When I look at my savings account, I don’t see pounds and pence. I see freedom.
—Merryn Somerset Webb, British journalist
In 2016, author Paulette Perhach wrote an essay for The Billfold called “A Story of a Fuck Off Fund.” It laid out the all-too-believable scenario of a woman who ends up putting up with an abusive boyfriend and a male boss who sexually harasses her because she has only $159 in the bank, an overdue car payment, and maxed-out credit cards—and she can’t bear the thought of asking her dad for another loan.
When her boss calls for a one-on-one in his office, walks up behind her, and puts his hand up her new dress, she just squirms away as he apologizes, even though she knows she should tell him off or report him. She hears herself saying instead, “It’s okay. Just forget it.” And after she scurries out of the room, she surveys the office, half full of women, and wonders to herself, “How many of them have secrets like the one you’re about to keep?”
I teared up when I read the essay. A friend had sent it to me in the wake of the latest wave of #MeToo allegations, and that last line seemed particularly germane. Not having enough money to cover even a month’s rent can leave you feeling powerless. If you can’t afford to miss a single paycheck, it’s harder to speak up at work. If you’re dependent on a partner to cover expenses, it’s harder to walk away.
What I hadn’t anticipated was that the article would dredge up memories from my own life that I’d brushed aside years earlier. Now I saw them through a different lens. I was nineteen and working as a hostess at a restaurant over the summer. The manager, a middle-aged man with a mustache and a belly that hung out over his jeans, followed me into the walk-in refrigerator, telling me how much he loved my lips and how he’d dreamed the night before of me going down on him. At the time, I remember brushing past him and mumbling, “Thanks, I guess.” But at the end of my shift, I walked out the door of the restaurant, and I never came back. I was fortunate, I realize now, that I could walk out because I had some savings and the safety net of my parents to fall back on.
Years later, when I was in management, I had a notoriously sexist boss with a temper. By then I’d shored up my savings and knew I could walk away from a bad situation and be fine financially. It wasn’t something I was conscious of most of the time. But I remember I didn’t hesitate to speak up when he swore at an intern in front of the team, made dismissive and chauvinistic comments in a meeting, and later tried to move my desk away from the team in what felt like retaliation. I could raise my voice in large part because, if worse came to worst and he fired me, I had enough money saved and enough confidence in my ability to find another job to know I would be okay.
It hadn’t dawned on me initially how fortunate I was that I had that safety net—and how different things might have been if I’d really needed each paycheck. It hit me that having savings isn’t just for covering emergencies, upcoming trips, or things we want but can’t afford right now. Savings provide security. Having savings is like having a protective shield, allowing you to deflect bad behavior, walk away from an abusive partner or a toxic workplace, and know that you’ll be able to take care of yourself. If you’re dependent on someone else financially, that person has the power in the relationship—whether it’s a boss or a boyfriend. While you may tell yourself that you won’t put up with any abuse or disrespect, if you don’t have the ability to cover your expenses on your own if you leave your partner or job, you can feel trapped.
We talk about having an emergency savings fund to cover unexpected expenses like car repairs or a sick pet. But that’s only part of it. Putting away money is really like building a boat that may one day carry you to safety—or wherever you want to go. That’s what building wealth is about.
I didn’t truly grasp that until after my midnight revelation. Before that, I had looked at saving as depriving me of the things I wanted now in my life. What I hadn’t understood was that by limiting the amount of money I was saving and investing, I was just depriving myself of choices in the future. If I’d continued down the same road, tucking away a little here and there—but for the most part, spending much of each paycheck—I would have had to put off, or even give up, some of the things that meant the most to me, like a second child and a home we could grow into in the city we loved.
