Same Old Cliché Helps No One

06 May 2018 17:07

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One thing I despise are when articles discuss the lack of savings and the author brings up the old cliché ”if you just cut back on going out to eat…” and like magic all your problems are solved. That is what one recent author published in a Motley Fool article.

The article focused on a recent Capital One survey which asked its survey participants why they weren't saving. The top 2 results were; not earning enough money at 41%, and counting on Social Security at 18%. The thesis was that these are bogus and nothing more than excuses because people have failed to give up non-essentials. I really cannot believe people like this are allowed to write these articles. They sit up high, act self-righteous and provide no facts for their position.

I will admit a percentage of people fall into the category where better budget skills will improve their saving habits but I bet dollars to doughnuts that percentage is smaller than these opinionated authors or experts think. Here are a few facts to help support my position.

The Federal Reserve Bank of Atlanta posted this metric that tracks the percent of people that have not seen wage growth for the year and as of Mach 2018 that figure stood at a whopping 14.3%. As a side note; my wife falls into this category as she was told no raise for this year. Overall for 2018 the median increase in earnings is foretasted to be 3%. The Bureau of Labor Statistics currently has inflation pegged at 2.4% so real wage growth is closer to 0.6%


Overall unemployment numbers are down but not if your education level is high school or less according this statistic from the Labor Department’s Bureau of Labor Statistics.


Finally, inflation is not the only item eating away at our wages. In a recent study by the Kaiser Family Foundation found that the average amount enrollees paid toward their deductible rose a whopping 229%, from $117 to $386, between 2005 and 2015 while wages rose just 31% during the same period.


After all this I did not even factor in tax increases from local and state governments which vary from an increase of 1% to 4% depending on where you live. At the end of the day folks are dealing with low wage growth, inflation, rising health care and rising taxes. We are being asked to live on less money, exactly how does someone save more?

All of the folks I know that are struggling know where every single dollar is being spent and have already eliminated non-essentials. The last thing they need are lectures or to be reminded of where they should be in life. If you are one of these authors that writes these articles and believes you are helping then please do us a favor and go back to your ivory tower and stay there. We don’t need you! These folks need encouragement and positive reinforcement that they can achieve something.

One thing I can agree with is if you have a job no matter your expenses there is always an opportunity to save something just not as much as many of these articles claim. You may not believe it but just a couple dollars a week can change your life. Wouldn’t it be nice if you had a $100 or $200 emergency fund you can raid in a time of need? To take advantage of these opportunities you need to have a couple things.


First thing you need (beside a job) is a checking account.
Not just any checking account but a free checking account with online bill paying capabilities. It may sound hard but they do exist. One of the first places to try are local banks. Local banks tend to offer much better accounts with free or small service fees that beat the big banks (like Wells Fargo or Bank of America). I never understood why so many people are willing to take the fee abuse from these big banks. If there are no banks in your area then try online banking. You can find a recent review of online banking sites at Nerdwallet.


Second thing you need is internet access.
This doesn’t have to be a computer, a smartphone plan works just as well. If you cannot afford to pay for internet or a smartphone plan then try your local public library. Most public libraries offer free internet access and computers to use, this is not the most secure option but it can serve you until something better comes along.


Once you have these two things the world opens up to you. To begin everyone can dig to find a small amount to save and you can start with $6 a week. I realize it doesn’t sound like it can make a difference but it can if you keep the faith and maintain a steady saving habit. First split the $6 into two categories: emergency savings and investing (yes you can start to invest with $3). After one year you will have $150 in emergency money and $150 in investments. Think a $150 a year will not make difference? Think again. If you are 30 years old and invest $150 a year till retirement (age 68) you could earn $165 a month in retirement to supplement your social security. How is that for $3 a week! The best part is this is the minimalist approach and if your situation improves then it only gets better over time as you can save more.

As far as investing, there are free trading apps out there that can help. The one I recommend is M1 Finance as you can access using a computer or smartphone and it allows you to buy fractional shares. The only drawback is you need a minimum of $100 to open an account ($500 for a retirement account) however once you reach that milestone you can make any size investment after that. The beautiful feature of M1 Finance is that it lets you create a basket of ETFs and/or stock where you set the allocations and it automatically buys everything at those percentages all for free.

In conclusion here the steps to take:

  • Get a checking account
  • Get internet access
  • Save regularly even it is just a few dollars a week
  • Invest for free

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