Blog Post 3/16/17
Getting Ahead
"Contentment is natural wealth, luxury is artificial poverty."
Socrates
Recently, I gave a seminar. The topic I covered was Save More, Spend Less. The reason I chose this topic is simple. It seems to me that investors, as well as folks in the financial services industry, tend to have an unhealthy fixation on rate of return, to the exclusion of rate of savings. In fact, outside of articles covering economists’ prognostications about the economy as a whole, I rarely hear or read about the savings rate, specifically as applied to individuals.
With alarming frequency, I come across articles pointing out that this or that organization has an underfunded pension. I also read about what people have in their 401k plans, the principal repository of retirement savings for many folks. What I read is more than sobering. It is downright scary. Perhaps, I should restate what I have just written. I read about what people do not have in their 401k plans.
Why are we, as a nation and individually, in this dreadful position? The answer is simple. We spend too much and we save too little. And because we save too little, we have become obsessed with maximizing return on investment, in order to make up for the savings shortfall. What a mess!
Now, it is completely sensible to want to maximize the return on investment of our portfolios. We should do everything we can to get the best return on our hard-earned money. However, we should do this responsibly, meaning without undertaking unacceptable risk.
The more money we routinely save, the less return obsessed we need be and, consequently, we can work toward our financial goals while arguably taking less rather than more risk. If our portfolio is flush, because we systematically nudge ourselves to save more money, we might be less tempted to underwrite greater risk.
To me at least, the best way to get to where you want to go financially is to make “slow and steady wins the race” your mantra when it comes to investing and rates of return. Under saving and then feeling you need to be very aggressive with your investment portfolio can put you in a position to see your hard-earned money eviscerated in an adverse financial climate. It is difficult to tell when that climate will take hold and it is difficult to protect against. Remember 2008?
What to do then?
How about taking a look at our spending patterns? I have done this on more than a few occasions. What I inevitably find is that even though I diligently work to save money, somehow, I fall prey to marketing induced impulse spending and bad habits. When I do a review of my spending patterns, I tend to find a significant amount of money I can save.
I am not suggesting that we work hard only to live a lifestyle based on a diet of bread crusts and water, no heating or air conditioning and driving around in a 40 year old rusting hulk of a clown car. Yet how many of us are living in the opposite direction, the free spending direction?
How many of us have gym memberships we almost never use (I did,) cable television packages we could cut in half without diminishing our viewing pleasure (I did) and nice vehicles we could keep a few more years, that would still look great and function well. In my case, I’ve decided to keep my truck rather than trade it in. How many of us stumble into our basements, garages and closets and think, “Where did all this stuff come from?” Oh, and that stuff is comprised of things we rarely, if ever, use. But, we sure did pay for it.
I do not want to be a scold. However, we need to start reminding ourselves that our society is in a death dance with rampant consumerism. The cure is simple. I do not pretend, however, that it is easy. We need to be ferociously honest with ourselves about what we want out of life and then act accordingly.
Would we like financial security?
Would we like a diversified investment portfolio that we can take less rather than more risks with?
Would we like our money to work as hard for us as we worked for it?
Would we like to take risks knowing that if things go against us, we have done such a good job of saving that it will not affect us in any material way?
Do we want sustainable lifestyles or do we want to dramatically cut back on how we live as we age?
Do we want to be the unwitting victims of Madison Avenue marketing mavens, who do their best to get us to spend on this or that supposedly indispensable thing, only to find those things years later, unused, hiding in our garages and basements? Oh, and not having made us any happier.
Do we want financial freedom or the artificial slavery of a mindless consumer merry-go-round? Someone wrote once that “the chains of habit are too light to be felt until they’re too strong to be broken.”
While I believe that any chain can be broken there is real insight in that statement. Bad spending habits generally do not appear overnight like a field of mushrooms. Their seeds have been planted in our psyches by marketers over years and indeed lifetimes, until we come to believe that these desires are our own.
In a very real way it reminds me of the Common European Cuckoo bird. This little cutie lays its eggs in the nests of other birds and lets them do the work. When the cuckoo chick hatches, it evicts the host’s chicks in order to monopolize the food supply. The host bird toils away to feed another birds chick. One, mind you, that has killed its natural offspring.
We are too often toiling away to feed the needs of companies that don’t love us and who’s products and services don’t improve our lives. And it may be killing our future.
Personally, I am working on saving more and spending less. And you know what? I am missing exactly nothing in my life. I do not feel crimped or shortchanged. On the contrary, I feel liberated and optimistic about my and my family’s future. I chose to spend less and save more. You might want to consider the same.
Even if you have had a lifetime of bad spending habits, it is never too late to get started on the path of saving money and living a better quality of life. Take action now. Getting ahead is, in a very real way, predicated on examining our spending and savings habits and adjusting them to meet our goals. Our future, in the largest sense, is in our hands.
We can do this! Let’s take action now!
You might want to contact a financial services professional you trust, to help you appropriately invest your newfound savings.
Scott R. McGimpsey March 16th, 2017
This material was prepared by Scott McGimpsey and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources, however, we make no representation as to its completeness or accuracy. Neither Summit Brokerage Services Inc. nor Scott McGimpsey is engaged in rendering legal, accounting, or other professionally services. If such assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any federal, state, or municipal tax penalty. Moreover, a diversified portfolio does not assure a profit or assure protection against loss in a declining market. UNIFIED PLANNING GROUP is an independent firm with securities offered through Summit Brokerage Services Inc., Member FINRA, SIPC