Until then, I hadn’t acknowledged that just keeping my head above water financially meant that I could easily slip under at any time. If I’d lost my job then, or been hit with a big, unexpected expense, I would have been in serious financial trouble. And living with that knowledge (even if you try to ignore it) can create a lot of anxiety. The American Psychological Association surveys Americans each year about their top stressors, and money is consistently in the top three. In its 2020 survey, nearly two in three adults identified money as a “significant source of stress.” And the research shows that women are more likely than men to report living paycheck to paycheck and to feel financial stress more acutely. The APA found that women consistently report higher stress levels from money worries than men do and are more likely to experience symptoms like feeling overwhelmed, anxious, and fatigued as well as having trouble sleeping.
Continuously treading water is exhausting. Yet we often keep it up, hoping that maybe someone will notice us flailing about and “save” us or that things will just improve over time. The better solution is to learn to take care of ourselves financially so that we can propel ourselves forward and stop moving in place. Saving is the antidote to the stress of living paycheck to paycheck.
More money = more choices. It’s that simple.
One spring night, driving home from a friend’s party, my friend Simran’s husband was killed in a car crash. She was twenty-six at the time. Suddenly a single mom with a toddler, Simran was now forced to cover all the bills on her own. Without her husband’s salary, their monthly household income fell by 60 percent. It would have been completely understandable if, when the five-figure life insurance check arrived, she deposited it in the bank and used it to subsidize their expenses while she figured out her next move. Instead, she cut her monthly expenses, buying groceries in bulk and packing her lunch—and putting off any purchases that weren’t absolutely necessary. Parents and in-laws helped with childcare. She used the insurance check to buy a small apartment on the outskirts of the city and rented it out for regular income. That rental income helped supplement her salary until she could find a better-paying job.
When she first told me that story years later, I was stunned. Who would have the wherewithal at twenty-six to cut expenses and invest that insurance money—especially after being widowed with a small child? When I asked her why she hadn’t thought to spend some of it to cover her bills as she adjusted to life as a single mom, she looked at me incredulously.
Her dad, she explained, had taught her early on to live on the regular income she brought in—and to save some of every single check for her future. And then to invest anything she got outside of that, whether it was a bonus, a birthday gift, or a check from the insurance company. If she was in a bind, she should tap her savings—not this insurance windfall—and then work to replenish them. As she saw it, this was a chance to invest for their future, not money to spend on everyday expenses.
Even as a young girl, Simran remembers putting money aside for her future—carefully dividing her allowance into four piles. “I had one for fun, one for clothes and other ‘essential’ expenses, one for short-term goals like a stereo system for my bedroom, and one for my future,” she told me that night, as we were swapping childhood stories over margaritas. “My dad instilled early on the importance of saving money. He always asked me not what I was making but how much I was saving. He told me, ‘When you get money, it’s not about what you can buy. It’s about what you can save.’”
This approach is key to the breadwinner mindset: thinking about how each check you get can help you build your wealth (and make you less dependent on future checks!) and bring you closer to the future you want.
One popular budgeting framework is the 50/30/20 rule. Half (or less) of your paycheck goes to needs: essential expenses like your rent or mortgage, utilities, insurance, and basic groceries. Another 30 percent can go to wants: everything from travel to take-out meals. And the remaining 20 percent goes to saving, investing, and paying off debt. However you split up your paycheck, financial advisors generally recommend trying to set aside at least 15 to 20 percent for saving and investing.
So did Simran’s dad. And starting with her first job, she got in the habit of setting aside at least that much from each paycheck. Even after she got married, and especially when she gave birth to their son, Simran—who was one of three daughters raised by a middle-class couple in Delhi, India—continued to set aside some of each check for her future.
Years later, when she got a marketing job at the New York office of a big financial firm, Simran, who was still a single mom, would use the earnings from selling that first apartment to help purchase a two-bedroom condo in downtown Manhattan for herself and her son. Then she bought a second rental property. The money she would make from that investment and the earnings she’d saved from her jobs would eventually help her cover the bulk of her son’s college tuition, buy a home in San Francisco, and pursue her dream of starting her own business in her late forties. She didn’t get there overnight. But being in the practice of saving and investing early on not only helped her get by as a single mom but also gave her more choices and opportunities later in life.
