Something's More Than Nothing

My math teachers would be so proud!

After completing kindergarten (I never actually completed preschool), first through eighth grade, four years of high school, a BA degree from the UW and then an MPA degree from the University of Illinois that included a few math heavy courses, I have concluded that something is more than nothing.

Not to mention a quarter of a century since I have been in the workforce, since summer of 1993.  I am obviously not a millennial.  I'm part of a Generation called X.  

“But I can barely pay my bills as it is!”

"There's no way that I can save a million bucks while trying to pay for everything now."

“There’s no way I can ever possibly save that much for retirement! Why bother trying?”

If you read pretty much any comment thread or Facebook thread in response to a personal finance article of any kind, you will typically encounter numerous comments like the ones above.

Although the original article may be about any number of typical personal finance topics, the most popular ones being about how much money people are making by writing about money, different ways to hustle for more money, ways to cut back on expenses and my personal favorite, about Paying Yourself First and automating those payments, the responses are often of a similar variety.

There are the braggarts among them who may casually drop that they make a quarter mil per year or that they have a few million in the bank and how should they deploy it?  You will come across a number of comments bashing liberals and an equal amount bashing the President and conservatives.

You'll also find a plethora of comments noting that improving one's personal finances is too difficult and, thus, it is better to do nothing at all.

There are some good reasons for that line of thinking.  First and foremost, many personal finance topics are discussed in terms that are beyond the bounds of what normal people can afford. When you start talking about saving $2 million for retirement, a person earning $40,000 a year is going to immediately feel as though the article is coming from fantasyland. It is just not realistic.

Something else you'll see is that some of the strategies provided for achieving change are not realistic for the lifestyle of the certain readers.  Some of the tips listed may not apply to you or me, but that does not mean that all of them do not.  I'm going to continue paying for our son's college and then our daughter's in several years despite the high costs and to the detriment of our own retirement funds.

We are going to continue purchasing goods and services at a similar level that we do now, but that does not mean that we cannot cut back in other ways.

If, like me, you desire to create more and consume less or to get grittier or more frugal or to always Pay Yourself First, you may agree that it all sounds fine and dandy, but the biggest reason why so many of us do not save for retirement and our rainy day funds is because change is never easy.

As a matter of fact, change is quite hard.  Take it from a middle aged guy who has been forced into unwanted changes at work over the past year and struggled mightily to accept them.  I learned from personal experience that if you are thrust into a new situation outside of your comfort zone without being open to trying new things, it’s probably not going to work out well for you.

I have had to make some painful adjustments, and I still struggle with them occasionally.  But because it is so important to me to support my family, pay for our children's college educations and save for retirement, I sucked it up and did what I had to do.  That is how I go into work every day.

I remember when my father used to urge me to run even though I hated doing it on my own.  I was very resistant to it despite being a better than average track and cross country runner in high school.  When I was in college and started falling out of shape, he would tell me that it was okay even to just run around the block even though I thought that ridiculous.  If I was going to go out running, I wanted to dress in my running gear and do five miles within a half hour.  That's running, I thought, not jogging around the block.

Here I am three decades later with a chronic ankle injury and so far out of shape that it would be a major challenge for me to run around the block.  Thus, I sit in my underwear and write words about it on my laptop instead of doing it.

The point that my father was making was that sitting on your duff and doing nothing will achieve just that: nothing.  Conversely, doing something, even if it is the smallest baby step that you can imagine, could possibly be the spark that starts something bigger and has the chance to grow, whether it is writing a blog post tonight when I'm feeling kind of shitty, but that I will incorporate into a future eBook about, what else?  Money.  Or it could be your first fifty dollar deposit into a new account that will become a future source of retirement income or the down payment on a second home two or three decades from now. 

What you do not want it to become is money that disappears because of the inevitable Next Recession, or just grow it into a few hundred dollars that your heirs receive once you are gone.

Sorry for that morbid thought, but the fact that you can start very small is what I am trying to make.

Setting aside one measly buck per day will add up to $365 at the end of the year or even $366 once every four years.  That may be enough for you to handle a minor emergency, for example the new dryer that my wife ordered today after ours broke down for good yesterday.

Many articles have cited that many Americans cannot even handle an emergency expense of $500 or $1,000.  As the President would Tweet: SAD!  I know many people who make more than those amounts every single day.  They do not work as hard as you may think, but they work smarter.

