Tuesday, October 16, 2012

You Should Save Money Right Now

This is not the most interesting or even the most exciting topic in the world, but for people of any age, it is one of the most important of your life (with the fate of your immortal soul being unarguably more important). Whether you are 61 or 21, saving money can make a big difference in your later years.

For those older folks, this is much more of a reality than to those in their 20s like myself; you have to prepare for retirement. Social Security is broke. You cannot rely on the government to provide for your retirement. The treasury is broke, your state is broke, your municipality is broke. Years of fat contracts to union workers, welfare spending, and fascist economic management has deprived our governments of any possibility of fulfilling future contracts. The US budget alone pays nearly 25% of all expenditures to maintenance of federal debt. In other words, a quarter of all expenditures are just interest payments. Try to imagine that you had so much debt that 25% of your income (and actually more than that since government is always running a deficit) went to interest payments on your credit cards. You would declare bankruptcy in no time. The government is essentially bankrupt, so you have to prepare for your own retirement, and the sooner you do it, the better.

There is only one way to become rich: save and invest. Sure, there are those who live off of an inheritance or who stumbled upon an oil field in their backyard, but it's time to get real, that isn't going to happen for you or for me. Part of being an adult is being responsible, and one of the easiest ways to become responsible is to grow your wealth and save money. The best reason to save money is for a rainy day. You never know when you will have a job loss, an illness, or any big expense. If you are living paycheck to paycheck, you will have no way of dealing with these issues besides going in debt. Remember, debt is the biggest hindrance to growing your wealth. When you owe people money, and that sum gets bigger just because of interest payments, you're going the wrong direction. So have a rainy day fund. Second of all, with savings, you get the benefit of compound interest. For instance, if you save just $100 a year, in 25 years you will have saved $2500. With 8% interest (a big underestimate), you will have an extra $5000. That's basically $5000 in free money! And all you had to do was save $100 a month.

It is all well and good to be mindful of your future, but don't ignore the present either. Sure, you could save money by eating really bad food, working all the time, and just being miserable, but at some point present losses outweigh future gains. Ask yourself whether going without something is worth your future expected earnings. In general it is better to do without, but not always. Make a plan and be prepared for your future, and you will have security for yourself and your children. Don't put this off for some day, start budgeting now!


  1. Damn good advise coming from such a young man. Well done, Tony. When my sons were ready to go out on their own and start families, I gave them this advise:

    If you are going to start a family you will need to buy a good amount of term life insurance to protect your family if the unthinkable should happen. The most important debt you have is to yourselves. From your combind take home pay you need tp put away in a savings account at least 10%. This is only to be touched in emergencies. Needing a new washing machine or a television doe s not qualify as an emergency. Other than a car or a home, avoid buying things on credit. Credit cards are for conenience only. Always pay the full amount every month.

    Only ine of my sons took my advise. I guess batting .500 isn't all that bad.

    I hope all is well with you, Tony.



    1. Hey Jim. Everything is going well. I'm now in a PhD program and working hard. I need to get back into blogging. With everything going on in the world, I feel like I have interesting things to say but no one else is saying them (not to sound too ego-centric, though). I do have the inspiration, but I need to pace myself lest I burn out. Here's hoping I get some insightful posts back up on the blog.

      And I hope everything is going well with you too. Let me know.

  2. I absolutely agree on this one. Nowadays, you "seriously" need 2 to 3 jobs in a day to somehow avail the basic necessities in life. Also, the idea of saving isn't present at most of us anymore because of the new lead star, "credits". I'm not against credit cards, I myself have some, but ideally, it doesn't match with the thought of saving.

  3. I hope the new year is a great one for you, Tony!