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One of the best habits is the habit of saving! But how Much Should One Save? The answer cannot be given in a few words, for the amount one should save depends upon many conditions, some of which may be within one’s control and some of which may not be.
Generally speaking, a person who works for a salary should apportion his or her income as follows:
- Savings Account » 20%
- Living — Clothes, Food and Shelter » 50%
- Education » 10%
- Recreation » 10%
- Life Insurance » 10%
- TOTAL » 100%
However the following indicates the approximate distribution which the average person actually makes of his or her income:
- Savings Account » NOTHING
- Living — Clothes, Food and Shelter » 60%
- Education » 0%
- Recreation » 35%
- Life Insurance » 5%
- TOTAL » 100%
Under the item of “recreation” is included, of course, many expenditures that do not really “recreate,” such as money spent for alcoholic drinks, dinner parties, and other similar items which may actually serve to undermine one’s health and destroy character.
An experienced analyst of men has stated that he could tell very accurately, by examining a man’s monthly budget, what sort of a life the man is living; moreover, that he will get most of his information from the one item of “recreation.” This, then, is an item to be watched as carefully as the greenhouse keeper watches the thermometer which controls the life and death of his plants.
Those who keep budget accounts often include an item called “entertainment,” which, in a majority of cases, turns out to be an evil because it depletes the income heavily and also the health. We are living, right now, in an age when the item of “entertainment” is altogether too high in most budget allowances.
Real Story of an Ordinary Man
“Do not save what is left after spending, but spend what is left after saving.” – Warren Buffett
A few years ago a young man came to Philadelphia, from the farming district of Pennsylvania, and went to work in a printing plant. One of his fellow workmen owned some shares in a Building and Loan Company and had formed the habit of saving $5.00 a week, through this Association. This young man was influenced by his associate to open an account with the Building and Loan Company. At the end of three years, he had saved $900.00.
The printing plant for which he worked got into financial difficulty and was about to fail. He came to the rescue with his $900.00 which he had saved in small amounts, and in return was given a half interest in the business. By inaugurating a system of close economy he helped the business to pay off its indebtedness, and today he is drawing out of it, as his half of the profits, a little better than $25,000.00 a year.
This opportunity never would have come, or, if it had, he would not have been prepared to embrace it, had he not formed the habit of saving money.
The Journey from Ordinary to Extraordinary
When the Ford automobile was perfected, during the early days of its existence, Henry Ford needed capital to promote the manufacture and sale of his product. He turned to a few friends who had saved up a few thousand dollars, one of whom was Senator Couzens. These friends came to his rescue, put in a few thousand dollars with him, and later drew out millions of dollars in profits.
When Woolworth first started his Five and Ten Cent Store Plan he had no capital, but he turned to a few friends who had saved, by the closest sort of economy and great sacrifice, a few thousand dollars. These friends staked him and later they were paid back hundreds of thousands of dollars in profits.
Van Heusen (of soft-collar fame) conceived the idea of producing a semi-soft collar for men. His idea was sound, but he had not a cent to promote it. He turned to a few friends who had only a few hundred dollars, who gave him a start, and the collar made each of them wealthy.
The men who started the El Producto Cigar business had but little capital, and what they did have was money they had saved from their small earnings as cigar makers. They had a good idea and knew how to make a good cigar, but the idea would have died if they had not saved a little money. With their meager savings they launched the cigar, and a few years later they sold out their business to the American Tobacco Company for $8,000,000.00.
John D. Rockefeller was an ordinary bookkeeper. He conceived the idea of developing the oil business, which was then not even considered a business. He needed capital, and because he had developed the habit of saving, and had thereby proved that he could conserve the funds of other people, he had no difficulty in borrowing what money he needed. It may be truthfully stated that the real basis of the Rockefeller fortune is the habit of saving money which Mr. Rockefeller developed while working as a bookkeeper at a salary of $40.00 a month.
James J. Hill was a poor young man, working as a telegrapher, at a salary of $30.00 a month. He conceived the idea of the Great Northern Railway System, but his idea was out of proportion to his ability to finance. However, he had formed the habit of saving money, and on the meager salary of $30.00 a month had saved enough to enable him to pay his expenses on a trip to Chicago, where he interested capitalists in financing his plan. The fact that he, himself, had saved money on a small salary was considered good evidence that he would be a safe man to trust with other people’s money.
Opportunities on Every Corner
Most businessmen will not trust another man with their money unless he has demonstrated his ability to take care of his own and use it wisely. The test, while it is often embarrassing to those who have not formed the habit of saving, is a very practical one.
A young man who worked in a printing plant in the city of Chicago wanted to open a small print shop and go into business for himself. He went to a printing supply house manager and made known his wants, saying he desired credit for a printing press and some type and other small equipment.
The first question asked by the manager was “Have you saved any money of your own?”
He had! Out of his salary of $30.00 a week he had saved $15.00 a week regularly for nearly four years. He got the credit he wanted. Later on, he got more credit, until today he has built up one of the most successful printing plants in the city of Chicago. His name is George B. Williams.
There are opportunities on every corner, but they exist only for those who have ready money, or who can command money because they have formed the habit of saving. The late J. P. Morgan once said he would rather loan a million dollars to a man of sound character, who had formed the habit of saving money than he would a thousand dollars to a man without character, who was a spendthrift.
Generally speaking, this is the attitude that the world takes toward all men who save money. (Excerpt is from The Law of Success: In Sixteen Lessons by Napoleon Hill)
