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Marriage Partnership, Summer 2000
Super Savers
Do you associate saving with deprivation? Relax—these simple steps
to socking away money will reap lifelong benefits
by Suzanne Woods Fisher
I've never made much money. I'm college
educated, a whiz at Trivial Pursuit—but the skills, talents and passions
I've been blessed with aren't ones that generate much cash. And
yet, I'll be able to come up with the funds to put our four children
through the college of their choice. How? Simple. Saving money and letting
it compound over time really works.
When my children were toddlers, I scraped together $500 per child and purchased
some stock. It was such a small amount that my husband and I ignored it and
just let it grow. And the Lord blessed that decision in his abundance. What
delights me even more is that God allowed me to contribute so fully, while
staying at home, raising children and writing.
Why save? There are many good reasons: the first of which is that we are
asked to be good stewards of what God has given us.
While Christ was clear that our trust and sense of security shouldn't
lie in our riches but in God, it is also a biblical principle to work diligently
and plan for the future. Consider the work ethics of ants, advises wise old
Solomon (Proverbs 6:6). Ants never give up. They plan for winter all summer.
They plan for summer all winter. And while they gather food for winter, they
gather all they can.
Another reason to save is that our life expectancy is getting longer. Your
retirement may last 20-30 years. According to the Johns Hopkins School of
Hygiene and Public Health, the average American life expectancy hit an all-time
high in 1999 of 76.7 years. The World Health Organization (World Health
Report 1999) states American women live, on average, seven years longer
than American men and have higher medical expenses than men. Currently, men
in the U.S. average 73 years, women 80 years.
Then there's the peace of mind that comes with savings. With money put
aside for a rainy day, I don't panic when the roof starts leaking or
the car sounds funny.
The Pay-off
My husband and I have always been conservative spenders—not typical of our
"work now, spend now" peers. We bought an inexpensive fixer-upper house in
our area, remodeled it and then paid it off within eight years—at the point
in which interest benefits on taxes begin to diminish. (Recently, I came
across the meaning behind the word mortgage. It has Latin roots that
are chilling: Mortuus means death, gage mans grip. Mortgage
means death grip. Hmmm.)
We also started deferring income early in our twenties through 401(k)s and
IRAs. At times I wondered "When is this going to pay off?" especially as
I observed friends' razzmatazz accumulations. Within about ten years,
I could see aggressive saving had been worth every unspent penny. We've
never really missed the money we deferred, we're prepared for college
and emergencies, we have the option of an early retirement or a career change
and we've created a built-in self-discipline for ourselves. And we've
modeled fiscal responsibility to our children.
Of course, you don't have to be as conservative as we've been to
reap lifetime benefits from saving. Develop these habits while you're
young—with small amounts of money that you probably won't even miss—and
I guarantee that you will appreciate it one day.
Painless Savings Strategies
1. Set Goals. It helps to know what you hope to accomplish, so set
long- and short-term goals. Do you want to buy a house? Or retire at age
55? Determine how much you need to save each month toward your goals.
Like many couples, Jeff and Gail DeBell of Woodway, Washington, disagreed
about how to handle money. "Our goals weren't the same," says Gail.
"I was more interested in enjoying our money; Jeff grew up much more frugally
and was programmed to save. When we were first married we had friends who
spent huge amounts of money on entertainment and live-for-the-moment kinds
of things like cars or trips. Now a lot of them are looking at retirement
in a few years with no savings."
Now that Jeff and Gail have been married 20 years, she has a better appreciation
for Jeff's vision. "He had a dream to pay off the house. He wanted to
be debt-free when we got to the college tuition phase of our lives and to
move up retirement, which come very close together," Gail says. "I have to
admit it is pretty nice to have that mortgage money freed up every month.
Jeff was the driving force in good, wise decisions along the way."
Even if you're not sure what you'll do during retirement or what
it will cost, you can still set a goal. For people, in their twenties or
thirties, a retirement savings goal might just be saving as much as possible.