You may not have been raised the way Simran was. Most of us weren’t. (I certainly wasn’t.) The United States is a consumption-driven country, and saving isn’t valued here—nor is debt reviled—as much as it is in other cultures. Much of what we’re taught about saving is framed in terms of spending goals. Save money now for that designer bag or spa getaway.
Living paycheck to paycheck is perfectly acceptable, even normal, in America. And so are excuses like “I’ll start saving and investing when I start making more.” (I used that one myself.) But women disproportionately feel the effects of it because we’re more likely to carry student debt, we earn less, and most of us aren’t making money choices based on the assumption that we may need to provide for ourselves and a family in the future.
In fact, research shows that women consistently lag behind men when it comes to saving and investing—both for short-term goals and emergencies and for longer-term goals like retirement. A 2016 survey by the nonprofit group America Saves found that fewer than half of women were regularly saving even 5 percent or more of their income. Another survey found that nearly one in four women had less than $100 saved to cover unexpected expenses. In a 2020 survey by Bankrate, nearly one-third of women said they had more credit card debt than savings.
As a country, we’ve normalized debt. And we’ve framed saving as something to aspire to—not a habit to put into practice with every paycheck. What if instead we were conditioned to set aside 20 percent of every single paycheck from day one, saving some for short-term goals and investing the rest for mid- to long-term ones? Imagine how much money we would already have by the time we were in our thirties or forties.
Actually, you don’t have to imagine it, because we can run some calculations. For simplicity’s sake, let’s say, hypothetically, that over the next ten years, your annual income averages $48,000 after taxes (the equivalent to a salary of around $60,000) and you put 20 percent of that aside for saving and investing. That’d be $800 a month. If you put one-quarter of that amount into savings, you’d have $2,400 after one year, not including any interest you earn. And after a decade, if you had it in what’s considered a “high yield” savings account with an interest rate of 1 percent, and you left it alone, you’d have more than $25,000!
Not bad. But let’s say you put the remaining 75 percent ($600 a month) into the stock market and invested in an index fund that mirrored the S&P 500-stock index, which returns about 7 percent on average per year after inflation. You could have more than $100,000 in that account a decade later! (Although, keep in mind, that the amount could fluctuate year by year, as 7 percent is an average.) I’m not saying that’s the ideal allocation for you—we’ll talk more about investing in Chapter 7—but getting in the habit of saving and investing money from each check early on means you’ll benefit big-time from compounding. That’s when the returns on your investment earn returns and so on and so on. And that can help your money grow exponentially. That $100,000 could be a down payment on a home or enough to kick-start a business. Or a big head start on a retirement fund. And if your earnings went up more over that period (as I’d hope they would!), your investment balance would be even bigger.
Of course, many of us may feel that we can’t put quite that much aside, especially early in our careers. (And not all of us are making $60,000.) And that’s okay. What’s critical is to start regularly saving and investing something so that your money has the chance to grow. Then you can increase the percentage you set aside incrementally over time. Even $50 a month auto-deposited into a high-yield savings account could net you more than $3,000 after five years. Put another $50 a month into a brokerage account and invest in a fund that mirrors the S&P 500-stock index, and it could grow to more than $8,500 over a decade and to more than $25,000 over twenty years (using the same 7 percent annual-return assumption).
Saving and investing some of your income now helps that money grow over time. And that can give you more options later.
For Samira, a forty-four-year-old endocrinologist in California, having savings allowed her to take five months off after giving birth to her twins in 2013 and then come back to a three-day-a-week work schedule, knowing that she and her husband would still have enough money to cover their expenses with ease. “If we hadn’t saved a significant amount of money, there’s no way we could have considered that—or me even being off those five months,” Samira told me.
