Lets Talk Savings


Today kicks off America Saves Week, which is sponsored by America Saves.  From February 22nd until the 27th different topics will be discussed to promote savings as a goal through automation.  Below is a list of the savings strategies that will be promoted each day.

Monday February 22nd: Save Automatically
Tuesday February 23rd: Assess Your Savings
Wednesday February 24th: Save for Retirement
Thursday February 25th: Save for Emergencies
Friday February 26th: Saving at Tax Time
Saturday February 27th: Paying Off High Interest Debt

You can follow the conversation on Facebook or Twitter by looking up America Saves @AmericaSaves.  The official hashtag to follow is #ASW2016.  One of the cool things that is happening is the opportunity to win $500 toward your savings goal.  To enter just tell @AmericaSaves what you are saving for using a photo and #imsavingfor, more info can be found here http://ow.ly/Ywl6K .

                                                                  Things to Consider about Savings

Do You Have Enough Saved

Determine how much is enough. Make a plan to get more saved.  Then stick to that plan.

Finding Extra Money

Reduce  your current expenses.  Lots of people typically have at least one thing they are paying for and not using. You can also sale items no longer needed.  If possible look for additional income sources as well.

Make The Sacrifice

What can you go without?  It helps to figure out what is worth making a sacrifice for.  Once you have something worthy of saving for it helps you achieve your goal.

What Are You Saving For?

Consider all the areas where you need to be saving.  Some common things people save for include: debt, healthcare, retirement, education, and emergency fund.

Don’t Live as A Miser

Be frugal, but don’t overdo it.  If you overdo your savings you may deprive yourself of many things which you enjoy.  Depending on your financial situation, it could be appropriate to take an aggressive approach toward saving.  Ideally you want to find balance between your savings and your lifestyle.

Make Automation an Everyday Thing

If you save automatically you won't miss it.  The balance will continue to increase, and you won't feel the pressure of trying to save on a regular basis.  Automation can be done with a dollar amount or a percentage of earnings.  A benefit of automation is that it helps to ensure you will have funds available during an emergency.

It All Adds Up

The amount does not matter, so much as the habit of saving matters.  Small amounts will grow over time.  A good place to start is with your spare change.  It might surprise you just how much your spare change adds up to.  Use the momentum you get from saving small amounts to increase your savings rate.

Not Sure How Much to Save

This is common for a lot of people.  Ideally you should save as much as possible.  Consider how you live now and how you want to live in the future.  Try to consider how the amounts needed will adjust based on different life stages.It is a good idea to at least have enough to cover a few months of expenses in case you get in a bind.

Consider Using a Savings Chart

A savings chart can be a great idea, because it provides a specific dollar amount to save over time.  By using a savings chart it is easy to track the progress you make.  It gives you an expected outcome at the end of some period of time, like over the course of a year.  It is also easy to adjust the amount being saved depending on how much you can personally allocate toward your savings goals.

I watched an interesting movie the other day, titled The Big Short.  The movie was about the Housing Bubble that existed within the U.S. in the mid 2000s.  It takes a look at the landscape that was created by issuing sub prime loans, creating crafty financial products composed of underlying mortgage products, and the unraveling of it all.

The movie paints a vivid picture that shows just how bad things had to be for something no one thought was possible to happen, the housing market collapse.  People got lots of loans they could not afford, sometimes with nothing down.  Which means people bought more house than they could afford, then they got underwater so the house was worth less than they owed.  Lots of people ended up losing their homes.

Banks also created fancy investment products like Collateralized Mortgage Obligations (CMO’s).  A CMO is “A type of mortgage-backed security in which principal repayments are organized according to their maturities and into different classes based on risk. … Income received from the mortgages is passed to investors based on a predetermined set of rules, and investors receive money based on the specific slice of mortgages invested in (called a tranche)”.

The movie shows that after all the best mortgages started to dwindle in number, that subprime mortgages began to be included.  The real issue that came from having lower quality mortgages included in these new investments is that they were still being highly rated.  Investors look at ratings to make sound decisions, so if lots of those ratings are off investors are picking investments based off of bad information.

6 Key Takeaways from the Movie

1. No such thing as a safe investment.
2. Don’t go along with popular investing.
3. If an investment seems off it could be. 
4. If is sounds to complicated to invest in it is. 
5. People don't always learn from past mistakes. 
6. It is of vital importance to do your own research.  

7 Things to Consider with Your Portfolio

1. Investments can go down to zero. 
2. Look at what investments are composed of.
3. Do you know the top investments you have?
4 Is there overlap in your various investment accounts with the same investments?
5. Do you have too much exposure somewhere?
6. When you bet the whole farm you win big or lose big.
7. Too much company stock can be a bad thing, because if your company does bad so will your    investment. 

CMO Definition- Investopedia  http://www.investopedia.com/terms/c/cmo.asp#ixzz3zK2htzmj