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It All Starts With Saving

February 3, 2015

Article by NuView president, Glen Mather:

We generally become the summation of our habits, the outgrowth of our discipline, and the energy of our ambitions.

Ever hear anyone say, when challenged about their attitudes and habits, “I’m sorry, but that’s just the way I am?” I’m certain that they don’t mean to convey that they are unwilling to evolve or change, even in a positive way, but those statements reinforce the sense that they feel content with their current situation no matter how negative it may be.

When is it too late? Only when you can no longer effect change. As long as a conscious effort can be exerted, you still have time.

Last month, I read a wonderful book called Cash Flow Diary by J Massey. When I met Massey, I saw him speak in front of hundreds of investors, and later I invited him to speak at our annual Planning for Prosperity conference in Orlando. I had a very unusual response to his book on real estate investing – I started flossing regularly.

I was struck by Massey’s assertion that he had come to the realization that there were a few tasks that he routinely did every day, and if he had to perform them, why not do each well? His thought was, “I’m already at the sink, just brushed my teeth – flossing will only take about 2 more minutes.” He then purposed to make it a habit, and after 30 days flossing became routine, so much so that he referenced it in his book.

If Massey could do it, so could I, and it’s true… I just returned from my annual dental check-up and received high marks from my hygienist that my gums were the best ever. Who knew that it would be so easy to establish such a sensible habit?

Most of our negative habits are formed, not by thinking, but by the absence of thought. I have little doubt that most people’s attitude about money is formed the same way. Do you see the extra dollar in your pocket as a measurement of what you can consume, or how much more you can invest?

My friend Greg tells me that he drives an older model truck, despite his ability to afford something new, because for the price of a $40,000 truck he can buy a run-down property that he can rehab and rent for $600 per month. Greg, instead of purchasing an asset that quickly depreciates, is purchasing a type of an annuity with an income stream of about $5,000 per year after expenses, and Greg gets a bigger kick out of his balance sheet than what is parked in his garage.

Unfortunately, most Americans do not share Greg’s values. According to a recent survey by the Federal Reserve, about 1/3 of non-retired US Households have no retirement savings or pension. Among those aged 55-64, more than half said they expect to work “as long as possible” rather than work full time to a set date and stop working. (Federal Reserve Report on the Economic Well-Being of US Households, Aug 7, 2014)

Why is such a large portion of our citizenry unable to prepare for retirement? For a small number of households, it may be due to dire economic hardship. However, for most the habit of saving was probably never established in the first place.

I can see it with our clients – there are those who have been faithful savers as well as those who waited way too long to start with retirement age rapidly approaching.

Just think of savings like flossing. It is far more valuable if you start young, yet any day you start will produce results immediately and will accrue long-term benefits once it is established as a habit. So rather than setting a large savings objective, just start with a percentage of your earnings, and as your earnings improve just increase the percentage. Then teach your children and grandchildren to do the same.  Better yet, when those savings are in a self-directed retirement plan you avoid the tax bite – and that’s an idea to sink your teeth into.