2019, like any new year, is a time to reflect on the past 12 months, and the coming year. We consider what we did and did not do, and maybe what we want to do differently this year. Many of us are focused on post-holiday exercise to lose a few pounds or thinking about where to go or what to do on Spring Break, or even preparing our taxes. Pretty basic stuff.
2019 in many respects is no different than any other year. We must make money, buy and pay for things we need, pay taxes, and save. Hmm, Save. Sounds good doesn’t it? Reasonable? It has a nice sound. But save for what? Saving is so boring don’t you think? Why put off until tomorrow when you can have it today? I’ll save later when I make more money, have less expenses, etc. Savings is so yesterday. The excuses abound. Let’s consider saving in a somewhat different light.
The word save comes from the Latin word, salvāre, to save, retrieve, deliver. Other definitions include words such as guard, rescue, preserve, protect. The word salvāre sounds a little bit like salvation! Oh, now that sounds pretty important!
In a way, though, having some salvation, or something to save you, especially in volatile times can be very reassuring and comforting. It also allows for you take risks. Saving is usually not associated with risk. We all take risks, some small, some large. You may consider yourself risk-averse, or perhaps you are the type that throws caution to the wind and runs headlong into the unknown. Risk is also a relative concept, of course. What you feel is risky is different from others, for sure.
Savings can be a risk strategy. Yes a strategy. What is strategy? Strategy is a plan. And, what do most people do when they take on risk, they build into their plan a backup, by leveraging insurance (saving). You may think of savings like you would insurance. If you did not have insurance on your home or car, how confident would you be going about your daily activities? You might be concerned that you would be in a collision on your way to work or school, and your car would be unusable. But with insurance, for a small cost compared to the price of a new car, you can quickly be back in a car, back to work, school, etc. You just managed your risk.
Even though we think of insurance as a cost, it is in fact savings. In essence, you have spent (or saved) a small amount of money, i.e., insurance premium, a known cost, to save a larger amount of money, and unknown costs, AND, allowed you to take on risk, and take it on with less stress. This conversation is not about insurance, however. It is about saving, and risk.
We know that people who take on risks, in general, tend to find opportunities in business and life, that those who do not take risks do not experience. Some folks do this without regard to risk, and it works out. But, we also know that others have failed. Often the failure is not due to a bad idea, or execution, but time. Yes, time. If the individual had more time, they very likely would have been able to see their idea, product, company, etc. through the risk phase to success.
This is where saving comes in. Saving not only reduces risk, it helps with managing lifestyle. If you desire to try something new in your life, such as starting a business, going back to school, writing a blog, you may want to consider your saving. Consider additional savings when times are good, when you receive a raise, and before you have a major life event. Don’t wait until something happens and then try to save more.
Five Ways to Save Today
- Pay off ANY debts you can, first high cost-nondeductible debt like credit cards, student loans and car loans.
- Next, consider paying down lines of credit and then your mortgage.
- Pay yourself first. I know you have heard this before, but it really is the best way. Can you put money into your company’s retirement plan? How about a Roth or Traditional IRA?
- Eliminate trivial but needless costs. Look first for small savings. They’re easy to find and take advantage of. For example, try to avoid impulse purchases that really do not provide any real value to you. Shop during sales if you can. Take on chores that you usually pay someone else to perform, such as mowing the lawn or shoveling snow.
- Open an account that pays a decent rate of interest, and if it is somewhat difficult to get to, even better.
Want to learn more about saving strategies or other ways you can get your 2019 financial plan off on the right foot? Start here.
The views and strategies described may not be suitable for all investors. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for accounting, legal or tax advice. References to future returns are not promises or even estimates of actual returns a client portfolio may achieve. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation.
The views expressed are those of BerganKDV Wealth Management. They are subject to change at any time. These views do not necessarily reflect the opinions of any other firm. Investment advisory services and fee-based planning offered through BerganKDV Wealth Management, an SEC Registered Investment Advisor.