Savers Win, Spendthrifts Get to Work Until They Die

During the last economic downturn the big news was that folks were paying off their debt and saving more money.

piggy bank broke?

Seems that trend has petered out now that we’ve “recovered”. Reports for 2013 show we saved only 4.5% of gross income – no wonder most people don’t even have a $1,000 cushion in their bank account!

And, typically, people are now taking their retirement funds and putting it back in the stock market – now that it’s reaching new highs. While the broad equity market benchmarks typically show returns of 8% – 9% over 10 and 20 year terms, the latest QAIB (Quantitative Analysis of Investor Behavior from Dalbar) reports the average investor has made 2.6% over the last 10 years, 2.5% for the last 20 years.

So, You Probably Don’t Want to be Average…

What’s the problem? Average undisciplined investors go “all-in” as the prices peak and then sell when prices sink to their low point. They engage in emotional decision making instead of following a plan – especially one that accommodates volatility.

These are just two common behaviors that lead to economic failure for the average working class (middle class) families. And so now, many baby-boomers, who assumed economic prosperity and a secure retirement was their birthright, are on the path to poverty in old-age. That assumes they make it into old-age since access to – and the ability to pay for – good medical care impacts longevity.

What do successful economic winners do that everyone else doesn’t?

>> First, they spend less than they make and save the difference.
Does that mean you cut the TV cord and wait to see the hot shows until they get to DVD? Maybe.

We’ve covered this topic from the cutting expenses aspect recently: the whole month of February was devoted to showing folks how to free up money for savings (look for a link below this post). Plus, there are many blogs and magazines that focus on frugality. Find one or two to follow for more ideas and support reducing expenses – here’s a list to get you started:

Mr.MoneyMustache     Festival of Frugality     The Frugal Duchess      Savvy Frugality     Moolanomy     

The flip-side is increasing your income. Passive income is nice but, at least initially, additional income is usually earned. Instead of relaxing on the couch watching those TV shows, you may need to be at a second job or starting a sideline business.

Make a list of your skills and put them to work earning extra money. Can you turn a screw, rewire a lamp, alter clothing or clean a pool? If you’ve already got the tools and the know-how, place a small ad on Craigslist or the local classifieds and start adding to your income. Do you make jewelry or artwork? Reach customers worldwide by selling via sites like Etsy.

In addition to the money, you’ll learn some business skills as you organize your venture, market your services, file the paperwork and pay taxes as a small business owner instead of an employee. Fact is, you’re much more likely to join the ranks of the wealthy as a business owner than an employee. And, if you need to continue to generate income after you retire, these skills will be even more valuable.

>> Next, you’ll learn to be a rational investor with the money you save.
Instead of following the impulsive herd, wealthy savers make an investment plan and stick with it.

Simple? Yes. Even easy but only if you make a commitment to your economic freedom. That’s where we hope to help readers the most. As the header says, is here to be your Financial Life Coach.

Many middle-aged people have given up their hopes of being economically independent and look to the government, their family and friends to support them as they age out of the workforce. Disability claims have skyrocketed as laid off workers can’t find jobs they’re capable of performing. I help readers avoid this fate by supporting them as they discover and practice wealthy habits.

Happy Piggy Bank...

 So, what ONE action can you take today to increase your savings?

For me, I’m a bit of a book collector – it’s so easy now that they all fit on my ipad – so, I am going to go and figure out how to access my local library’s online offerings instead of hoping on Amazon next time I “need” a book. Plus, I think I’m also going to start spending some time in the library. It’s quiet and my dog won’t interrupt me 5 times while I’m writing a post!

Add your commitment, challenge or question below and let us support you on a journey to financial freedom!

Live Long and Prosper – Leah, the

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