We wandered around the Coachella Valley for several days this week. If you’ve never been to the area you aren’t missing out. It’s a giant desert valley centered about 120 miles due east of Los Angeles.
Some people go there to golf. Others go to retire…and die. We, on the other hand, were there strictly for business and we couldn’t wait to leave the moment we arrived. It was hot, and dry.
So we conducted ourselves the only way we know how. Serving our client with interest, industry, and integrity. Then we made a beeline west the moment it was tolerable to do so.
Making money was the purpose of the business trip. Saving some of it is the objective. Naturally, making money is easier than saving money. But that doesn’t mean one shouldn’t pursue saving money any more than one shouldn’t pursue healthy gums.
While saving money is simple…you spend less than you make. In practice, it’s not easy. Particularly with young kids. They burn through shoes faster than a dipsomaniac burns through a bottle of strawberry Boone’s Farm. Not that we mind…other than to make the point that there’s always an unexpected expense that cuts into monthly savings.
Still, saving money is a goal worth striving for. Not only to have an emergency stash, when the inevitable emergency comes. But also as a foundation for building and accumulating real wealth.
Why You Need Emergency Savings
The simple fact is, accumulating wealth is impossible without first saving money. In other words, saving money comes before wealth and abundance. Unfortunately, many Americans are not saving any money. Their paycheck arrives every two weeks and it’s all gone before the next one arrives.
“According to a survey of 1,000 adults released by Bankrate.com on Tuesday,” reported MarketWatch, “nearly one in three (29 percent) American adults (that’s roughly 70 million) have no emergency savings at all — the highest percentage since Bankrate began doing this survey five years ago. What’s more, only 22 percent of Americans have at least six months of emergency savings (that’s what advisers recommend) — the lowest level since Bankrate began doing the survey.
“These findings mirror others — all of which paint an abysmal picture of Americans’ ability to withstand an emergency. For example, a survey released in March by national nonprofit NeighborWorks America also found that roughly one third (34 percent) of Americans don’t have emergency savings.
“Greg McBride, the chief financial analyst for Bankrate.com, says these low savings reflect that households haven’t seen their incomes ramp up and thus ‘household budgets are tight.’ Plus, he adds ‘people don’t pay themselves first — they wait until the end of the month to save what’s left over and then nothing is left over.’
“The problem with this lack of savings is that emergencies can and do happen, and when they do, you may be forced into an expensive solution like credit cards or personal loans — and in extreme cases having to declare bankruptcy. Indeed, half of Americans had experienced an unforeseen expense in the past year, according to a 2014 survey by American Express; of those, 44 percent had a health care-related unforeseen expense and 46 percent had one related to their car — both of which tend to be things you can’t avoid paying.”
Foundation for Massive Wealth
The take away, as far as we can tell, is to start building your emergency fund immediately. If you already have one, continue to add to it. Like exercise, the patience, prudence, and discipline of saving require practice. Similarly, it’ easier to continue saving once you’ve already started.
Plus you never know what tomorrow may bring. The economy’s been in a slow motion recovery for the last six years. At some point, most likely before another six years passes, the recovery will go into reverse. What then?
When the economy slips, the debts and investments made with expectation of higher growth become impossible to pay. If this coincides with rising interest rates, things can get ugly real quick. Unemployment rises. Bankruptcies stack up.
No one really knows what direction things will go in the immediate future. There could be another boost to GDP. Or the economy could slog along for a while longer. It is also very possible the economy could fall into recession.
The best time to stock up on fire wood is before the temperatures drop. Not after. In fact, we can’t think of a better time to stock pile some cash than today. Both in your bank account…and in your mattress. You’ll sleep well having an emergency stash under your pillow. You’ll also lay the foundation for massive wealth, by having cash available to scoop up the big discounts when everyone else declares bankruptcy.
Sincerely,
MN Gordon
for Economic Prism
