Outside Economics

But It's So Hard To Save Money...

Posted by Wendell Brock, MBA, ChFC on Fri, Apr 28, 2017

Providing financial counseling for many years, a question like this often comes up: Why is it hard to start saving? Money is a very emotional thing and we all have our own thoughts and opinions about it’s use, which can be very personal. We can always jusBank_1.jpgtify our wants into needs - its a matter of developing the strongest argument as to why this or that is a need not a want, thus eating up our entire pay check on the mixture of real needs and perceived needs (real wants). 

Here are some reasons why it is hard to start saving money: 

1. Saving money requires self discipline - lots and lots of self discipline. There is no one around “forcing” us to save money, like the government forces us to pay taxes. Saving is 100% on us personally. With each and every paycheck that comes in we have to make the choice to save. Establishing a habit of saving comes after months and perhaps years of successful saving.

2. The money we want to save is competing with the money we want to spend - there are so many wants and perceived needs that we look at and say, “I can afford this” and so we spend the money before saving. When in reality we might not be able to afford it, but because we want it we buy it.

3. People tend to spend first and save what is left over, when they should save first and spend what is left over. These priorities are mixed up. When we spend first and try to save what is left over there is never enough to save. We can always spend what we earn and our spending/perceived needs increases with our income.

4. Successful savers save first. They pay themselves first and pay others last. They sacrifice their short-term wants for long-term goals. They understand the difference between needs and wants and they focus on their self-discipline in other areas of their life so saving becomes a more natural extension of their disciplined life. In our society of instant gratification, which is filled with stuff, we focus on the things we don’t have. With some justification we make those things into needs, and exchange our future savings for wants, thinking they will bring us happiness, ignoring our future.

Keeping a budget (you can learn more at Budgeting 101) in line is a very key element to saving money. Our spending can and often does expand with our earnings, making every purchase important! One key to being a successful saver is to have an emergency fund established. And ONLY use if for emergencies! 

How do you go about saving? Many people simply save through their work via payroll deduction. They may contribute to the company 401(k) plan or other savings vehicles and call it good. Real savers do save through work and save more on their own. They simply move some money to an old fashion savings account, then when that gets to a significant size they invest it in some manner. Savings can be built several different ways. 

Saving money can become a priority. Developing the self discipline to save will be an attribute that will bless you for years to come. Struggling with it is natural, have faith that it can be done! Go do it!! Please let us know how you go about saving money. What are your challenges with saving money - outside of your company retirement plan?

“The Power to make and keep commitments to ourselves is the essence of developing the basic habits of effectiveness.” Stephen R. Covey

Topics: Budget, Saving, money, Emergency Fund

A Way To Become Debt Free With A Spender

Posted by Wendell Brock, MBA, ChFC on Thu, Apr 20, 2017

Financial Arguments

While studying Financial Planning in college one math class referred to a mathematical formula as an argument, something I was not too familiar with. Not completely understanding the topic - the only argument I had was with the professor! Recently I was talking with a friend about personal financial topics, I asked her, “What money topic do you and your spouse argue about most?” Her response, “debt.” She wants to be debt free!

Debt - This husband and wife are the typical middle income American family: both spouses work, two kids, a suburban home, a couple of autos and maybe a pet or two. When debt becomes a real problem the heated argument rises from a simmering two, to at least a six or higher on a scale of one to ten. argument couple.jpg

Why? Simply because he does not show any interest in caring about the family finances. He works and spends what he wants on snacks, tobacco, or other stuff at the gas station. He does not have a serious concern for the future; life is easy.

The problem became really serious when he began using his wife’s credit card for business travel and never turned in the expense report. He did not bother to collect expenses that were due him from his company. She offered to do the paperwork for him and it just did not seem to matter, it was still too much trouble. He has since been laid off and is employed with a new company, and those expenses are now theirs to bare and pay off.

Some people as the saying goes are “wired differently” or perhaps they have a short in their wiring. Either way people can always change, that I am confident of. Money issues are very emotional, thus solving those problems is emotional as well. We think through these financial issues and come up with solutions. Here are a few ideas if the above story sounds a bit like a situation you are familiar with. 

First people have to want to change and typically they change because they see something better or what they are experiencing is so painful that they realize they must change. This change maybe in baby steps, but that is o.k. any positive change is good. If there are a few episodes of back-sliding, claim progress, be patient, and press forward with faith.

