their beds to reduce their chances of attack from weeds or pests. Some lay down something between plants to block out the sun and prevent weeds from growing, Others use a hoe daily to remove the unwanted threats to their investment. Without a doubt, it’s life’s unforeseen expenses that pop up like weeds, which pose the greatest threat to savings. In order for a savings to grown, you have to plan to protect it with an emergency expense fund. So here are some “Gardening” Steps For Today:
- Plan for it – People usually plant something they love in their garden. Likewise, having an intended purpose for which your savings will greatly enhance your determination to stick to your plan. With this in mind, determine how much you can save each month. No matter how small, it is a start. Use this to create two separate savings; one for paying off debt and long-term growth, and the other for emergency funds. Initially, you’ll want to use all savings to grow the emergency fund to $1000. Then, apply all savings towards paying off debt by paying off those accruing the most interest first. After this is done, the savings amounts should be split 50/50. Next, when your emergency fund has built up to an amount worth 4 to 6 months of household income to protect against unemployment, then you can finally switch all towards long term savings, and replenish the emergency fund as necessary.
- Prepare the soil – To have savings, you must have a place in which to set aside the funds. Create 2 separate places in which to start your savings. If you can, set up 2 savings accounts which will receive automatic withdrawals from your paycheck direct deposit account. If you can’t do this at the time, then put cash it in 2 separate containers until you can. The point is to have a location separate from your monthly expense funds.
- Plant the seed – I know some may currently think this next to impossible, but there has to be an initial investment. So no matter how small the initial amount. Even if it’s $2. Split it and save it. One word about using savings for debt here. If you have debt that is accruing interest, it is best to apply your savings towards eliminating the debt first. Still fund the emergency fund account, but use the savings funds to get out of the debt hole before it gets deeper.
- Nurture it – Just like a garden needs water, sunshine, and nutrients, in order for the savings to grow, it will require a routine amount of new funding to grow. At the very least, but more often if possible, make a monthly installment into your long-term and emergency savings.
- Protect it – The emergency fund is there to protect the long-term savings. But what protects the emergency fund? Well, that is you and your determination to make a change. But there are actions you can take which will support your effort. You can plan a small reward for yourself with each installment. Even it’s just an activity which you enjoy. It will bolster your habit to make the investment. Sharing your progress with your friends or family will also create an appropriate feeling of accountability to continue the action.
- Appreciate success – As with looking upon a growing garden, there is a certain feeling of success that comes with periodically reviewing your hard-earned investment. So remember to look past the weeds and work to review your accomplishment periodically.
- Enjoy it – As with a garden, it takes a while before you can enjoy the fruits of your labor. But there will be a day when you’ll reap the rewards for your hard work.
- Plan for growth – Most experienced gardeners will tell you that as their confidence and skill grew, so too did their garden. Look for opportunities to add to your savings. It may be an one-time additional fund, or reduction in monthly expenses which can go towards savings. But if you’re fortunate, and your income grows, so should your savings.
When your savings starts to grow, you’ll start to think about investing it in something that generates interest or provides a dividend. That’s when the real money tree will take root. But that’s a topic for another post.
If you have children at home with which you have shared your gardening, this would be a great opportunity to show them how a money tree works as well.
As always, thanks for reading.
And remember to take the next step…
Mitch