04 - Savings 101: Paying Yourself First

Why is it so hard to save money, even with the best intentions? In this episode, Daniel and Shanna are joined by First Century Bank President & CEO Rob Barger to discuss the single most powerful habit for building long-term wealth: Paying Yourself First. Rob explains the crucial mindset shift from "saving what's left" to treating savings as your most important bill. We’ll discuss how to start saving even if you feel you're living paycheck to paycheck and why automation is the secret weapon for effortless, consistent success.

Subscribe today and send your questions to podcast@fcbtn.com.

Transcript

Episode 4 | Savings 101

00:00:00 Daniel Hill: Shanna, imagine you have two friends. Friend A is incredibly motivated to save money. They read articles, they set goals, they promise themselves that this month they're definitely going to save whatever is left in their checking account at the end of the month.

00:00:16 Shanna Browning: Oh come on, I think we all know that, friend. Or let's be honest, we are that friend sometimes. What happens at the end of the month?

00:00:24 Daniel Hill: Life happens. An unexpected dinner out, a sale that was too good to pass up, and at the end of the month, what's left is usually a lot less than they hoped. If anything at all.

00:00:35 Shanna Browning: So what does that other friend do?

00:00:37 Daniel Hill: Well, friend B doesn't rely on willpower. The day they get paid, they have an automatic transfer set up to move one hundred dollars from their checking to a separate savings account. The money is gone before they can even think about spending it. Who do you think will have more saved at the end of the year?

00:00:54 Shanna Browning: I mean, it's got to be friend B, without a doubt. It's the difference between relying on emotion and building a system.

00:01:10 Daniel Hill: Welcome back to Making Sense of your Cents. I'm Daniel Hill.

00:01:14 Shanna Browning: And hey, I'm Shanna Browning. Today we're talking about the exact difference between hoping you'll save and having a plan that guarantees it. And to do that, we are thrilled to welcome our very first guest, a man who has seen firsthand the power of this simple, simple habit. That's our President and CEO of First Century Bank, Rob Barger.

00:01:35 Daniel Hill: Rob, why don't you tell us a little bit about you? We've given the history of the bank in our first episode, but we'd love to hear a little directly from you. What does First Century Bank mean to you?

00:01:47 Rob Barger: Hey, guys. Thanks for having me. I'm excited to be here. Um, the bank is pretty much, uh, my life. It's my family's life. Um, ever since I was a child, uh, I've been coming to the bank and visiting the bank, and and, uh, as a teenager, I worked, uh, as a teller at the bank during the summers.

00:02:13 Daniel Hill: There's that teller again.

00:02:14 Shanna Browning: Teller again?

00:02:15 Rob Barger: Yeah.

00:02:15 Shanna Browning: We've all started as a teller.

00:02:16 Rob Barger: Yeah, absolutely. It's one of the toughest jobs in the bank. Um, you know, I watched, uh, my grandfather, uh, run the bank and, uh, my father and, uh, and my mother, who's now Chairman of the Board, um, so it's it's a family business, and it just happens to be a bank. So it it means a tremendous deal to me.

00:02:43 Shanna Browning: Oh. We're greatful. You're here. We're thankful.

00:02:45 Daniel Hill: Yes.

00:02:47 Rob Barger: Well, thank you. I'm excited to be here and excited to be a part of this new podcast.

00:02:53 Shanna Browning: So we talked about that. Um, the concept is paying your first... paying yourself first. Excuse me. Rob, for someone who's never heard that phrase. Tell us what it means in practice.

00:03:05 Rob Barger: Well, paying yourself first is a fundamental shift in your financial priorities. Um, most of the world operates on what I call a pay yourself last model.   You get your paycheck, and then you start paying everyone else, your landlord, your mortgage company, um, the car, the credit cards, um, the grocery store, etc. After you've paid every single other bill and expense, you look at what, if anything, is left over and that's what you save.

00:03:43 Shanna Browning: So this treats saving as an optional luxury, right? Sometimes you do only if there's money to spare.

