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Posts Tagged ‘savings’

Are you saving enough?

In behavior, culture, domestic life, family, life, Money, parenting, US on March 10, 2014 at 2:21 am

By Caitlin Kelly

images-3

A recent piece in The Wall Street Journal asserts that Americans spend way too much money:

You may overspend because you’re bored, you have no budget or you want to keep up with your neighbors.

Or you might be letting your emotions dictate your financial decisions.

Whatever the reason, you may be setting yourself up for a financial disaster.

But fear not: There are a few ways you can rein in your spending before it’s too late.

Tracking your cash flow and tapping into your feelings are two things financial advisers say you can do to curb your urge to spend.

“The spending choices you make now will greatly impact your quality of life later on,” says Patrick McDowell, a Miramar Beach, Fla., financial adviser.

Here’s an honest post by a new Broadside follower (welcome!), a college student, making minimum wage and struggling financially with college costs:

Although it can be annoying, I understand this is making me a better person.  It’s not just about the money all the time, it’s about a learning experience.

And here’s a dense and dry blog post, recently chosen for Freshly Pressed, about behavioral economics — written by a professor:

Certainly the evidence that people don’t typically behave rationally is quite compelling.  It’s easy to find examples of behavior which conflicts with economic theory.  The problem is that it’s not clear that these examples help us much. I’m pretty much obsessed by when, why, how and where we choose to spend our money. Or save it.

Given how little money most Americans save — here’s a blog post from The Economist about that — it’s a tough decision to postpone immediate pleasures (let alone the daily grind of needs), for groceries, housing and medical care in the future, possibly decades away. What if we never get there?

But what if we do live to be 80, 90 or beyond — and find ourselves broke and scared?

Here’s a frightening post from one of my favorite writers, Guardian journo Heidi Moore, about how older women — because we earn less and live longer — end up in poverty:

17.8 million women lived in poverty in 2012, 44% of whom lived in extreme poverty. Extreme poverty means “income at or below 50% of the federal poverty level”, which amounts to less than $5,500 a year…

What is surprising is that the slide into deep poverty is happening so soon, and in such massive numbers, among the elderly. It’s not clear what could have changed between 2011 and 2012 to cause it.

My mother went into a nursing home three years ago, paying — for a small room — $5,000 a month. Yes, really. That certainly made clear to me the very real cost of getting old, ill and needing costly care every single day. She saved, lifelong and ferociously, so she has the funds for it.

Most of us will not.

Our parents and grand-parents, and a few fortunate folk in specific industries, could look forward to a company pension; Jose will receive one from The New York Times, thank heaven. A few lucky people also get a company match to their 401(k) retirement savings from their employers.

But most of us are now expected and required to save and save and save and save, praying our investments retain and grow in value. I’ve been saving 15 percent of my income every year for a while; it’s finally adding up to a sum that makes me feel like the sacrifice is worth it.

It’s also simplistic to shame people who “spend too much” when millions have lost their jobs, often repeatedly, and have run through whatever savings they might once have had. Millions are also now earning far less than they once expected or hoped to.

Wages are stagnant or falling while the cost of living rises each year — and we’re still human beings who actually want to leave our homes and have some fun!

I splurge on four categories: 1) items or improvements for our home; 2) travel; 3) entertaining friends; 4) fresh flowers.

ALL IMAGES COPYRIGHT CAITLIN KELLY 2013.

How about you?

What do you splurge  on — and where do you keep your wallet closed?

Can you save more than $5.09/day? You’d better start!

In aging, behavior, domestic life, life, Money, seniors, US, women, work on June 17, 2013 at 12:05 am

By Caitlin Kelly

If you want to scare the shit out of almost any American — those who don’t have a defined-benefit pension guaranteed to them — which knocks out most workers, ask them how much money they have saved for their retirement.

retirement

retirement (Photo credit: 401(K) 2013)

The median figure, among those aged 55 to 64, (i.e. an age group, traditionally, potentially planning/hoping to retire within a decade or less), is a mere $63,100.

