Donell Edwards, Blogger
About Donell Edwards: Donell Edwards is President of CWR Media and is also founder and publisher of The College World Reporter (CWR) magazine and CWR World News & Information Service. He is also a professional speaker, freelance writer, and entrepreneur. To book Mr. Edwards to speak at your next event, contact:
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Thought for Today: The habit of saving is itself an education. It fosters every virtue, teaches self-denial, cultivates the sense of order, trains to forethought, and so broadens the mind. – Thornton T. Munger, American Scientist (1883 – 1975)
Know Your Money
Tuesday – December 6, 2016
Saving Is Not Optional!
By Donell Edwards
There are many attitudes and philosophies about saving, but there is one factor that cannot be ignored in achieving financial security, and that factor is that saving is not optional.
Emphasis On Saving
Over the years in this blog we have discussed saving numerous times because of its importance. In fact we featured a special series on saving in May of 2014. The series included: Getting Started – Do You Have What It Takes? published on May 12, 2014. The second post in the series was Debt Management, Creating Income Streams, Savings, which was published on May 13, 2014. The last post in the series was Making The Most Of your Savings published on May 16, 2014.
In addition to the special savings series we also published Knowing Your Personal Finances: Are You Ready to Save?, Starting An Emergency Fund, and Time To Change Your Thinking About Saving.
Why Saving Is Not Optional
We are revisiting this topic today in view of a survey conducted by GoBankingRates in January 2016 which found that 1 in 3 Americans has $O (none, zilch, nada) saved for retirement, 42 percent of Millennials indicated they have no retirement savings, and about 75% of Americans over 40 are behind on saving for retirement.
This follows a pattern that has existed now for over a decade, and continues to be a major issue in achieving financial health. If any of those statistics apply to you individually you should be gravely concerned. However, as we have also pointed out in this blog many times, a person must first have the circumstances to be able to save. I speak from personal experience and know for a fact that some people really know they should save and want to, but just can’t because of their current circumstances.
What If You Just Can’t Save?
So, if you are reading this and are thinking “I know I need to save, but I just can’t right now because it takes everything I have to just get by, and most of the time there is not enough to take care of my living expenses.” You have some challenges, and your goal should be to continue to work to change your circumstances so that you can save by taking on additional work if you are not already doing that, or by working overtime if it is available. Also, by carefully examining your budget and eliminating everything except essentials, real essentials, such as shelter, food, utilities, and healthcare. Implement a spending moratorium, and don’t make any new purchases until you work yourself out of the situation that you are in. The point is, don’t accept your current situation as permanent, make whatever changes and sacrifices you need to make to get your financial house in order, and once it is in order, continue to maintain a strong financial foundation. The blessing of being in a less than favorable financial situation is that it forces you to make positive adjustments that will benefit you the rest of your life, if you are willing to work to overcome all of the problems holding you back financially.
Your Attitude Matters
On the other hand, if you have the means to save but just don’t see the advantage, consider what will happen to you and if you have a family, what will happen to your family if you do not have funds set aside for emergencies. These could come in the form of the loss of employment, which is very possible in today’s economy. Or it may be the result of you or a family member being the victim of a long-term health problem or disease. Or perhaps it may be the result of an environmental catastrophe such as a flood, tornado, or hurricane. If you do not have funds set aside for these things, how will they impact your finances?
Even if you have insurance to help with some of these issues, in most instances you are still exposing yourself to substantial financial loss. That is why setting aside emergency funds is so very important to financial stability.
What You Can Do Now: Pay Off Your Debt
The first thing we suggest is that you pay off all outstanding debt, with the understanding that this probably will be a long-term goal. As you pay off a debt, take the money you were using to pay that debt and apply it to another debt, and continue this process until all of your debt is eliminated. The trick is not to incur any additional debt while you are doing this.
What You Can Do Now: Control Your Spending
Learn how to identify and eliminate wasteful spending. Also, improve your shopping skills and learn how to plan your shopping and look for bargains and save on grocery, clothing, and other items or services you purchase. Become a coupon clipper and use coupons to help with your savings on your purchases. Consider using SmartPhone apps that can help you save if you own a SmartPhone like Ibotta, SnipSnap, SavingStar and Coupon Sherpa. Always look for ways to save on purchase and control your spending so that you can save for the unexpected, and eventually to build wealth. Make sacrifices willingly and do not give in to impulse buying. Make credit card payments early or on time and pay more than the minimum required to improve your credit rating, which results in a higher credit score and lower interest rates, and which will help you avoid late charges.
As we have mentioned previously in this post in order to save there must be funds to save. Those funds should come from effectively managing the income that you have, implementing and closely following your budget, and paying down your debt. A key factor in your success will be how well you learn to control your spending. Without being redundant but to emphasize, be aware that controlling spending takes sacrifice, willpower, determination, and a willingness to change. Make the commitment to yourself to do these things. If you happen to receive income occasionally from other sources, don’t go on a spending spree and waste it all, but use some of that money for your savings. You should develop a savings conscious mentality with any money that you receive.
What You Can Do Now: Earn More On Your Current Job Or In Your Career
- Prepare yourself for success, a job promotion or raise by becoming an avid reader. Read, read, read. Read trade magazines and learn about what is going on in your industry. Be a resource for your supervisor and management team. Be the person that becomes known as the guru in your office. Study the company’s internal reports, newsletters, and any other information that will educate you about the company’s goals, objectives, competition, projections, etc.
- Attend seminars related to your current position and further educate yourself or learn new skills that can be utilized in your current position or to help you to advance your career.
