Turning My Financial Mistakes Into My Money Lessons


Four Important Savings Lessons I Learned the Hard Way

By Candice Madruga Knoll, Flourish Contributor

Saving money is not something I would ever think of writing about. I am in no position to lecture anyone about financial responsibility and savings, so think of this as a “lessons learned through my own mistakes” piece.

Photo by Slava Bowman on Unsplash

I come from a family that always saw financial decisions as an afterthought and considered savings a luxury for those who make more money than they can spend. For a few years, we lived a lavish lifestyle after my parents built a large company that exported fruit and vegetables from the Northeast of Brazil to Europe. They worked hard and were superb at developing technology, growing high-quality produce and managing people. They were not so good at managing the financial and bureaucratic aspects of the business.

The good days did not last long. The country went through a deep recession, and inflation shot through the roof. My parents were forced to file for bankruptcy and to make drastic changes to our lifestyle. In addition to losing our company, we lost houses, cars, and land. We went from living in a mansion to sharing a room in our grandmother’s house among the five of us. How do you recover financially from something like that?

Coming to America (with $800 dollars)

After graduating from college, I moved to the United States. I arrived at San Francisco with $800 in my pocket. I got a job at Nordstrom’s two months later and was shocked to realize that I was making over $2000 dollars a month. I still had the habit of converting everything to the Brazilian currency, and in real that was so much money compared to how much I made in Brazil. I was lucky to have a generous aunt and uncle in the Bay Area who let me stay with them for a while, which kept my expenses very low at the time. For the first time, I was able to save some money but that didn’t last long. Soon I moved to San Francisco with just enough money to cover my expenses for two months.

That is when I started picking up financial lessons.

Lesson 1 — Raise your Savings, not your Lifestyle

Having little to no spending money forces you to be mindful of your spending habits. During my first year in San Francisco I made enough money to cover my basic living expenses: rent of my room, food and transportation. The little money left I carefully spent on the occasional burrito, drink or slice of pizza in the Mission with friends. I had gotten used to this modest lifestyle until I got my first promotion and raise. Before I even got my slightly improved paycheck, I had already found a nicer, more expensive place to live and enrolled in a gym. Saving part of that “extra cash” never occurred to me.

This pattern repeated itself over the next several years: I would get a raise and soon adapt my lifestyle to make sure every single dollar I made was already committed by the time it hit my account. More money meant that I could go out more often, buy nicer clothes, go to a nicer gym. Never in my life did I stop to write down my expenses and try to stay within a budget so that I could set some savings aside. Looking back I wish I had been more mindful to budget for future financial security and foregone some of these lifestyle bumps.

Lesson 2 — Set aside a predetermined amount of “extra money” before you get it.

Every time I was about to get a raise, I would tell myself: once I make this much money, I will start saving. But every time I reached that salary, I would spend the extra money and set a higher I-will-save-when-I-earn-X threshold.

Many of us are easily attracted to the brighter, bigger, newer, and most luxurious, and if we feel we have the means, we will easily opt for the “premium” offering. It is because of this mindset that my idea to wait to have extra cash was flawed. The only way to guarantee that we have extra money is by treating that money like “extra” before we even put our hands on it. Impose limits to your spending and be sure to account for incidentals, setting aside a predetermined amount each paycheck.

Lesson 3 — Savings buys you future freedom.

Perhaps one of the biggest flaws in my financial mentality is thinking that I will only save when I reach a certain point of professional and financial success

If you are like me, there will be times when you are forced to make life choices that involve, at least partially, risking financial security. Should I go back to school, switch jobs, open a business or join a startup? Your answer to these questions might change depending on your financial safety blanket. In my case, this became obvious when I wanted to take an internship in the US but didn’t have enough saved. It also came back to haunt me when I decided to go to business school and, finally, when I decided to make a career change while pursuing my business degree.

Pursuing my dreams meant taking risks, a jump that would have been much easier to take if I had a safety net made of savings. What can you learn from this? Your decision to save today will buy you the freedom to make bold career and life choices in the future.

Lesson 4 — Small savings (or expenses) really add up.

Okay, so this savings talk sounds very neat, but how do I incorporate that into my life? Good news is, you can save quite a bit by making some small changes. If you pay attention to your everyday expenses, you might notice that a considerable part of your income is spent in mindless habits.

After deciding not to work full time during my last semester of business school, I had to make my spending habits fit my (almost) non-existent budget. One simple change was making myself coffee at home everyday instead of paying for two cups of the overpriced beverage at a coffee shop. Another change that turned out to have a positive impact — not only in my bank account but also in my health — was making an effort to cook at home. In a city like San Francisco, you can easily drop close to $20 on your Monday lunch. Multiply that by 30, and you have a substantial monthly expense. Add dinners and #brunches to that and you might find out where a big chunk of your cash is going. I am not saying you should forego eating out all together but shifting your default meal to be cooked at home and viewing eating out as a treat will do wonders!

Do as I say, not as I Dough

The lessons you learn from your family can easily become deeply ingrained habits. In my case they were overwhelmingly positive, except when it came to financial habits. As my parents watch me work to change these habits one by one, they have voiced to me their admiration and even relief in knowing that these new habits will keep me from experiencing the uncertainty and pain they had to go through due to their lack of financial planning.

Bottomline is, savings is about adopting the necessary mindset to create a comfortable cushion for oneself. Although it is not easy, it is simple to get started. The earlier you start understanding your budget, setting financial goals for yourself, setting aside money to reach those goals, and making smart, everyday spending choices, the better prepared you will be when the time comes. And the time will come when you need to use the savings you set aside.

Flourish is on a mission to empower individuals to establish healthy saving habits and make that feel like play. If you’d like to be part of our first users and participate to shaping our product, sign up here to join the waitlist!

You can also read

4 Simple Steps Towards Financial Freedom

Candice Madruga Knoll was born and raised in Brazil and is now living in San Francisco. She is a recent graduate of the MBA program at Haas School of Business and has been a friend of Flourish since it was just an idea in the founders’ minds.