The median among all Americans is a staggeringly low $10,890, (minus the value of a home and/or vehicle.)

When New York Times writer Jeff Sommer recently wrote that $1 million wouldn’t do much, more than 600 readers weighed in with comments, prompting him to tackle the subject again the following week.

My math works like this — if, when (if) you graduate from college at 22 and start working immediately, you begin saving $5.09 every day, some $36.00 every week, or $144 every month, every year without a break — and with no accrued or compound interest from investing that money — you’d end up with the $63,100 median figure.

Surely we can do better?

For some people, right now, saving $5.09 every day, all seven days of every week, is impossible. Their living costs cannot be trimmed in any way, and/or their wages are too low.

Many fresh graduates, and older workers, are unable to find paid work in this economy. They are stalled, frustrated, broke, angry. Some carry enormous debt burdens of homes underwater or student loans they cannot discharge through bankruptcy. Some people are very ill, or have very ill family members for whom they must add the cost of care and the time it takes — i.e. unpaid labor — to do this as well.

But…for the rest of you, snap that wallet shut!

The culture that most Americans live in is one that continues to glorify and fetishize spending lots of cash, (or credit, mostly), acquiring tons of shit that’s new and shiny and cooler than everyone else’s — whether an Ipad or Ipod, phone, car, house, vacation, clothing, whatever. You can blow easily thousands of dollars on a freaking baby stroller, if that somehow seems essential to you.

Television and social media and the internet bring very rich peoples’ lives into our own. We can press our greasy little noses against the impenetrable glass wall of their luxuries and whine: “Why not me?”

You can go broke even trying to keep up.

saving and spending

saving and spending (Photo credit: 401(K) 2013)

I’ve been lucky. I grew up in Canada, a nation that still chooses — with much higher rates of taxation — to heavily subsidize college education. My annual tuition, from 1975 to 1979, (yes, really) was $660 a year. I was able to put myself through university and graduate debt-free.

I’ve also been able, since my second year of university, to sell my writing, photography, editing and translating skills to others — and had the developed skills, delivered on or before deadline every time, to make them want more of my work.

I’ve been fortunate, since the age of 22, to be able to share housing on four occasions, which helped cut my living costs in two expensive places — suburban New York and Toronto.

I’ve been grateful for good health, so I have never lost months or years to debilitating illness(es) and treatments that would have prevented me from working.

But that’s one side of the ledger — the getting side.

I’m also cheap as hell, when necessary, and it was necessary for years on end, especially when single paying $500 a month for health insurance, and facing three recessions in my industry.

I’ve chosen to stay in a one-bedroom apartment for 25 years. Would I prefer a second or third bedroom or bathroom? A backyard and fireplace and verandah? Hell, yes. But did I want to assume a much larger mortgage payment and longer repayment term? No. Nor the stress of fearing potential homelessness. Ever.

I’ve been saving 15 to 25 percent of my income every single year for years.

Our ironing board recently broke. I paid $4.30 at our local thrift shop for another one. Score!

When my income bottomed out to a terrifying degree in 2007 to 2009, I took a part-time retail job ($11/hour no commission) and bought my clothes and shoes from consignment shops.

Until my ex-husband moved in, I had no television. Until my second husband moved in — when I was in my early 40s — I did not have cable or a cellphone ($200/month saved right there.) I drove a used, paid-for car, as we still do.

A friend of mine runs her own company, an investment fund, literally managing millions of other people’s money. She drives a Mini Cooper, not a Mercedes or Lexus or Range Rover, the vehicle people expect.

“That’s how I got a million dollars,” she says, with a knowing smile.

We plan to be mortgage-free by 65. We have no children. We will have multiple income streams, one of which is our savings. Adding to them is a non-negotiable part of our life, as automatic, necessary (and boring!) as brushing our teeth.