Samira’s parents always lived frugally, making purchases with cash and saving as much as they could, and their habits rubbed off on her. “I have saved since I first got paid,” she said, anywhere from 30 to 50 percent of her income. “There’s a lot in life that’s unpredictable. Saving gives you so much more flexibility when things come up.”
“My husband used to think someone was wealthy because they drove a BMW or lived in a big mansion. But it’s really about having the money to have the flexibility you want,” she added. “My husband was able to leave his job and try working on his own startup. I was able to go part-time after we had kids. And if I don’t like my job now, I can quit and know that we’ll be okay financially. If you don’t have savings, you don’t have choices like that.”
Laura, who runs a PR consultancy in New York City, started saving early in her career, too. Was it easy? Not at first. Laura remembers sharing a four-hundred-square-foot apartment and a foldout couch with a roommate when she first moved to the city. “It was so uncomfortable that after a month we put a mattress on the floor, and I woke up with round welts because the springs came out. My roommate ended up buying a sleeping bag, and I slept on the couch,” she remembered. “We were just scraping by.”
Eventually, she rented her own place. “It was an itty-bitty apartment. But I didn’t try to go bigger, because I wanted to save money,” she said. “I didn’t have a number in my head, but I was saving as much as I could with the idea that I would eventually buy an apartment.”
Her savings mentality helped her out when the unexpected happened early in her career: emergency back surgery at twenty-five. At the time, Laura was working as an assistant for a soap opera. It was her first year, and health benefits didn’t kick in until her second, so she’d purchased a high-deductible emergency insurance plan. Eight months into her job, she started having severe back pain. It turned out she had a cyst on her tailbone. Her doctor said she needed surgery immediately, and her insurance only partially covered the cost. “I ended up having to put in ten thousand dollars. I cleaned out my bank account,” she told me. “That experience convinced me of the importance of having savings and good health insurance. I immediately started saving again.”
Less than seven years after she’d rented the tiny studio apartment, Laura had saved enough to buy herself an apartment nearly twice as big. “Without savings, I wouldn’t have been able to do that,” she told me. “And I love this apartment.”
Saving money enables you to have more of what you want in your future and, just as importantly, to be able to avoid situations you don’t want to be in. That could include going back to work before you want to after giving birth. Or staying in a relationship with a partner who treats you badly because you don’t think you can afford the rent or mortgage on your own. It could be staying at a soul-sucking job way longer than you know you should because you can’t afford to miss even one paycheck. It may mean wondering if you can afford to see that specialist when you get sick. Or if you can afford to visit your mom or someone else you care about who lives far away, when you know how much it would mean to both of you. I don’t want you to be stuck in a terrible situation or to miss out on time spent with the people you care most about—or any of the things that really matter to you in your life—because you didn’t save and invest enough money. That’s how you’ll be able to afford the goals you came up with in the last chapter.
The night I was up, pacing back and forth with my infant son, realizing I had to start putting money toward a life that reflected my values and dreams because no one else cared more about my future than I did, I knew I might have to take some pretty dramatic steps to get on track financially.
The next morning, when I first wrote out a description of my future life, I felt invigorated and motivated. But when I opened my laptop and started researching what making this vision a reality would actually cost, I had a total breakdown. I sat hunched over the desk my husband and I shared in our bedroom, sobbing as the numbers sank in. Until I’d actually looked at the costs, I’d been able to fool myself into thinking it wouldn’t be that much of a stretch to get a bigger place in New York City and afford another kid. But now it was as if every bad choice I’d made with my money for the past decade was suddenly catching up to me. There was no denying that I had to make some changes.
In the days and weeks and months that followed, I made a series of choices about my money that were guided by a completely new set of motivations. Now every single decision I made with my money was in service to the future I wanted to create. That meant no more mindless spending or impulsive purchases. And it required me to budget my money so I knew exactly what I could afford to spend in order to save what I needed.
