Your Investments: I’ll take the shoes in both black and red
If you budget and have the money for certain ones, then go ahead and treat yourself. But if you can’t afford to take the family to Italy for a week of skiing, then go to the Hermon for a day or two.
By AARON KATSMANSHOULD YOU buy it?(photo credit: REUTERS)
Whoever said that money can’t buy happiness simply didn’t know where to go shopping” – Gertrude SteinBefore I get to the topic at hand, I wanted to provide an update about an article that I wrote two months ago.“Last week as I was driving home on the Begin highway after having to drive my girls to their high school because they were late, I thought that I noticed a billboard about getting out of debt. My eyesight isn’t what it used to be and at full speed, I wasn’t able to make out what it said. Well a few days ago, again after driving my girls to school (notice a pattern?) I was once again on Begin and was stuck in traffic. Lucky for me, I was stuck in traffic directly in front of that same billboard. After reading it and then reading it again because maybe I missed something, my blood pressure shot up, and I was in complete disbelief. The billboard was from a leading Israeli credit card company – I am actually a holder of their card – and it said, ‘Change your minus into a plus by taking our loan!’”Well for all of you who have little faith in Israeli regulatory institutions, a certain amount of justice was served. A few days ago, Isracard was hit with a 675,000 NIS fine for the misleading advertisement. Don’t be surprised if they increase your charges to pay for the fine!Pass the creamSo last week I was sitting with a young couple that had a decent net worth, but were in constant debt. When we started analyzing their expenses it became quite clear that there was zero discipline in their budget. If they wanted to buy something, they went ahead and bought it. When I pressed them about the fact that they didn’t have the salaries to justify their standard of living, they told me not to be worried, and that they are confident everything will work out.This is not a column railing against millennials. I know plenty of older people who are also guilty of spending more than they earn. But this meeting confirms the millennial financial stereotype. About a year ago, the investment firm Charles Schwab commissioned a survey of 1,000 people, to learn more about their financial habits. Maryalene LaPonsie of US News and World Report wrote of the poll that, “81% of millennial respondents were somewhat or very confident in their ability to meet financial goals. That compares to 65% of Gen X and 54% of baby boomer respondents, respectively. However, data suggests that millennials are not spending money on items that further traditional long-term goals like retirement or homeownership. For instance, the Charles Schwab survey revealed that 60% of millennials buy coffee that costs more than $4 per cup, 69% buy clothes they don’t necessarily need and 76% will spend money on the latest electronic gadget.”Why is there a need to buy clothes that you don’t need, especially if you don’t have the money to pay for them? I would say that these numbers aren’t specific to the US. Here in Israel, I can’t tell you how many people I know – who get free coffee at their work – yet will line up to pay 15 NIS for a cup of coffee at a chain. One of those a day comes out to just about 4,000 NIS a year – for coffee! Imagine if that money could be put into savings. Do you realize that 4,000 NIS saved annually for 35 years at a 5% interest rate will grow to more than 370,000 NIS?!AdvertisementIt’s time to be smart with money and start thinking ahead. If you start drinking coffee at work and that will turn into 370,000 NIS, imagine what would happen if you actually start focusing on saving! Try and put away 10% from your salary into your savings, and maybe just buy one pair of shoes, or do without the latest “i” whatever gadget. Just by taking these small steps you can build a very nice nest-egg.Get realI am not saying that you should go without luxuries. If you budget and have the money for certain ones, then go ahead and treat yourself. But if you can’t afford to take the family to Italy for a week of skiing, then go to the Hermon for a day or two.A secure retirement is a lot more beneficial than a closet full of out of date electrical gadgets and high heels that you just had to buy 20 years earlier.The information contained in this article reflects the opinion of the author and not necessarily the opinion of Portfolio Resources Group Inc or its affiliates.Aaron Katsman is the author of Retirement GPS: How to Navigate Your Way to A Secure Financial Future with Global Investing. www.gpsinvestor.com; aaron@lighthousecapital.co.il.