Here’s an interesting, helpful and smart post from Dailyworth.com about how to face up to the reality that we all need to save (more!) money and invest it as wisely as possible.

Are you saving for retirement?

If not, why not?

If not, how do you plan to pay for your living costs in your 70s, 80s and beyond? (People insist they will keep working. Find me the employer willing to hire a 75-year-old.)

How to manage your money

In aging, behavior, business, domestic life, education, family, life, Money, parenting, work on January 7, 2013 at 10:02 pm

There are so many people eager to tell us how to do it.

But how many of them are right?

I recently recently reviewed a terrific new book, by a fellow New York writer, Helaine Olen, called “Pound Foolish: The Dark Side of the Personal Finance Industry” for The New York Times; here’s my full review.

She’s largely scathing of the Big Names who make a shitload of money telling us what to do with our own — (my finger slipped and typed “yelling.” That, too!)

English: CNBC’s “Mad Money with Jim Cramer” ca...

English: CNBC’s “Mad Money with Jim Cramer” came to Tulane University’s Freeman School of Business Oct. 19, 2010 to broadcast in front of a live audience as part of the show’s “Back to School Tour.” (Photo credit: Wikipedia)

People like Jim Cramer, Suze Orman and Robert Kiyosaki.

In 2012, I wrote a personal finance column for five months, every week, aimed at Canadian readers. I learned that every personal finance author seems to have a different opinion:

Love ETFs! Hate ETFs! Bank six months’ savings! No, three! Mutual funds are great! No, never!

Personal finance is deeply personal, affected by family, culture, education, understanding, (two very different things!), greed, fear, hope, comfort, wishful thinking. And the larger economy. In the 1980s, I earned 18 percent on my Canada Savings Bonds. Not today!

At 19, I was handling my money alone. Like every other, it’s a skill best acquired through practice. I was living alone, earning income as a freelance writer and photographer, putting myself through university and living on a stipend of $350/month in Toronto, where my rent, for a tiny studio apartment in a lousy neighborhood, was $160 a month. That left me $190/month — or $2,280 for the year for everything else: dentist, haircuts, clothing/shoes, laundry, food, phone, answering service.

Oh, and tuition and books; University of Toronto then (mid-1970s) cost $660 a year.

My parents never helped me out financially — beyond the cost of my small, cheap first wedding. And no chance to go home and live free or cheaply for a while after the age of 19.

Mutual Funds for Dummies ... U.S. Funds at War...

Mutual Funds for Dummies … U.S. Funds at War — Too simple? (Monday, June 4, 2012) …item 3.. Music to Help Study and Work – 26:39 minutes … (Photo credit: marsmet545)

Here are some of the many factors affecting our ability to earn, save and invest, in bold:

One reason we’ve been able to save a decent sum for retirement is having no children, an estimated annual cost, per child, of $10,000.

I chose a profession, journalism and publishing, that often pays crap. I did expect to have a steady income, and a staff job making $60-80-100,000 a year throughout my 30s, 40s and beyond. But my first New York magazine job, in 1990, paid $40,000 — $5,000 less than I’d earned at a  Montreal newspaper in 1988.

(Thank God for my pre-nuptial agreement, and alimony, both of which gave me time to get back on my feet and find a well-paid staff job.)

Yet three recessions since 1989 — with 24,000 journalists fired in 2008 — and ongoing upheaval in my industry have put paid to any notion of a steady, high income.

Once you’re earning beyond your basic needs, (and learn to keep your overhead low,) save like crazy and invest thoughtfully to keep your nest egg growing, no matter how slowly or how small.

Luckily, Jose’s staff newspaper job is steady, union-protected and a kind of work that does not damage his health or strength. Unlike many Americans, we’re extremely lucky he has a company pension to look forward to. He has also been responsible enough to make a will and designate me the beneficiary of all savings to protect me financially if he dies before I do. (I did this for him as well.) If you have assets, and dependents, protect them!