Next develop a vision of what could happen if small changes were made. Helping this person see a vision of what the short-term would look like if they made such small changes is most valuable. Set a goal, if we had an extra $1,000 we could go on a small vacation to (pick a place). Talk it up and get them excited about it. Then work on the plan to fund it. 

bigstock-Two-green-street-signs-with-th-22445225.jpgMaybe since both spouses work, the saver could offer to the spender a matching deal: you cut out $50 per week of excess spending and I will match the $50 towards the trip. The spender’s $50 can go on debt and the saver’s $50 can go towards the vacation. 

That is $200 per month each and in five months $1,000has been saved for the trip, and an extra $1000 of debt has been paid off. Next, establish a new vision, set a new goal, make a plan and repeat.

Help the spender understand that debt is a constant - it is something that we may live with all the time, it never sleeps or goes on vacation, and never seems to go away unless something is done about it. In today’s world there are people out there who simply love to spend, keeping them in debt, and they love the feeling of “power” or “entitlement” they have when they pull out the charge card. 

That emotional feeling of power or entitlement can be transferred to a feeling of greater power and strength when there is money in the bank and you don’t have to pull out the charge card. True financial strength is not developed by having a great credit rating; it is developed by having the self-discipline to save money.



 "Your failures are your stepping stones to success" ~Howard Ruff

Topics: Saving, debt free

A Method To Optimize Retirement Income

Posted by Wendell Brock, MBA, ChFC on Fri, Apr 07, 2017

The question is often asked, “how does a person optimize their retirement income?” Most companies these days only provide limited resources to their employees in regards to retirement planning. Gone are the days of the large pensions, as fewer and fewer companies offer them. Most only offer a 401(k) type option, which is a contribution based plan; meaning that the only funds an individual will have when they retire is what they personally have saved in that account plus any employer matching contributions. 


Pension plans are formula driven, based on a person’s time employed and salary, which determines a benefit that would be paid to the person when they retire. These plans use actuarial science to determine the contributions the company makes to fund such a benefit in the future. The key being the actuarial science. 

Contribution plans rely solely on the contributions, which have legal limits, and the markets to produce an end result account value - if the winds are favorable (markets) you may end with a better retirement. If the winds are contrary your retirement may be in jeopardy. Like any storm they can come on the horizon at any time unannounced placing your retirement nest egg at extreme risk.

Due to such risks people who are withdrawing from those investment accounts are advised to only take out small amounts per year, in the range of 2.5%-3.5%. This small percentage will minimize the drain on the account so it would hopefully last through retirement. Meaning that withdrawal amounts would only be approximately $2,500 - $3,500 per $100,000 of investment dollars per year. Not a lot of money.

Enter in actuarial science - by employing a strategy that would use both an investment account and actuarial science a retiree may be able to significantly increase the annual income and never run out of money, never suffer due to the contrary winds of a bad market. In essence a retiree is able to create their own personal pension plan.

Actuaries are employed mostly by insurance companies to calculate rates and tables to offer benefits to their policy holders. Unlike investment services, which is an art, actuaries use science. Proven facts and mathematical formulas are used to determine a benefit for the policy holder, this is done to ensure that the beneficiary of the policy will never run out of money.

Because of the science involved, insurance companies through an annuity can create a private pension account. An annuity may pay out up to twice the amount of standard withdrawals from an investment account, effectively allowing the policy holder to be paid 5%-7% or more of the base amount of the deposit. Meaning that a retiree would receive, $5,000 to $7,000 per year for the rest of their life for the same $100,000 contribution.

Say a retiree has a $1,000,000 in a contribution type retirement plan, in a non-secure investment account and they set it up to withdraw 3.0%, each year they would withdraw, $30,000. If they split that amount and left half in the market and moved half to an annuity, they could be paid $45,000 per year ($15,000 market account + $30,000 annuity). That is a 50% increase in their income for the rest of their life guaranteed by the insurance company.

In today’s world retirement planning is challenging, but using the right tools can take some guess work out and provide some additional security over the long term. Providing retirees with some much needed and deserved peace of mind.



"The power to make and keep commitments to ourselves is the essence of developing the basic habits of effectiveness." ~Stephen R. Covey

Topics: annuity, retirement income, actuarial science


Wendell W. Brock, MBA, ChFC

Subscribe by Email

Follow Me

Most Popular Posts

Other Sites I Follow, hobbies, fun and info:

gold-vs-silver-1.jpg  Nauvoo Mint brokerage services for precious metals


john Mauldin chair


Outside Economics is not a registered investment advisory firm (RIA) and does not act as an RIA. Outside Economics does not provide any specific investment advice. Any information obtained from this website or through one of  Outside Economics' representatives should be reviewed by a professional.

Subscribers Note: We do not sell our email list. Period. Thank you for subscribing.

Recent Posts