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Spending and Saving

Guest post by: Jim Stovall

Article Overview: Whether you make millions of dollars a year or earn minimum wage, there are only three things you can do with your money: You can spend it, save it, or give it away. Your spending may range from absolute necessities to outrageous luxuries. Your savings may be prudent investments or coins in your piggy bank. And your giving may be coins you drop in a donation jar or launching your own foundation. But there are still only three things you can do with every dollar.

Spending and Saving

Whether you make millions of dollars a year or earn minimum wage, there are only three things you can do with your money: You can spend it, save it, or give it away.

Your spending may range from absolute necessities to outrageous luxuries. Your savings may be prudent investments or coins in your piggy bank. And your giving may be coins you drop in a donation jar or launching your own foundation. But there are still only three things you can do with every dollar.

Financially successful people make sure that each dollar is divided between spending, saving, and giving. Traditionally, Americans have been a very giving and generous group of people. This generosity fluctuates some but remains strong, even during difficult economic times. If you're not giving away part of every dollar you earn, you're missing a great opportunity and one of the true joys in life. While, as a society, our giving can always improve, we seem to be doing fairly well overall.

The problem arises when we make the decision between spending and saving. Savings rates in America are dangerously low and, in some sectors of the population, the savings rate statistically actually drops below zero. You may wonder, as I did, how it is possible to save less than zero.

When I researched the statistics, I found that many people today are spending significantly more than they earn, and the disparity is showing up in their credit card balance, line of credit, or other debt instrument. This is a dangerous practice as without long-term retirement investments, your golden years may seem more like aluminum foil than gold. Without some emergency savings, you are like that pilot flying his plane 50 feet off the ground. While it might work for a little while, sooner or later, you will crash and burn if you don't leave some margin of error in the form of a cash reserve.

When we look at global savings rates, we find that Europeans save 20%, Japanese save 25%, and the Chinese save over 50% of their income. This is fascinating when we consider that economic growth is thought to be fueled by spending, but China has one of the fastest-growing economies while their people are saving half of their income.

Global statistics are interesting for study or theoretical discussions but really don't matter to you and me. The economic conditions on Wall Street or The White House should not concern us nearly as much as the financial picture on our street at our house. There are many ways to calculate the best way to spend, save, and give our money.

In my newest book, The Financial Crossroads, my coauthor Tim Maurer and I explore a number of ways you and your family can win with money. We offer many calculators and other tools you can use to get the information you need so you will know what to do; however, it's important to realize that financial information abounds. As in most things, with money we don't fail because we don't know what to do. We fail because we don't do what we know.

As you go through your day today, commit to get the information you need to make quality financial decisions and then act.

Today's the day!

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Article Tags: Financial Crossroads, Investments, Jim Stovall, Tim Maurer



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Re: Plan Your Retirement NOW - Hi Barbara, Thanks for your in depth post. I would have thought, someone would have responded to you by now. I think it is a good idea to check which post have had no response. That is why I often check these out and endeavour to reply. I do it for two reasons: one is a kind of appreciation for the person who took the time and wrote it and 2ndly, actually to revive it if at all possible. We are living in a microwave society, we need every thing very quick and find it hard to exercise delayed gratification. It starts with the young ones. They watch their parents getting everything so they want the same. The word Saving is almost not heard of in today's society. There is a sale, it looks good and I need it now is todays mentality . I am in England, where the statistics and demographics are similar. There might be some fluctuations, but in general it is a world wide issue. The government borrow money, too. Not many people are interested in that sort of information. One thing I need to add, worry is never the sole answer. It has a negative affect on the health of the people. That is a total different subject, but you have mentionned several times. Any other ideas from our colleagues?
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