00:03:51 Rob Barger: That's right. Yeah. Paying yourself first flips that entire script. It means you change your mindset to view your savings  contribution as the most important, non-negotiable bill you have. The very first bill you pay each payday is your future self basically. It's a profound mental switch from being a consumer to being a builder of your own wealth.

00:04:16 Shanna Browning: What a great statement to building your own wealth. So you're treating your savings transfer almost like your mortgage bill or your electric bill. It's just truly not an option.

00:04:27 Rob Barger: Yeah, I mean, it's more important than your electric bill. It's the only way to guarantee that you're consistently building a financial safety net and in making progress towards your long term goals. Uh, hope is not a financial strategy.

00:04:45 Daniel Hill: Oh. That's good.

00:04:46 Rob Barger: A system is a strategy. And this is the simplest and most effective system there is.

00:04:51 Daniel Hill: That makes complete sense, Rob. I can hear a lot of people listening right now thinking, though. That's a nice idea for someone else I'm living paycheck to paycheck. There's literally nothing left. What do you tell them?

00:05:05 Shanna Browning: I think that feeling is so incredibly common. I've been there. I think we've all been there on some level. I was looking at a recent survey from the Federal Reserve that found something startling. Nearly four - four out of ten adults would not be able to cover an unexpected four hundred dollars expense using cash or savings. They'd have to borrow it, don't fix it, or sell something to come up with the money.

00:05:31 Daniel Hill: Wow. That's a that's a tough statistic. That is. It shows how thin that financial buffer is for so many families. So when we talk to people what are hesitations we hear? It's often, "I just don't earn enough money". Or the classic, "I'll start saving when I get my next raise".

00:05:49 Shanna Browning: And unfortunately, that "I'll start later" is such a common one. It's the financial equivalent of "I'll start my diet on Monday" or "I'll make my resolutions in January". There's a real psychological hurdle there, a feeling of not having enough to even begin. It's just overwhelming. So, Rob, with that context, for someone who truly feels that saving first is impossible, what's your advice?

00:06:16 Rob Barger: Well, that is the most common and most legitimate barrier people face. So my advice is twofold. First, start ridiculously small. The specific dollar amount is far less important in the beginning than building the habit and proving to yourself that it can be done. You can find, uh, twenty dollars in your paycheck, for example. Or can you find ten dollars? Can you find five dollars even? The psychological victory of successfully and consistently moving money to savings, even a tiny amount, is incredibly powerful. It breaks that "I can't save narrative" you've been telling yourself.

00:07:07 Shanna Browning: So it starts small. You can't walk unless you crawl and you can't build the muscle. You've got to build the muscle before you try to lift a heavy weight.

00:07:16 Rob Barger: Exactly. The second part of my advice is to to hunt for found money. The best time to increase your savings is when your income increases, for example. Like the next time you get a raise at work, before you get your your first increase paycheck, go into your HR portal and increase your 401(k) contribution by one or two percent, for example. Or go into your online banking and increase your automatic transfer. You won't even miss the money because you never got used to spending it in the first place. So you capture the new income for your future self before lifestyle inflation absorbs it all.

00:08:05 Daniel Hill: Wow. That's that's a powerful technique. So you're not really trying to cut back on your current lifestyle. You're just directing future growth towards your goals.

00:08:15 Rob Barger: Yeah, that's the easiest way to make significant progress without feeling the pain of deprivation.

00:08:22 Shanna Browning: All right Rob, we have the mindset shift which is the first place we have to start with that and a strategy for getting started. So what's the single most important mechanism to make this system work long term?

00:08:37 Rob Barger: Well in my opinion it's one word automation. Willpower is a finite resource. You might be incredibly motivated to save after listening to this podcast, but what about in six months when you're tired, stressed, and a new shiny object catches your eye?

00:08:55 Shanna Browning: Oh, the shiny objects.  

00:08:58 Rob Barger: Yes, uh, relying on manually moving the money every pay day is a recipe for failure.

00:09:05 Daniel Hill: So how does someone set up this automation? What's the what's the best process for that?

