Getting more by going paperless

Filed paper stack I decided to go green by going paperless with our investment, checking, savings and credit card accounts. The amount of paper the various banks and brokerages generate with the per-transaction, monthly and quarterly statements is obscene—Ameriprise is the biggest offender amongst our account providers.

Although we live a digital lifestyle—for example, I have been tracking my accounts electronically using Microsoft Money since 1996—I like the security of paper statements. Ridding my workflow and filing system of paper statements makes sense from a time, money and space standpoint even if it means I surrender a little peace of mind.

Our shredder has already thanked me.

Building Wealth

About a year ago, I wrote a post about retirement planning and discussed the how and why of calculating your wealth score. TB received her latest Social Security Statement so we quickly ran the numbers to see how our wealth score had changed. And change it did, much to our surprise. Despite the bumpy ride the U.S. economy has been on since mid-2007, our wealth score as of today grew to 33.4% (+5.4%) in just under 12 months. That’s more than a 19% year-over-year increase.

Stack of Coins To put this in perspective, the denominator in the wealth score calculation is the sum of every dime of one’s reported lifetime earnings. TB’s starts in 1990, when she earned $976; mine starts in 1991, when I earned $1,949. The numerator in the wealth score is one’s net worth (i.e., what would be left after all your debts/liabilities are paid). Some financial planners include automobiles, jewelry, furniture and similar possessions when tabulating their clients’ net worth. The assumption being one can liquidate such possessions to pay off debts/liabilities if necessary. TB and I are more conservative, choosing to only to track our savings, equity investments and real estate as assets. As a result, our net wealth score basically means, together, we have managed to hold onto 1/3rd of our total lifetime earnings in the form of durable assets that, over the long term, should continue to appreciate.

How? Discipline. Hard work. Sacrifice. A bit of luck. Many factors contribute each and every day. I would simplify these to 3 rules anyone at any income level can adopt immediately, assuming s/he can work:

  1. Have a plan. When would you like to retire? How much will you need in retirement? How do you get there? Consulting with a professional can help. Also, there are numerous retirement planning tools online to help you get started.
  2. Save more, spend less. This could also be called living below your means. This is where the discipline and sacrifice factor in. Sure, any of us could die tomorrow, but what if we don’t?
  3. Be productive. For most, the period spanning our late 20s through early 40s is the most productive for building wealth (just ask professional athletes). Exceptions may be models and actors. This is because savings during this period have many years to appreciate in value compared to even the higher savings made during the later years in life. One way to save more and spend more is by earning more. This is often the most difficult step especially if our physical, mental or emotional health suffers from the longer hours, higher stress or weaker personal bonds.

If you start young, time is on your side, and you can run the road to retirement at a leisurely pace. If you wait until you’re older, you have a shorter distance to run, and it could require an all-out sprint. In either case: Run.

Living check-to-check on $250,000 per year

A very enlightening yet troubling article appeared on MSN Money today. It is entitled, “The rich don’t save either” and summarizes a survey conducted by HSBC Bank on the saving & spending habits of U.S. households across all income levels. Some interesting excerpts from the article:

…savings hurdles transcend income levels…Empty pockets

As the article states right off the bat, “The low to no savings rate in the United States extends to rich people too. It isn’t just low- and middle- income people who find it difficult saving money.” According to the data, the savings rate in the U.S., averaged across all households, dropped to 0% in 2005 and recently dipped to less than zero for the first time since the Great Depression. That means, on average, Americans are working to simply consume and pay interest…seems more like an American nightmare to me.

This is unsettling when you consider government & private retirement and assistance programs are slowly unraveling to the point either there may not be enough money to meet the basic needs of the vast majority of American citizens or taxes will need to be raised so high they become an even bigger burden on an ever dwindling workforce. Baby Boomers can’t float us forever.

…49% of respondents with at least $250,000 in income aren’t saving more because they simply “want some spending money.”

Bling! Bling! I can’t lie. That would probably be me too if it weren’t for TB. I like saving but have the urge to splurge from time to time. That is why having a wife who likes her money to smell like mothballs is really the best retirement decision I could have made. Sorry, Nancy.

…awareness dims, however, with the more money you earn. More people who earn between $50,000 and $100,000 save consistently than people who earn between $200,000 and $250,000 per year…

In short: More money, more problems. Or, perhaps more accurately: More money can make you a big dummy.

Public Service Announcement: Don’t be a dummy. Save your money.

How Nancy Dunnan Changed My Life

TB and I were chatting yesterday and somehow we ended up talking about investing. The crux of the conversation was how so many of our family members view the stock market as a massive Ponzi scheme setup to allow institutions to steal money from small investors. Perhaps this is true, microscopically, yet investing in equities, particularly stock, has been a surefire method of sustained asset growth over the long term. Still, the stock market is viewed by many in our families as something to be feared rather than something to be leveraged.

This fear is real and cannot be summarily dismissed. I wish I could chalk it up to conservatism, yet these same people throw caution to the wind whenever the next get-rich-quick opportunity (aka scheme) comes knocking. Another explanation is complexity. The stock market involves millions of numbers, some with lots of decimal places, others with lots of commas. There are also numerous financial & technical terms resulting in a jargon and shorthand that could scare away just about anyone.

I am sure if you asked the average person to walk you through the process of buying a share of McDonald’s or Starbucks stock, they probably could not tell you. However, they can quickly tell you what comes on a #3 and that they prefer Grande-raspberry-soy-extra-hot-no-whip-mocha lattes. For many people, it is easier to buy from most publicly traded corporations than it is to invest in them.

I could have been one of those people. Statistically, from my upbringing, I probably would have as well if it were not for a book I bought and read one college summer.

Continue reading “How Nancy Dunnan Changed My Life”

Char says I AM affects who You Are

Our good friend, Char Slaughter, who is more like an older sister, had one of her recent blog posts published in an E-zine. Char is a certified professional coach and motivational speaker who shares her gems with the world on her blog, http://www.CoachChar.com/.

The title of the post is “Simple Formula To Manifest Your Intentions.” You will have to read the article to get the lesson firsthand. It is the best 688 words you will probably read today. I found several suggestions in the article I can and will apply to both my professional and personal life. How often do you read a blog which offers that?

Thanks, Char!