In Chapter 4, you determined the values that really matter to you in your life and the financial incentives you want to put in place to keep up the momentum on your journey. Now it’s time to think about how much you’ll be able to put away in order to get on track to both reach those wealth goals and be able to address short-term incentives as well as unexpected expenses that pop up along the way (because they will).
Everyone’s goals are different, so there’s no one approach to figuring out the right number for you right now. It’s really a matter of pricing out what you want in the future, calculating how much you need to save to get there, and then figuring out how long it will realistically take you to save that money—and what you may be willing to do to speed up that process.
When I did my calculations, we had very little money saved up, so we were saving the down payment almost from scratch. That meant checking out homes in neighborhoods we liked, figuring out what the minimum down payment and monthly mortgage and insurance payments would be, and then looking at how much my husband and I could each set aside for them. Since I felt more urgency than he did and had my sights set on certain neighborhoods—and I had more catching up to do financially—I set myself a big savings goal.
When I’d had my midnight revelation, things looked pretty bleak. I was still carrying over a thousand dollars in credit card debt. I was living paycheck to paycheck. The thought of planning for our future still made me anxious. I felt unprepared to be in charge of making financial choices that could affect not only my future but now my family’s future, too.
But I put my initial concerns to the side temporarily and started to create a spending plan that I could actually follow—one that cut back sharply on things that were less important to me and allowed me to continue to indulge in some of what I loved—so that I could put more money against my debt and start saving more. That meant more cooking at home and less going out to dinner with friends, though I still met them for drinks and happy-hour menu specials. It meant skipping vacations and taking the bus to visit my in-laws rather than flying. It meant cutting back on new clothes unless it was absolutely essential and shopping secondhand or sales for our son’s clothes. It meant skipping pricey Pilates classes and making better use of my discount gym membership. And picking more family activities that were free or close to it, like picnics in the park, readings at the local bookstore, and free concerts and other events around the city.
When I first looked closely at where my money was going, I realized a lot of what I spent was out of obligation, guilt, convenience, or habit. I was spending money to attend social functions that I really wouldn’t have minded skipping. I often picked up take-out meals when I didn’t feel like cooking or got groceries at the expensive food store down the block when I didn’t feel like walking another three blocks to the cheaper supermarket. I bought a coffee and a snack most days on the way to the subway out of habit, even though we had a coffee maker and plenty of snacks at home and at the office.
I hadn’t thought much about it until I realized that each of those choices meant that I would have less money to spend in ways that were more meaningful. The bottom line was this: I often did not spend my money in ways that brought me real satisfaction or fulfillment. So what would it look like if I did?
Once I started earmarking more of my money for the things that would really benefit me—leaving me feeling satisfied and fulfilled, confident in the knowledge that I was taking care of myself and my hopes and needs—I found that there was less money left to put toward purchases that weren’t as satisfying. It’s like the old adage of paying yourself first: Allocate money toward your future goals first, and then budget what’s left for spending.
It also helps to share your goals with friends and loved ones so that they can help support you. Around the same time I started spending more mindfully, a good friend of mine left her corporate job and was trying to get her consulting business off the ground. For the first few years, she wasn’t making much money, and what she did earn went to her mortgage and other essential expenses and toward building her business. So we decided that when we met up—and we usually got together once every week or two—we would either eat dinner at her place, and I’d bring a cheap bottle of wine, or she’d find a happy-hour or Groupon special somewhere if we went out. Rather than feeling like we were depriving ourselves, I discovered that I had just as much fun. And I felt better afterward when I looked at what I had spent. While I was ostensibly helping her keep her expenses down, I was grateful to spend less, too, and still share quality time with her. Even after she was earning more, we continued to stick to the same plan.
Whether we realize it or not, our spending is largely guided by the values we’ve prioritized. But whether those values are truly ours, or simply family or societal values we’ve adopted, is an important distinction. If we’re spending money in order to conform or to please or impress others—values that we may have picked up from social conditioning but which may not reflect our true desires—we may end up spending in ways that leave us feeling dissatisfied and frustrated. Because our spending is out of line with what we truly value.
