Eat Your Spinach

Chapter 4: Act or Die: Save and Invest Now

The chapter title is a little dire. But fear or despair caused by financial
uncertainty causes stress, and stress is an enemy of wellness, so perhaps it is not as far fetched as it at first seems. In any event, the “save and invest now” maxim has not been heeded by many contemporary Americans. If you act on it, you will set yourself apart from the herd, and be happier. Here is how.

Do a Budget

The first step toward building a long-term savings and investing program is to prepare a budget that spells out how you spend your money. Work out a budget and stick to it so you can pay your bills and save for your long-term financial needs.

First, write down all your expenses such as rent or mortgage payment, utilities, insurance, car payment, car expenses, food, clothes, entertainment, vacations, presents, furnishings, medical, taxes and more. Budgets should be detailed up to the point at which the detail keeps you from actually using one. Then prioritize the items putting the most important expenses first. Be sure to include savings at the top of the list of expenses. Save at least ten percent of your total before tax income. If you can save more, do so. If you can't save ten percent, then save as much as you can, but make sure you are stretching to do it.

If your income does not cover your expenses, reduce expenses that are not absolutely necessary. You can cut back on gifts, vacations, entertainment, furnishings and purchases of more "stuff". Most of us already have more things than any realistic assessment of true need would dictate. Sometimes it helps to inventory the things you have and consider how you could get more pleasure or utility out of each item. For example, most of us spend more on cars than we actually need to. Can you take public transportation to work and use part of the saved gas and wear and tear on your car for a weekend trip? Or how about food? Prepared food (especially “fast food”) costs far more per unit of nutrition than basic ingredients that you prepare yourself. Cooking can be fun and is a good way to attract and impress friends, and is likely to be better for you than restaurant or ‘carry out” food. If you are in a position to buy a house, consider making a down payment on something less expensive than the banker says you can afford, and put or keep this “extra” money in savings or to invest. Although houses can be a very good investment, they are usually too large a portion of your portfolio for good diversification, and the bigger they are the more they preclude other investments.

As you financial situation changes, adjust your budget accordingly. If you are fortunate and earn more money, increase your savings rather than spending.

More in this chapter:

Save Before You Spend

Save As Much As You Can

Start Young

Set Up Retirement Accounts and Save Automatically

Where to Buy

You can order this book in hardcover or paperback from XLibris.