Carol Vannerson of Olympia, Washington, says, "After we had been married
about a year, I remember asking Stu, 'What exactly are we saving
for?' and he answered 'Retirement.' Then I said,
'Well, I can't wait to retire because boy, are we ever going to
be rich!' Ten years later it was great to know that we had a big buffer
there."
2. Take Full Advantage of Compounding. Most people don't realize
the power of compounding—but King Solomon did. "He who gathers money little
by little makes it grow" (Prov. 13:12).
"Over a 20-year period the benefits can be incredible," says financial consultant
Kris Fry. "Small amounts like an extra 25 dollars a week, given 30 or 40
years to compound, really add up."
For example: If you start at age 25 by investing $2,000 per year for 10 years
(total investment of $20,000) at an 8 percent average rate of return, by
age 65, you have $291,500.
Starting at age 35—investing $2,000 per year for 20 years (total investment
of $40,000) at an 8 percent rate of return, by age 65, you'll have $197,500.
Start early and let money and time work for you. "The easiest way is to pay
yourself first and have the money disappear from your checking account before
you can spend it," advises Kris. "You will be truly amazed at how fast it
adds up and starts to build.
"I firmly believe that most of us can find $100 a month to put away for our
golden years—just make it happen," advises Kris. "I cannot over-emphasize
the benefits of starting to save at an early age, as early as possible. The
best time to plant a tree was 20 years ago—the second best time is today."
3. Take 10 Percent off the Top. Kris recommends adding to your savings
amount as income increases. "An excellent way to invest is to take 10 percent
of your take-home right off the top of your account so that you never see
it and then as your income increases, so does your investment."
If you invest in the stock market with your savings, a benefit of the "10
percent off the top" strategy is that you dollar-cost-average into it.
Since the market can go up and down throughout the year, when you
dollar-cost-average, you end up buying more shares at a lower price and fewer
shares at a higher price. "You are not trying to time the market—no one
can," she warns.
Kris is not a believer in budgets. "They never work," she says. "Instead
take 10 percent for tithing, take 10 percent for saving and use the remaining
80 percent."
4. Max-It. One way to boost the "save as much as you can" approach
is to maximize automatic saving through payroll deductions—including your
401(k). Most are better off with forced savings, because it's out of
your paycheck before you see it. Taxes may be a fact of life but your part
could be offset or deferred through 401(k)s, 403(b)s, IRAs, etc.
5. Keep Hands Off Savings. Don't make the mistake of borrowing
against your retirement money, or your money stops working for you. Studies
show that people often borrow from their 401(k) when they're most vulnerable
in their careers—in their late 40s or 50s. If you don't pay that loan
back, it's considered a distribution, and that means you pay income
and penalties.
The Tortoise and The Hare
"Some problems today stem from the Silicon Valley mentality—that anyone
and everyone else is out there getting rich so I can too," says Kris. "This
get-rich-today mentality is causing people to do stupid things: borrow and
then trade on margin, use the Internet to trade so often that all their gains
get eaten up in transaction fees and buy on a whim without doing the necessary
legwork to make a good, solid investment. A well-managed, no-load mutual
fund is [still] most people's best bet. By doing the monthly investing,
you dollar-cost-average into your fund and watch your money grow."
Aggressive saving is more of a lifestyle than anything else. "Like a lot
of other things, it just becomes a habit," says Carol, "and like all good
habits the sooner you start the easier it becomes and the later you start
the harder the bad habits are to break."
The real way to build wealth is through consistency, patience, and sticking
to a savings and investment philosophy that you believe in.
Suzanne Woods Fisher is a freelance writer who has published over 40 magazine
articles. She lives in Hong Kong with her husband and four children.
Copyright © 2000 by the author or Christianity Today International/Marriage
Partnership magazine. Click here
for reprint information on Marriage Partnership.
Summer 2000, Vol. 17, No. 2, Page 26
Marriage Partnership
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