- Become close friends with your human resources manager. Find out what options you have for career advancement and what you need to do to position yourself for success in pursuing those positions.
- Be open to the idea of returning to college to get additional education.
- If overtime is available, be willing to work overtime to increase your income.
What You Can Do Now: Create New Income Streams
You can create a new income stream by starting a home based business. The power of a home based business is revealed in this comment from the U.S. Small Business Administration website: “What do Apple Computer, Hershey’s, Mary Kay Cosmetics, and the Ford Motor Company have in common? These well-known corporations all started out as home-based businesses. In fact, more than half of all U.S. businesses are based out of an owner’s home.”
In addition to having an additional income stream from starting a home based business, there are some very good tax advantages as well. Obviously, everyone does not have the desire or the drive to have a home based business. But if you have the entrepreneurial spirit, you are well organized and are good at time management, and you are willing to learn, having a home based business can provide you with many rewards.
How To Save
If you are currently in a position financially to start saving but it is something you just have not done and would like to start but need some ideas on how to get started, here is a great idea.
I was listening to the radio a few months ago and heard about a fantastic way for people who have very little money to use a portion of their income to save $,378 within a year. Then this process may be repeated over and over again, or modified to increase the amounts and save more. The idea is to get into the habit of saving, to convince yourself that you can save.
I did some research after hearing about this saving method and discovered an outstanding blogger, Lisa Bedford, and her blog, The Survival Mom – http://thesurvivalmom.com/. Lisa shared information on her blog about this interesting saving method known as the 52 Week Challenge. If you are looking for a place to start, this may be just what you need.
Where To Save
One of your concerns, justifiably so, may be where to save your money, since the interest rates at most banks is so very low it is almost not worth even putting money into them. The question then is where is the best place for savers to save their money?
In researching this question and discussing it with some of the people in the finance industry, I discovered that credit unions generally pay more interest than banks. In May 2014 GoBankingRates.com published an article, Highest Savings Account Rate Is 40X the National Average, which included a comparison chart that shows the average savings account rates over the previous year for banks and credit unions and the national average, and the change from 2013 to 2014. The article also lists the 10 best savings accounts based on data from the GoBankingRates database. So, credit unions are a good choice.
For those in the military, United Services Automobile Association (USAA) is a good option. This company provides banking, investing, and insurance services to people who serve or have served in the military and their families.
Another option is to purchase Certificates of Deposit (CDs) if you are prepared to leave the money in the account for at least 6 to 12 months. Since you should be saving for the purpose of creating an emergency fund or to accumulate enough money to invest, leaving the money in the account for up to a year should not be a problem. In some cases the interest on CDs may be higher than the interest in banks.
So, do your own research, and look for the best deal. Also, make sure to read the fine print because there may be penalties for making more withdrawals than allowed, for failing to meet the minimum balance requirement, and there could be other hidden penalties or fees.
A Word For Millennials and Gen-X
A word especially for our young readers, the Millennials and gen-Xers. The statistics referenced earlier in this post indicate that Millennials and Gen-Xers are among the highest percentage of Americans who have little or no savings. This may be interpreted as either a lack of appreciation for the importance of saving, or a lack of information and understanding about the importance of saving. I can remember when I was in my twenties I did not really appreciate the importance of saving. I knew that it was a good thing if I did, but even with my parents encouraging me and repeatedly trying to help me appreciate how important it was to save, I still viewed it as something optional that I could do later. At that age, I felt that I was “bulletproof,” “untouchable,” that I could conquer the world on my own terms and ignore all of the wisdom that had been made available to me. I learned later in life how very wrong I was. Thankfully, I learned before it was too late, but it was still very, very, very costly to me.
If you are a young person and you are reading this, 18-35 years of age, please take some time to think about how you manage your money. Think about your future. Think about all of the things in life that you have not prepared for financially in the event you lose your current income. Will you be able to have a place to live, or will you be forced to move back home with your parents? Will you be able to keep your vehicle, or will you be forced to lose it? Will you be able to continue to take care of your family if you have one? What will happen to your spouse and children? These are some very important potentially life changing scenarios that should be given every consideration.
If you are a mature reader and you know a young person that needs this information, perhaps your own child, or a relative or colleague or business associate, recommend this blog post to them or send it to them.
We also encourage every reader who feels the need for assistance with their own money management skills, to help get out of debt, control spending, and begin saving, to sign-up for our 13 week KYM Money Success Strategies Institute, which starts on Monday – January 9, 2017. This program will provide step-by-step instructions on how to improve money management skills, use credit wisely, get out of debt, and build wealth, featuring daily video support during the first four weeks.
We will also be available to help with any questions enrollees may have. So, make this your New Year’s Resolution, to enroll in our KYM Money Success Strategies Institute. To enroll, just click here. And remember we start Monday – January 9, 2017. SIGN UP NOW!
We Would Like To Hear From You. Are There Any Brave Souls Out There Willing To Share? If you would like to share with our readers how “bad” spending habits have affected you, anonymously or otherwise, for our upcoming special, “Confessions Of Spendaholics,” please send your experience to firstname.lastname@example.org.
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Disclaimer: I have a Bachelor of Business Administration degree but I am not a financial planner. However, I have acquired years of knowledge about personal money management through my life experience working through my own personal finances that allows me to share that knowledge with readers of Know Your Money. The Know Your Money Blog posts written by me are my own common sense observations and opinions and are for informational use only. Although my blog includes contributions from experienced financial professionals, please make your own financial decisions based on personal research or contact a financial adviser.
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