Sunday, April 9, 2006

Hooper: Saving is about a lot more than the money


Michael Hooper, columnist for the Topeka Capital Journal makes some very good points in Sunday (4/9/06) column. I have included it in its entirerity below:

I was standing in line at a local bank recently when I noticed some certificates of deposit were paying 4.5 percent. I told the person standing behind me, "I am going to save $5,000 and buy a CD."

He said, "I just wish my wife and I could spend less than we earn."

He articulated a huge problem in America. This country is the economic powerhouse of the world, but we have one of the worst savings rates.

Last year, our collective household savings rate was minus 0.2 percent. That compares with 8 percent in Switzerland, 6.7 percent in Japan and 10 percent in Sweden, according to Patrick Woodall, senior researcher with the Consumer Federation of America.

When I give talks in schools, students often ask me, "How much do you earn?"

My response is, "It's not how much you earn, it's how much you save and what you do with it that counts. I've met couples who earn $65,000 a year but can't save a dime."

In 1989-90, when I set a goal of saving money to travel the world, I paid off $2,000 in credit card debt and saved $5,000 in 14 months on a $16,000 annual income. At the time I was single and had a cat to take care of.

I realized the credit card companies were charging me 20 percent interest -- costing me $400 per year.

Paying the minimum wasn't getting me anywhere. I paid $200 per month until the credit cards were paid off and never let myself get into that situation again. Now, I pay off the balance when the credit card bill comes.

You can achieve your financial dream if you contemplate what you really want, decide what really matters to you, write down a feasible plan to get there and work the plan daily. Meditate on and internalize your goal, and you will walk in the direction of your dreams.

Live below your income, pay off your credit cards and save every month. Buy used automobiles, take care of them and drive them into the ground.

Buy clothing on the cheap at second-hand stores. Rarely eat out. You save $3 to $5 for each meal you eat at home or bring with you to work.

I recently talked with Tawra Kellam, a frugal Wichita mother who paid off $20,000 in debt from moving and medical expenses in five years on an income of $22,000 a year.

Kellam and her husband and three children learned to live on the cheap. Reaching their goal was a daily struggle, but their kids didn't suffer.

She said parents often spend $100 to have birthday parties at bowling alleys or pizza places. She said she had a birthday party for her son for $25 by creating a treasure hunt in her backyard. She cut her food budget by hundreds of dollars by eliminating pop and others drinks. Her kids drink water when they are dehydrated.

When I took my family to Disney World a few years ago, the place was crowded, and we could only manage to get in 10 rides in 11 hours. I figured I paid $35 per ride for my family of four -- and each ride lasted about 3 minutes. The irony was that my kids' favorite activity was going to Tom Sawyer island and exploring in the trees -- something we do for free behind the governor's mansion in Topeka.

I believe the best things in life are free. A walk through the park is good for you. You'll save money and probably live better, too.



Please feel free on any of my posts to share your thoughts. How have they helped you? Any thing you would like to add? This blog, isn't just me poting, but the entire readership sharing their ideas.

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