Some People Should NOT Be Saving Any Money

by Ron Haynes

Shocking, right? But it’s true: there ARE times you shouldn’t be putting ANY money into a savings account. That may be a difficult thing to believe but if you’re drowning in debt, putting money into a savings account isn’t the best idea.

Rules Of Thumb are just that, generalized guidelines, and while there may be some people who can regularly stash 50% or more of their income into their ING Direct savings account, others who are living paycheck to paycheck find it impossible to save a dime. That’s why I believe it’s best to get a solid budget into place prior to getting your savings account off the ground.

Let’s be clear: I’m not talking about your emergency fund. I believe, like the financial gurus, that you need to get a minimum of $1,000 into an emergency fund as soon as possible, but once you have it funded, you should shift your focus to:

  • Establishing a livable budget
  • Paying off consumer debt (credit cards, cars, store cards, medical bills, etc)

In reality, when you accurately perform the first task, the second task just falls into place. It did for me.

Why is a budget more important than setting up a savings account?

It doesn’t make sense to have $100 in a savings account if you are fighting with debt collectors. It makes no sense to have $10,000 in the bank earning one or two percent interest when you’re paying 14.99 percent or more on a $10,000 balance on your credit card. Your piggy-bank should starve until you can get your livable budget created and you establish stability in your finances as a result of knowing exactly where each dollar is spent.

It’s comforting to have money in the bank even though you owe creditors out your nose … I know. I used to keep a large sum of cash in my bank just as cushion even though I was paying 12 times the interest rate on student loan debt. Does that make any sense? At the time, I thought I was making the best decision, but now that I’m on the other side of debt freedom, I see things differently.

What’s the best way to get a budget started?

I still believe it’s YNAB (You Need A Budget). This unique and award-winning budgeting software is different than other budget or money management programs and the reasons are many:

  1. It doesn’t demand your banking passwords or logins. YOU retain those so you don’t have to worry with identity theft with your budgeting software. I HAVE to wonder about many of the online systems when banks, governments, and credit card processors with the highest security possible are regularly hacked and their information systems are breeched. That isn’t an issue when YOU control your passwords.
  2. It uses the highly reliable online envelope system with some interesting twists that get you out of the paycheck-to-paycheck spiral.
  3. The system helps you save for those “rainy days” and even for large purchases – including insurance or taxes.
  4. It forces you to focus on your budgeting leaks … and helps you fix them quickly.
  5. The software makes adjustments if you overspend, helping you correct those mistakes before you go to the next month.
  6. It even works for “spontaneous people!” Yeah, you know who you are.
  7. The system frees you from the paperwork monster of handwritten budgets (my personal favorite).
  8. You get a FREE TRIAL period to see if it will work for you.
  9. It works on Windows or Mac software. Everyone needs to learn how to budget!
  10. You can easily use theYNAB Budgeting App on your iPhone or Android to record transactions as they happen, or you can make entering receipts a daily ritual (you know, like checking Facebook!). You won’t believe how easy it is.

Get a FREE TRIAL to check out the best budgeting software on the Internet!

YNAB doesn’t track your investments. It’s really intended to represent more of a “Statement of Cash Flows” than to track a separate investment account. The real battle for most of us is what we do with our cash flow, not staring at the balance of your investment account on a daily basis. In fact, most financial planners discourage that practice for good reason. Let’s face it, once we get our finances under control by using a budget, we will finally free up enough cash to begin investing. Once you reach that point, you can easily track your investments through an online brokerage account.

Is YNAB free like Mint.com?

No, it isn’t, but unlike Mint.com, YNAB doesn’t subject you to advertisements for more credit cards (free isn’t really “free” is it?) or other products that you may or may not need. Plus, like I mentioned before, you DON’T have to surrender your passwords to your bank account or your Scottrade account or ANY account in order to sign up.

My conclusion: you’ll save the cost of the software many times over. It’s functional and easy to use. Most other systems are merely “expense trackers” masquerading as budgeting software – hey, you can do that with any spreadsheet. The difference is that YNAB puts you in the driver’s seat. I fully endorse it.

About the author

Ron Haynes has written 1000 articles on The Wisdom Journal.


The founder and editor of The Wisdom Journal in 2007, Ron has worked in banking, distribution, retail, and upper management for companies ranging in size from small startups to multi-billion dollar corporations. He graduated Suma Cum Laude from a top MBA program and currently is a Human Resources and Management consultant, helping companies know how employees will behave in varying situations and what motivates them to action, assisting firms in identifying top talent, and coaching managers and employees on how to better communicate and make the workplace MUCH more enjoyable. If you'd like help in these areas, contact Ron using the contact form at the top of this page or at 870-761-7881.


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