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?

 
REMEMBER:
 
“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

Bit Of What?  Bitcoin

Posted by Wendell Brock, MBA, ChFC on Fri, Jun 03, 2016

A new form of digital currency has received tremendous media coverage this past year, Bitcoin, which is essentially virtual money that is traded digitally by exchanges. Bitcoins can only be purchased and sold with legitimate currency, such as dollars or euros making it available worldwide. The total estimated value of Bitcoins worldwide is about 9 ½ billion dollars.

Bitcoins exist as software, not physical currency, and are not regulated by any country or banking authority. Even though U.S. Senate hearings disclosed that Bitcoin could be a means of exchange, it gave no assurance that it would actually become an accepted medium of exchange. Government regulations would need to be created and then enforced in order for Bitcoin to become accepted by other government entities. The currency can be traded without being tracked, thus raising the potential for illicit activity, such as involving weapons, drugs, and prostitution. Bitcoins are not illegal, but it is also not legally recognized by governments as a currency. bitcoin-image-small-file-1024x1024.jpg

In late December, the price of Bitcoins fell more than 50% from recent highs as the world's biggest bit coin exchange, BTC China, said it would stop allowing its customers to use the Chinese currency to buy the virtual currency. This in turn removed a big source of cash that had been fueling Bitcoin prices. At one point in November 2013, the price of one Bitcoin was almost identical to the price of one ounce of gold, both being valued at approximately $1200.

The price appreciation of Bitcoin has been a result of speculation, and hasn’t been used as a store of value or as a medium of exchange to any extent. Some compare Bitcoin to the tulip craze in Holland of 1637, when speculators pushed the price of tulip bulbs to incredible levels, followed then by a collapse in the tulip bulb market.

Bitcoin has surged on speculation that perhaps one day digital money will eventually become a legitimate global currency, and even replacing currencies from certain countries.

Bitcoins are mined by powerful computers that calculate complex, mathematical functions. Total Bitcoin quantity is capped at 21 million, and currently there are about 12 million that exist worldwide. Circulating physical coins only represent Bitcoin, and are not a store of value as is legitimate currency.

The growing mobile payment industry could be a big benefactor to the acceptance of Bitcoin, as new and creative applications are being devised to accept digital currency. Bitcoin transactions are very popular among mobile users, where rather than using a credit card or cash to make a purchase, all you’d need is your phone.

Bitcoins emerged in 2008 designed by a programmer or group of programmers under the name of Nakamoto, whose real identity remains unknown. New Bitcoins can only be created by solving complex math problems embedded in the currency keeping total growth limited.

The value of Bitcoins fell by about fifty percent in mid December following remarks by China and Norway to not recognize the digital currency as legal tender. The government of Norway ruled that Bitcoin does not qualify as real currency, but rather qualifies as an asset, producing taxable capital gains. Norway said that Bitcoins don’t fall under the normal definition of money or currency.

More and more nations have been taking an official stance as the popularity of Bitcoins has evolved. The European Banking Authority has warned about the risks of trading digital money and being subject to losses where consumers are not protected by any government entity or authority.

As digital currency evolves, some believe that it will eventually be accepted as a legitimate currency. But for the time being, others believe that its time hasn’t arrived yet. Various studies have recently emerged with different opinions, such as

a Stern School of Business study conducted by David Yermack, which concluded that Bitcoin behaves more like a speculative investment than a currency, and has no currency attributes at all. For additionall information on bitcoins read Understanding Bitcoin.

 

Sources: Bloomberg, Reuters

 

REMEMBER:

"What we plant in our subconscious mind and nourish with repetition and emotion will one day become reality" - Earl Nightningale

Topics: Gold, money, Bitcoin, Currency, taxable, digital currency, capital gains

Start Saving For Retirement Now

Posted by Wendell Brock, MBA, ChFC on Thu, Dec 12, 2013

Americans these days talk a lot about retirement, what they want to do, when they want to retire and where they dream about living. While there are many issues in planning a comfortable retirement, the most important is having enough money.

One fear these days is that a retired person may outlive their money. With people living longer, the 10 year retirement plan that worked for our grandparent’s generation no longer equals security.

To be on the proverbial save side, plan for at least 25 years of retirement. This puts an

Retirement planningthing you can’t afford.
 extra strain on your retirement savings because it not only has to provide you with a decent income, but for a longer period of time. 

There are some things that will help. First, get started right now. Procrastination is one 
In fact, waiting 10 years to start will cost you over two time the savings rate. For example for every $100,000 you wish to have saved by the time you reach 65, it will cost you $28.64 per month at age 25 and $67.10 per month at age 35. You may think that’s no big deal, but at age 45 it will cost you $169.77 per month and it only goes up from there. 

According to the Employee Benefit Research Institute only 39.4 percent of the 156.5 million Americans working participate in an employer sponsored retirement plan. This lack of savings will greatly affect the spending of future retirees.

Second, plan on working at least until you can collect 100 percent of your socia
l security benefits. For those born after 1958 this is age 67. The longer you work, the more social security you will collect on a monthly basis. Working longer, will also allow you to put more away in your retirement plan and let what is there grow.

Third, open a Roth IRA, use a Roth IRA as your primary retirement savings vehicle. (Unless your company matches your contributions in a company sponsored 401K). Between these two you should save a substantial amount of your retirement funds. The big thing is to save regularly, make regular contributions to these accounts. No one forces you to do this, so you must be self-disciplined in your savings and simply DO IT!

If you don’t like that idea, plan on increasing your savings rate. Currently Americans save approximately 4 percent of their income. It should be at least 10 percent, if not 15-20 percent. The more you save now, the less you will have to work during the golden years.

Finally, don’t be afraid to use mutual funds and exchange traded funds (ETF’s). By using an effective portfolio management strategy, like the 7Twelve® portfolio model you can manage risk while at the same time maintain adequate returns. Outside Investment Advisors can assist in implementing this type of model. Using appropriate funds should keep your money growing at a fair rate and keep it ahead of taxes and inflation.

Topics: retirement, Saving, Investment, money, planning

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Wendell W. Brock, MBA, ChFC

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