Happy Holidays! As we are in the holiday spirit and are no doubt spending money on gifts and parties, let’s start a new year concentrating on how to face the bills that are associated with a fun and gift-filled holiday season. It seems like a good time to start thinking about the benefits of saving instead of spending. I can tell you from personal experience that the simple financial lessons that our parents taught us are indeed the best way to get a good start on having a healthy financial life.
First, let’s look at one that everyone hears at some point.
1. A PENNY SAVED IS A PENNY EARNED
It is no secret that today, more than ever before, change occurs at a high rate of speed. That means prices of goods, services, homes, salaries, and food all change all the time and most of the time they go up and not down. The world population is growing in unprecedented numbers, traditional emerging markets have emerged and young people all over the world now have access to higher education. This means more people are competing for fewer jobs in the global job markets, more countries evolving into the competitive arenas of business and commerce, combine that with a technology explosion that allows almost everything to be done remotely and we have a competitive environment today that requires us to be more creative, flexible and prepared than ever before. There is one thing that you can do no matter who you are that will help you control your own destiny. That one thing is to start saving some money out of every penny that you receive for gifts or work. No matter what the amount you save, it is more than you saved before and will add up over time no matter what. So don’t think that $10 a week is not a good start, or that $5 won’t help in the long run. Yes, it will!
A simple savings account should be part of your plan to be prepared for the changes that we are all inevitably will face at some point in time. Today changes in our lives and society can occur at a moment’s notice. We must be prepared for any eventuality. We could lose our jobs to industry consolidation, foreign pricing, in-house competition, elimination of our department or company, and in many cases the possibility that technology will render our careers obsolete completely. We must be prepared for changes in our government that will produce changes in laws that will affect our finances, like social security, tax increases, new taxes on items that were previously free (like internet shopping), rising prices in everything from essential services like doctors, to education, housing, and food. We can help ourselves, increase our independence, reduce our stress … all by just putting aside a small amount out of each check we get for our savings. It takes time and patience to build a meaningful sum, but the length of time and amount accumulated depend on a number of variables. How much can you afford to put away? How committed and consistent are you about saving each week?
Saving as much money as possible has a myriad of benefits. Simple passbook savings accounts at your local community bank allow your money to grow with compounded interest while it just passively grows and waits for you to need it. Passive financial strategies are all a part of an overall financial plan that you should be working on developing. You should have some form of simple savings that allows your money to be safe, grow steadily and remain there forever or until only a dire emergency would require you to use it. If you invested $100 today and contributed approximately $25 per week each year, at 2% interest in your local bank with daily compounded interest at the end of 25 years you would have an additional $78,072 towards your retirement. Use the Nerdwallet compound interest calculator to see what you will have if you contribute to an account like that in the increments that you can afford. Play with the calculator. Throw in crazy numbers. Imagine yourself saving so much that you never had to worry again about paying your rent or going to the best doctor. You can do it, your children can do it and you can start today. Take that Christmas gift money from your family and save it instead of going out to dinner, or buying more video games. Neither of those things stays with you very long, but a savings account will stay with you, grow, and make a difference in the quality of your life when you need it the most.
Start simply to enjoy a lifetime of financial health. It’s never too late.
Play with the Nerdwallet compound interest calculator. It will surprise you how much making some small changes in your life will add to a lifetime of stress-free financial health.
You can get that extra money for savings each month by doing a few simple lifestyle changes. Here are a few suggestions…
- Make your morning coffee instead of buying it.
- Eat your meals at home and take them with you to work rather than buying them at the local lunch place
- Clean out your closet. I just did and I found so many things buried in there that I had forgotten I had. It was like shopping all over again. So now I have new things and do not need to shop for an outfit for that special holiday party.
- If you like movies, join a movie club. They offer discounted rates and allow a generous amount of movies per month, or if you only go to the movies once in a while.. invite friends for movie night at your house with a great new Netflix release.
Pot luck dinners and BYOB saves everyone money!
There are all kinds of ways to still have fun and not feel deprived while saving money.
Just keep in mind that retirement comes around much sooner than we expect it to. Being prepared will make those sunset years so much more enjoyable, and if you really save, it might come along sooner so you can enjoy your favorite hobbies longer.
Just remember nothing stays the same, everything change’s all the time and life always throws you a curve. Hit the ball out of the park, be prepared for it to come at you. Save! Save! Save! I promise you, you will never regret it.
Food for thought…
Stay tuned for Rule 2 next week same time, the same place.
Be healthy, be happy, be smart!