Freedom is the end-goal of saving. The more you save, the freer you are. When you have no more debt, and a stockpile of savings and investments, you are free. Free from the bondage of banks, free from the crushing weight of creditors, free from the worries of paycheck to paycheck penny-pinching, and most importantly, free do things with your money you never would have thought possible.
With a healthy savings, you will insulate yourself, to a degree, from the disasters that life brings. Sleepless nights due to worrying if a broken leg or a loss of job will financially ruin you are a thing of the past with six months to a year of net income in your high-yield online savings account. If, after taxes, you make $3,000 dollars a month, a good goal is to have (6×3) $18,000 dollars in a savings account. If you are a rock star, have $36,000 dollars in your online savings account. Each person in America should have a free, easy to set up, high interest, online savings account, and click here to know why.
Here’s the rub. Here’s the problem. We Americans don’t care about saving! We don’t lay awake at night worrying what will happen if our next paycheck doesn’t come. We don’t care about having a safety net because we live in the present. Living in the present is certainly fun because with a paycheck and a credit card, every one of our toys we buy is free and carries no financial consequence. Don’t live in the present! Instead, remember the past and think of the future. Forget the present, it’s worthless, and means nothing without the context of the past and future. Past financial disasters can teach us lessons today. And like the cliche says: we will repeat those same mistakes, lest we listen to the advice given from days long ago. Furthermore, if we focus our eyes on the future, then our smart financial decisions in the present will make so much sense. The idea of saving will be so salient and the pain of putting money away will fall into place, if we have an eye on the future.
So why does this matter? According to a statistic stated by Dave Ramsey, the Japanese save the most of any culture in the world, at 18.1% of their income. By nature, the Asian culture saves; that is just who they are. By contrast, the culture that saves the least, is you guessed it, Americans. What is our savings rate? Negative 2%! We spend more than we earn by 2%! With that kind of savings plan, we are not free. We are enslaved. We are beholden to our creditors, our toys, our banks, and can do nothing with our money, but pay it back to those who own us. In 2007, Americans spent 8.5 trillion dollars. Great for the economy, right? Well, the scary thing is that 6.8 trillion of it was spent on credit! Will that credit be paid back? Not nearly all of it and as it isn’t paid back, our economy will slide further into recession as both lenders and borrowers fall into trouble. Let me ask you a question: Are you free or does someone or some creditor own you?
If someone owns you, do you want to turn that ship around? Do you want to be free? I can guarantee that becoming free will only happen with a lifestyle change that involves a new mindset. “Make every thought captive so that it conforms to” your financial goals. Remember the past and look to the future, everyday, at every purchase!
Laura and I are not on an ivory pedestal. Three different banks own us and we are not free. We want to be and I hope you want to be too. Because I fly for an airline, it is always assumed that I make oodles of money. The truth is that I made more at Burger King than I did my first year of flying. If I wanted money, I would have gone into another profession, as an: engineer, doctor, architect, physical therapist, dentist, or go into business for myself. I won’t see 100K a year for YEARS! I say this only because I don’t want people thinking that I’m some richie rich with all the answers and pointing the finger at all the indentured servants below me. The truth is that Laura and I are indentured like all the rest! We just want to make smart decisions and hope that everyone in the U.S. will too.
Start today by opening up an online savings account here or here. It will link to your checking account so that you can set it up to automatically withdraw some money from your checking account and place it into the high interest savings account. I don’t care if it’s $10 dollars a month, do it! At least with a high interest savings account, your money in savings will keep up with, or stay ahead of inflation. Otherwise, with inflation, you are actually losing money on anything kept in a checking account.
Another smart way to stay ahead of inflation, and actually make money is a wise investment in gold. Unlike a stock or mutual fund, gold is always worth something. With the dollar falling in value like a safe thrown from a fourth story window, the value of gold is rising. Why? Many reasons, for which most can be Googled. A few are: Foreign investors are pulling out of the dollar, the Federal Reserve continues to drop interest rates, the economy is slowing, and fear is in the market. When there is fear in the market, a safe place to run is gold, which is where many investors are turning: hence the spike in the value of gold and the further weakening of the dollar. You can buy some gold bars/coins and store them in a safe place in your house or add gold investments to your portfolio. You will be a rock star in my eyes for doing either or both. Start here for more on buying gold.
Start now! Here is another quick example from Dave Ramsey why it is smart to start now instead of waiting:
Two brothers, the same age, turn 18. Brother one starts to invests $2,000 a year, which is only $166 dollars a month, into an investment each year until he turns 26. For you math majors, that’s 8 years and $16,000 dollars. Brother two starts where his bother left off. He invests starting at age 27, puts $2,000 dollars a year into an investment, which again, is only $166 a month. The only difference is that he continues until he is sixty five years old! The first brother only put money in for 8 years, until he was 26. The second brother put money in for 38 years, from 27 until 65. This is the lesson for starting now and appreciating compound interest: Brother One, who only invested for a short time, but started earlier, at age 65, will be ahead of brother two, who invested for 38 years and a lot more money, by $750,000 dollars! This assumes a 10% return for both brothers but the point is the same: start now!
Do you really need that next purchase? Do you really need to go out to eat that much? Do you really want to keep a balance on your credit card? A day of reckoning is coming. Will you be ready? Pad the savings account, contribute to your company 401(k) plan, and max out a Roth IRA, for both you and your spouse (and if you can afford it, open a Roth for each of your kids — they’ll love you for it when they turn 59 and a half!).
When we are free from our financial troubles, we can be better stewards of our money. Ultimately, we learn that our money isn’t ours anyway, its God’s. He has blessed us with the finances we have and gives us all we own. When we gain freedom, we are free to then give our money to others. Starting with giving a tithe (a tenth) to God, we thank Him for his rich blessing on us. After that, we are free to do other generous things like help the poor, give great Christmas and birthday gifts to others, and do random acts of kindness. That is what true freedom is all about!
Where to go from here?
Click here to read some simple ways to get started saving and setting goals, according to Dave Ramsey.
Click here to read about some great ways to save money on everyday things in everyday ways. It is written by Ken Rockwell.
Open an online savings account yesterday.
Don’t be afraid of credit cards, just make sure you pay them off each month. I know that lots of advisors, like Ramsey, say to cut them up, but that only masks the problem of credit cards. We shouldn’t solve our credit problems by hiding from them, but learning how to live with them and using them to our advantage, with reward cards.
Be smart, don’t live in the present, remember the past and keep a watchful eye on the future!
For more, visit TobyLaura.com!