Saving

I have entered a phase of my life where I am living off my savings. I have been planning this early retirement for many years. Part of retiring, whether early or not, is to develop a saving program. I opened my first savings account when I was 6 years old at the Sharpstown State Bank. A few years after I opened my account the Sharpstown State Bank was closed by the FDIC due to fraud. Eventually, I received a payout check from the FDIC. This was an impactful lesson for me about fraud and white-collar crime. Now back to the idea of consistently saving money.

I received a passbook from the bank and learned my first lesson about earning interest. My father encouraged me to make regular deposits from my weekly allowance. I enjoyed tracking my balance with my passbook. I recall being excited when my balance matched the bank statement. I believe this early start to saving developed a useful discipline that has stuck with me my entire life. I recommend talking with your children about saving and helping them get started with their own account.

We hear a lot about how we should invest and save in preparation for retirement. The objective of this article is to provide a balanced perspective on saving.

You hear commercials all the time asking the following question. Are you saving enough for retirement? These commercials are usually from Banks, Investment, and Insurance Companies. Do you think these companies are genuinely concerned about your retirement? Maybe, for sure they are trying to make money. Whenever you invest for retirement, some corporate entity is making money off your financial decision. While the message is good, it is important to be aware of the motivation for the plea to save for retirement.

There is nothing wrong with making a profit for offering retirement investments. Making a profit is a key tenant of capitalism. As a consumer of these retirement investment products, we need to be aware of the cost and value of these they provide.

As I mentioned, saving for retirement is a good thing. That being said, like everything else in life balance must be considered. If the investor saves too much, they run the risk of being retirement poor. It is important to have enough money available to live the life here and now. A young person has no idea what their retirement will be like from a health and family perspective. Not to sound morbid, but there is the possibility of dying before reaching retirement age.

The concept of retirement is evolving. A hundred years ago retiring from work was a foreign concept. Most people worked if they were physically and mentally able. Upon reaching an age where they could no longer work, folks depended on their families to provide care. With the advent of the Social Security program, the time of retirement began to focus on age 65. These days people are living longer and can work well past age 65. Many times, the financial reality of today’s society causes people to keep working well into their golden years. Poor economic conditions or bad financial decisions can contribute to a lifetime of employment. Of course, some people just want to work their entire lives.

It is never too early to think about long-term goals for your career. This goal setting can then be the start of developing your own retirement plan. I remember having the goal of retiring at 40 and buying a Porsche. Well, I never achieved that specific goal but setting it did cause me to start saving. There are plenty of tools for developing a retirement plan on your own. You can also consult a financial advisor. I will probably write an entire article on financial advisors but for now, I recommend an advisor who just sells advice. Stay away from those advisors trying to sell financial instruments.

I strongly advocate developing a savings plan for retirement or possibly a second career. If your company offers a 401k plan, at a minimum you should be investing up to any matching funds. Company 401k matching funds are free money. You should always take free money.  Part of developing a savings plan is to make sure you have money to spend today. I wrote about budgeting in a previous article. A budget is an essential tool for developing a retirement plan and living a financially healthy life today. You really do want to spend some of your money today. You should not spend to the point of accumulating debt or jeopardizing your retirement plan. You should spend money to help you enjoy the time and people who are part of your daily life. Time is a precious and limited commodity and spending some money to enjoy life’s experiences is a great investment.

Start saving today.

Make the most of this day!