Do you play the CPW game? Cost per wearing? Better quality clothes and shoes, even pre-owned and repaired, typically last longer than cheap crap you have to keep replacing. (And earning more money to pay for!)

I bought an apartment in June 1989, a one-bedroom. I’m still here. I certainly didn’t plan that, and fear I’ll never live in a house. I’d kill for a fireplace and backyard! But that real estate decision, (a long term mortgage with a decent rate, and low maintenance costs) allowed me to do good work I enjoy, even freelance, living alone, and allowed me to save 15-20 percent of my income every year, even when it was laughably low.

Read this life-changing book, and decide what is truly worth most to you — owning even more/bigger/newer stuff or enjoying free time. You can’t ever buy more time!

We drive a used, paid-off car, with no plans to replace it any time soon. (See: low overhead.)

Managing your money intelligently and attentively is a wearying life-long game of Whack-a-Mole. Just when you think things are going smoothly, boom! The car or house needs a costly repair or your kid needs braces or you lose your job — or all three happen at once.

Here are a few tradeoffs that work for me:

I don’t write a lot of checks to charity — but donate my time and skills to several volunteer boards and organizations instead.

I chose not to continue my formal education beyond a B.A. — but I attended Canada’s top university and, ongoing, read widely, attend conferences and network assiduously to stay current in my industry. Until or unless I know the ROI on an advanced degree, I won’t assume any educational debt.

We drive a battered old car — but it takes us safely, affordably and comfortably 10 hours north to Canada to visit family and friends.

We live in a smaller space than I’d prefer, with no second bedroom for my office or a bed for guests — but it allows us the extra cash to travel, save and entertain.

Managing your money means making choices, every single day. It means determining what matters most to you, and examining — truthfully — why that choice matters right now more than anything. (Designer labels, a trip to Paris, a new pair of skis, a second bedroom, a fourth child, grad school….)

Do you manage your money well?

Where did you learn those skills?

Personal Finance

Personal Finance (Photo credit: 401(K) 2013)

Related articles

When Do You Plan (Hope?) To Stop Working?

In aging, behavior, business, life, Money, work on November 28, 2011 at 2:02 am
Obadiah Sedgwick (1600?-1658), puritan clergyman

A Puritan clergyman. Do you really need to follow his lead? Image via Wikipedia

Now here’s a seriously depressing idea, working into your 80s.

A recent New York Times op-ed argues this is not only likely necessary for millions of Americans but — seriously? -- a terrific new development:

Retirement seems out of the question for increasing numbers of Americans who are saddled with debt and whose savings evaporated during the recent bust. Today’s workers should expect to labor longer, and companies should expect to employ more older workers.

The numbers supply a vivid picture of America’s graying work force. Between 2007 and 2010, the number of working Americans over 65 years old jumped 16 percent; the number of under-65’s in the labor force shrank. The trend started before the current downturn: the number of Americans over 65 in the labor force increased from 10.8 percent in 1985 to 12.1 percent in 1995 to 15.1 percent in 2005 to 17.4 percent in 2010. Until 2001, most workers age 65 and older had part-time jobs; since 2001, full-time work has been far more common….

Nearly 40 percent of 55- to 64-year-old Americans don’t have retirement accounts. Less than a quarter of this group owns a single stock or savings bond. The median net worth of 55- to 64-year-old Americans has declined during the last years and is now $254,000 (including housing), down from $273,000 just three years ago. American households saved less than 4 percent of their incomes for every year between 1999 and 2008; during this time, thrifty Germans were saving about one-tenth of their earnings. A nation that prefers spending to saving is going to find it difficult to enjoy a comfortable retirement.

Call me lazy, unmotivated, un-American. The thought of working into my 80s — instead of (I hope) being able to wind this thing down in the next decade or so, in my mid 60s — is appalling. I’ve been working for pay since I was 14 and started life-guarding.

Enough already!

Here’s a wild notion: Live low(er). Save more. Focus your goals not on the next set of paychecks, but when and how to extricate yourself from the hamster wheel of working for pay.