00:09:11 Rob Barger: Well, it's honestly, it's a simple task that pays dividends for the rest of your life. Uh, you log into your online banking, uh, you find the transfer section, you set up an automatic, uh, reoccurring transfer from your checking account to a separate savings account, for example. Uh, you set the day for you set the date and the day, uh, basically right after your pay day, and you set the amount. That's it. You're done. It's it's there. Uh, just forget about it.

00:09:46 Daniel Hill: Wow.

00:09:47 Shanna Browning: I love simple. I think sometimes we overcomplicate things. So sim... simple is is good. So psychologically, when that money, as we have set up from the automation Process begins. What is that benefit mentally when it starts moving on its own?

00:10:05 Rob Barger: Well it works. It's like magic. It removes temptation and decision fatigue. Um, you know, the money is gone before you can think about spending it. You naturally adjust your, uh, discretionary spending to what remains in your checking account. Uh, this is a concept called paying yourself first. But a better name might be tricking yourself into savings.

00:10:32 Daniel Hill: That's good, that's good.

00:10:33 Rob Barger: So you create a system where the default action is the wise one.

00:10:37 Daniel Hill: Wow. So to recap the entire strategy. First, you have to change your mindset to treat savings as your most important, non-negotiable bill. Second, start small to build the habit and capture what we call found money like raises. And third, and most importantly, use automation as your superpower to make the whole process Us effortless and reliable.

00:11:01 Rob Barger: Yeah. That's it. That is the simple three step formula to building wealth over your lifetime.

00:11:09 Shanna Browning: And again, simple right? It's that big word. Simple. Yeah. It's a powerful and very accessible strategy. And that's what brings us to this week's actionable tip.

00:11:24 Daniel Hill: Your action item for this week is to take the advice we've been discussing and put it into action. We're going to call it the Future Self five Minute Challenge.

00:11:34 Shanna Browning: We want you sometime in the next 48 hours. Block out five minutes, five minutes on your calendar. During that time, log into your online banking and set up that automatic transfer.

00:11:46 Daniel Hill: Rob said it best don't aim for a huge, intimidating number that will make you feel squeezed and cause you to cancel it next month. Pick an amount you know you can stick with. Is it twenty five dollars a paycheck? You know that's six hundred and fifty dollars a year. Is it fifty dollars a paycheck? Well, that's thirteen hundred dollars a year. What matters is the consistency.

00:12:07 Shanna Browning: When you see those numbers, Daniel, it matters. Twenty five a paycheck to six fifty a year. But while you're in your online banking, do us one more favor. Give that savings account a specific nickname. Don't just call it "Savings Account" or "Savings Account  1 2 3". Rename it. Get it in your mind and call it "My Future Freedom Fund" or "Emergency Buffer". Or if you're saving for a trip "Hawaii".

00:12:33 Daniel Hill: Oh, yes.

00:12:34 Shanna Browning: "Europe". Something great. Something fun. "Beach Trip" just make it fun.

00:12:38 Rob Barger: Well, that's a great point, Shanna. Naming your goal gives you every dollar, every dollar, a specific purpose and makes the goal feel real and tangible. And it makes it much harder psychologically to raid that account for non-emergencies. Right? Uh, you're not just taking from savings. You're taking from Hawaii.

00:13:00 Daniel Hill: Well, it makes it personal.

00:13:01 Shanna Browning: I'm not taking from Hawaii. No, not taking from Hawaii.

00:13:04 Daniel Hill: Well, Rob, we do thank you so much for joining with us and for sharing such practical, powerful wisdom.

00:13:11 Rob Barger: Absolutely. It's my pleasure. I've enjoyed it. And, uh, you know, this podcast, this episode is, is basically the foundation of everything, so. Yeah.

00:13:22 Shanna Browning: All right, next week we'll be taking another look at budgeting, exploring some simple methods that actually work to help you know where your money's going.

00:13:31 Daniel Hill: Don't forget to subscribe to Making Sense of Your Cents wherever you listen. And send us that question at podcast@fcbtn.com. Thanks for listening.