“Societal values are often incompatible with personal values,” Jessica Dore, a licensed social worker and trained psychotherapist, writes on Psych Central. “The things we are taught to value through television, movies, and magazines may not resonate with what feels truly important or supportive of our values as individuals. As a result, we have all found ourselves stuck—at one point or another—chasing something that we don’t even want.”
The antidote to that is to be clear about your values and goals. And to spend mindfully. It can even help to ask yourself what value something brings before you spend money on it. Is your spending bringing you closer to the life you want or taking you further away?
“Whatever seemingly small money decisions I am making now, I ask myself, How is that going to influence the future we want to have?” said Sargi, a thirty-nine-year-old executive VP at a global advertising company who’s married with a newborn son. “Whether it is about saving or purchasing decisions, I try to look at the cumulative effect. Every day it’s about re-grounding myself in what is truly important.”
That means building enough savings to provide a “substantial cushion” for their growing family and being able to take advantage of investment opportunities that can pay off in the future. Ultimately, she told me, “It’s to have the financial freedom to make choices.”
I wasn’t sure that changing the way I spent and saved my money would be quite as simple as changing my mindset. But in some ways, it was that simple. Because once I truly understood how much the everyday decisions I made affected my future and my family’s future, I made different choices.
I slowly built up my savings account. And I taught myself to invest and began to put as much as I could into my retirement and other investment accounts. Those early days weren’t easy. There were periods of self-doubt and some real sacrifices. But the desire to create that future I’d imagined outweighed all that. So I kept at it.
Just when I was starting to look around for a better-paying job, I had the chance to volunteer to take a severance package at the now-struggling magazine where I worked. There was no question I would sign up. I invested almost all the money I got, then hustled to bring in freelance income, surprising myself when I increased my earnings substantially. About a year and a half later, I was hired by a former colleague for my first management role. The salary was almost double what I’d been earning at the magazine. (More on that in Chapter 8.)
In less than three years, my debt was gone and I had enough in my savings and regular investment accounts to start house hunting. I began to feel a stronger sense of confidence, grounded in the newfound recognition of my own capabilities. Soon after, I put down most of the down payment on an airy two-bedroom home in Brooklyn with all the amenities I’d written down on my imagined ideal listing. And it was less than three blocks away from a beautiful park with running paths and a playground. I was five months pregnant with our younger son, Sebastian, when we moved in. It’s hard to describe the feeling of pride and joy that came over me when I took my pregnant self on a tour of our beautiful, brand-new apartment and reminded myself that I’d helped make it ours.
Whatever the results of your calculations, the most important lesson is recognizing the value of saving or investing some of every single paycheck, bonus, birthday check, and any other money that comes in. In fact, any additional money that comes in is an opportunity to boost those saving and investment accounts that are quietly chugging along, growing larger over time as you go about your daily life. (In other words, if you can afford it, put anything you get outside your regular income straight into your savings or investment accounts before you have a chance to spend it.) That’s how you’ll no longer have to depend on those paychecks, or a partner, down the road to afford the things that matter to you. That’s how you’ll be able to reach your goals even faster.
For me, it was incredibly reassuring to have more control over my ability to achieve the future I wanted. This newfound sense of agency felt good. As I further educated myself about personal finance, I became more active in managing our money. And as our net worth grew, so did my confidence and sense of security. Even now, I often remind myself what I am earning and saving money for. I still regularly check in with myself to make sure I never lose sight of what matters most. When I look around at my life, it feels good to say, I chose to create this.
That’s the power of saving and investing money for your future. The more money and thought you put toward your future, the better the chances it’ll be the one you want. In the next few chapters, we’ll look at ways to free up more cash and increase your earnings, so you can save even more, and how to invest to grow your money faster. But first, let’s look at how to pay down any debt you have more quickly and how to transform your relationship with credit, so it can help you build wealth—not hold you back from it.