Read this powerful book on the “value” of income versus time.


Unlike some other nations, for whom the endless drama of “work-life balance” is less difficult to achieve (paid maternity leave for months, for example), Americans are heavily socialized and rewarded (no paid sick leave, short vacations) for working all the time.

Those who seriously value other non-work -related activities — quiet time alone, traveling, volunteer work, spending time with our loved ones or pets, learning or perfecting new skills for the pure pleasure of it — are derided as bohemians or, worse, hippies. Time spent un-tethered to commercial production is considered deeply suspicious.

Don’t you want to workworkworkworkworkwork?!

Don’t you want to keep buying more/bigger/faster/newer stuff?

Jose and I are fortunate, still working steadily in fields we enjoy, to be earning enough for our needs. We save and invest  and keep a careful eye on those funds. We have retirement savings, (40 percent of people in our age group have none),  and are also lucky enough to likely (just) to be able to collect Social Security payments and a company pension.

Nor do we have children, grandchildren or parents whose financial needs compete with ours, as so many people do.

But I disagree that:

1) paid work is the best use of our very limited time on this earth;

2) saving money is too hard.

I’ve had years, plural and sequential, in which all I was able to do was pay my bills and do almost nothing else, hanging onto my home (which I own) with a white-knuckled death grip. I know it’s terrifying to not have a lot of (or any) spare cash. I’ve dipped into my IRAs more than once.

But I have IRAs because I deliberately save money every year, usually 10-25% of my income. Anything less makes me feel ill. Nothing is worth not having savings accumulating. Nothing I could own, see, do, listen to, eat, hear, wear or otherwise consume, is worth that to me.

In lean years, I buy little, and it’s from consignment shops or only on sale. I use and wear items that are 10, 15 even 20 years old, well-cared for, that don’t look it. Our one car is 11 years old. We have every form of insurance possible to protect what we’ve worked hard to accumulate.

It’s a choice.

Do you want to keep working that long?

Will you have to?

What compromises are you willing, or able, to make to avoid this?

Nice Girls Finish Last — Financially

In behavior, business, Health, Money, news, parenting, women, work on November 18, 2010 at 1:06 pm
My Grandfather (†); photo from January 17.JPG

Image via Wikipedia

Here’s a cheery reminder from a Globe and Mail story — Canada’s national daily — that women are screwed financially in old age if they devote their midlife time and resources, as many now do, to caregiving.

I’ve spent much of my workdays, (which is my only source of income as a freelancer), on the phone and email so far this week dealing with social workers, nurses and lawyers to discuss what happens next to my mother (divorced, few friends) who lives a six-hour flight away in Canada and who is now in the hospital.

It remains to be determined whether she will be able to return to living alone in her home.

As her only child, I can’t turn to anyone but my partner for help. We’re lucky she gets as much free government-supplied help and health care as she already does.

Another friend my age, a woman who is also a writer, devotes many hours every week cooking and caring for her in-laws. Her two sons, looking for work, are back at home.

We’re both very fortunate in having husbands and partners who earn a decent wage and, while our labor is necessary to the family income, it is not the primary or exclusive one.

(This lowered family income does not come without conflict. I could certainly earn more and spend less if I ignored my mother’s complicated needs.)

Every hour and dollar spent, lovingly or not, devoted to the care and needs of others is wage-earning (or re-charging) time lost to oneself or one’s other current and future financial needs.

The less money women earn (and we out-live men, statistically which means we need to earn, save and invest even more than men while typically working fewer years and earning less), the poorer our old age will be.

Caregiving often means financial disaster for the person giving it.

To whom does your duty lie?

What if your parent(s) were neglectful or abusive? Made lousy choices financially and with their health, and now, as a result of those choices, need (your) help to survive?

Too many of us are struggling in a terrible economy, with little or no leeway for our own needs, now and in the future.

What’s the answer?

Turn your back on your aging parents and/or your needy adult children?

Just say no?

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