Posts Tagged ‘saving’
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4 January 2009
Saving: The Best Kind Of Investing
Benjamin Franklin once famously said “A penny saved is a penny earned.” But Ben was seriously undervaluing the value of savings. A penny saved is usually worth considerably more than a penny earned, and this is something you should always consider in your daily life. You may wonder how a penny saved can be more valuable than a penny earned, but it’s very simple if you think about it. Imagine for a moment that you purchase an $80 DVD player. In this theoretical situation, you make $10 per hour and work an eight hour day, earning $80. The difference between the $80 you spent on the DVD player and the $80 you made at work is: you have to pay taxes on the $80 from work. So, even though you’ve earned $80 and spent $80, you’re actually behind where you started.
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21 December 2008
Getting Debt Under Control
As individuals, we often represent a microcosm of the country. In 2006, the US savings rate went negative, and it remained anemic for quite a while thereafter. At the time there was some beard-wringing; but ultimately some argued that this was nothing to worry about, because our stocks and houses were worth so much more. The obvious problem with that logic has become clear: it doesn’t take into account gains or declines in asset value. So when you have a sharp and sudden decrease in those asset prices, your negative savings rate is even worse than it would appear at face value.
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