Better yet, set aside five bucks per day, which may sound easier to challenged savers than $150 per month, and you'll have a cool $1,800 at the end of the year.  Park it in a fund that pays interest or invest it in a dividend paying fund, like the T. Rowe Price Dividend Growth fund that I just parked ten grand in last month, and that five bucks per day may grow into about two G's.

That may be enough to feed your family, make a car repair and pay your utilities for a month or longer, depending on where you live.  It may cover your mortgage and car payment.  Better yet, you should increase the amount that you set aside and grow it even more.

To make it even easier, you can set up an automatic transfer at your bank. Have them transfer $25 a week out of your checking into your savings account – this is something your bank can probably do.

That’s literally the equivalent of a few lunches out, half a tank of gas and less than the price of admission to a movie theater with popcorn and a drink.

Let's say that you save a decent amount and then are able to pay for a new appliance or auto repair without charging the expense on your a credit card. You save another $50 or $100 or more in interest charges depending on how fast you pay off your balance.

The point that I am making is that doing something is better than doing nothing.

I wish that I had read the above sentence and taken it to heart years ago but, as they say, you cannot go back into the past and hindsight is 20/20 and all that...

Doing something is better than doing nothing.

What about retirement savings? Many people feel completely overwhelmed by not being able to afford to save for retirement. They just can’t save nearly enough to have a “good” retirement, so they save nothing.

I should know.  I was one of those people. 

How about saving just 2% of your paycheck?

If you could save just a measly 2% of your income for twenty years at a typical 7% average annual return, at the end of those twenty years, you would have over of a year’s worth of living expenses in the bank.

If you supplement that with Social Security, it should last for several years of supplementing what you have and making your quality of life a whole lot better. There’s a pretty nice quality of life jump when you leap from Social Security benefits to benefits plus 25%.

If you’re saving just 2% for retirement while working a $50,000 a year job, you’re literally saving only $20 a week. It’s just three bucks per day.

Sign up for that, let the money slowly roll in, and you’ll have fifty grand or so saved up after twenty years.

$50,000 at retirement is far better than $0. That amount would allow you to withdraw $2,500 a year or about two hundred per month without breaking a sweat and that money will last and last and last, and an extra $2,000 to $2,500 per year on top of your Social Security is going to give you a nice lifestyle bump for the rest of your life. All because you decided to save three bucks per day for the last twenty years of your working life.

Of course, if you are able to, you should save a lot more than that.  What my current aim is, is to fund my wife's and my own Roth IRAs with $5,500 per year, which is the maximum amount we are allowed to until the number increases to $6,500 per year when you turn the big Five-Oh, as my wife will in spring of 2020 and I will around Thanksgiving of that year.

Per RothIRA.com:

Quick Summary

• You may only contribute to a Roth IRA if you make less than a certain amount of money: $135,000 for single filers and $199,000 for married couples filing jointly. (These figures are up from $133,000 and $196,000 for 2017.)
• The maximum annual direct contribution to a Roth IRA is $5,500 unless you are age 50 or over, in which case it is $6,500.
• You may make a contribution anytime from January 1 to the tax filing deadline (April 18 in 2018).

When you think about it, saving $5,500 per year in your late forties is not very much.  While it is a lot more than the $3 or five bucks per day that I have written about, it still only has the chance to grow to maybe $8,000 or $10,000 over the period of ten or fifteen years if the market continues expanding.  Not enough to live off of, for sure, but a good amount to supplement your pension or 401(k) with.  Not to mention any income that you have for intellectual property, real estate, gigs that you do, royalties that you collect or sales from your e-Commerce site.  

Anyhow, the point of this is that doing something, even if it seems small and inconsequential, is better than doing nothing, especially if you stick with it.

This is my lunch a few times per week.

Something as silly and small as mowing your own lawn, brewing your own coffee in the morning or drinking the swill in your break room rather than purchasing a five dollar drink, changing your own oil if you know how to or packing a PB&J for lunch a few times per week can make a big difference over the months and years.

Starting to invest is just one little step, but one that makes a difference.

The best part? One successful baby step gives you the courage to take another, and that one makes a difference, too.
Doing something is always better than doing nothing.

What are you going to do today?