From a young age, we're all taught to learn from our mistakes and let history be our guide for the future, so one would hope that after the 2008 financial crisis and the resulting economic slide, we'd all be a bit more cautious with our money.
But Robert Farrington, owner of the personal finance blog Cult of Money, doesn't think that lesson really hit home.
"I think it's already been forgotten at this point," he says. "Many of the bad habits are back, and Americans are going back to spending everything they have and taking on more debt than they need."
This time, Americans aren't buying houses they can't afford, but instead taking out student loans that will take them years and years to pay off. Robert, who took over the Cult from the site's founder last year, believes that Americans need to start paying closer attention to their debt and to start saving more.
"You may be able to get a loan for school, a loan for a car and a loan for a house, but you can't get a loan for retirement," he adds.
Here, he tells us more about his Cult and offers advice on how to save more of your money. Read on:
Can you tell us about the Cult of Money? What will we find on the site?
The Cult of Money is designed to highlight the ritual practices that we all face with money. I'm a believer that systems make things easier, and a cult is simply a practice of systems and traditions. The goal of the Cult is to improve your happiness with money through setting up systems.
Cults don't necessarily offer the most warm and fuzzy feeling to us...why did you choose that imagery to use for your site? What do cults do right?
Cults are edgy, but they're not necessarily a bad thing. You could simply exchange the word "cult" for a "system of practices," but it isn't as fun to call a website that. Cults are great for developing systems, rituals and practices, and in our case, it's about money. Everyone needs a system for their money - and most of us do whether we call it that or not.
Systems and rituals for money include budgets, spending habits, investing styles, and more. It could even include how you earn your money. The goal should be easy systematization of your money practices so that your money works for you, and in turn, you become happier with your money life.
What's the financial makeup of your average Cult member?
All walks of life are Cult members. We have readers who are just starting out financially and are looking to build systems to older readers on the verge of retirement who are looking for ways to budget better since they haven't had to live on a fixed income in years. We even have a lot of international readers who are looking to apply rituals to their money in their own unique way.
What percentage of your income do you recommend most people save? Why?
I think people should save as much as humanly possible - why not 50 percent? However, I think 20 percent is a much more realistic goal that everyone can do. The reason is simple: Nodiv else is going to save for you, so you need to take care of yourself.
But I think there is a myth to how you save. For example, if you have a 401k, and your employer matches, I count that toward your 20 percent. So, if your match is 5 percent, your 401k alone counts for 10 percent of your savings. You just got a bonus savings!
Also, you could earn more or side hustle to boost your savings. There are a lot of ways to save, and you don't need to feel trapped by a budget to do it.
When saving money, should we have a plan for every penny that's been saved? What's your advice on how to divvy up your savings to make it work for you?
Yes and no. When saving money, you need to have a broad plan - but do you need to go to every cent? I don't think so. I'm a big believer in focusing on the big things - max your 401k and your IRA. Have an emergency fund. But do you need to nickel and dime yourself on the small stuff? No.
Your savings needs to work for you by investing after you have a solid emergency fund. In your 401k and IRA, you need to invest in the broad stock market. It is the best way to see growth on your money over time. A big problem I see right now is too much risk adversity. The problem is that people are so scared of losing money, but what happens when you're 65 and your money didn't grow for you? It's almost having the same problem as not saving to begin with.
Why do you advocate automating as much of your financial process as you can? What are the advantages? What's the risk if you don't?
Automation is one of the easiest ritual practices you can do - because the system does it for you. Why worry about savings, when you can have your 401k and even your savings automatically deducted from your paycheck? Automation just makes things easier!
The biggest risk of not automating is not doing it. If you have the choice to save or not save, you could opt to not save. By having something automatically deducted from your paycheck, you suddenly are saving and the choice is different. Automation just helps the process and is one of the basic systems I talk about.
On your site, you say, "You are the average of the people you spend the most time with. Consider this and your friends." So what type of friends do you think will lift you up? Where's the best place to find fellow Cult members offline?
You goal should be to have friends who are also responsible with their money. The whole "Keeping Up with the Joneses" syndrome only happens because the Joneses are also bad with their money. If your friends are financially responsible, you will be more likely to be responsible. It's also helpful to have people you can relate to with money. Money isn't taboo, and it's OK to discuss it with your friends.
You can find fellow "Cult members" in a lot of places - neighbors, friends and even your church. The rituals we talk about are also found in the Bible, in other financial pundit's books and more. We're not reinventing anything, just trying to make the systems easier to follow.
Why are incentives so important to meeting your financial goals? Why isn't reaching your goals enough?
Incentives are key to meeting your financial goals because everyone needs motivation to do things. Why save? You need to ask yourself that, and use that to motivate you. Maybe you don't want to be poor? Maybe you want to buy something new - a house, a car? Having these goals can help make the actual action of saving tangible.
But you're right: Reaching your goals isn't always enough. "Retirement" is such a broad thing - it's hard to make that tangible. That's why you need to set up systems and automation to help you stash enough away so that you can live comfortably for years in retirement.
So what are the most common avoidable mistakes you think Americans make with their money?
Americans make two key mistakes with their money that are completely avoidable:
1. Starting off their life in debt
2. Not saving enough for retirement
By this, I mean too many people are taking on crazy amounts of student loans to pay for school, which they may never be able to pay back. There needs to be a ROI calculation and a return on the cost of education. Students should be taking on more debt than it's worth - and they should focus on going to state schools or other programs that they need, but maybe don't want. It's easier to start your life at $0 than it is at -$40,000. That's a big hole to start from.
Part two is not saving enough for retirement. Nodiv knows what the future will hold, but I can guarantee you that it will cost a lot more money than it does now. So, save more, and then when you think you're doing good, try to save more! Use automation to help you, but you have to save more!