According to a recent release by the U.S. Bureau of Economic Analysis, the personal savings rate in the country was 4.4%. Not bad, considering that before the current economic crisis, the savings rate was negative.
Where do you think most people focus their attention? The 95%? No, it’s the 5%. Think about all of the news articles, stories, shows, etc. that discuss investments. Stocks versus bonds? How much in each? Everyone is trying to find that ‘perfect’ investment.
Of that big slice of money, up to 40% can be taken by taxes – federal, state, real estate, etc. Up to another 40% may be taken by debt payments – mortgage, car loans, credit cards, etc.
But how much time do you really spend thinking about those things? Probably not much. Instead, those are just things we do each day. Generally, we think about tax exemptions only as often as we change jobs. And then hope we get a refund at tax time.
Or we shop of the lowest rate on a car loan or mortgage. We think about this each time we make a payment, but otherwise we don’t give it much thought.
Why is it that we spend so much time figuring out how to invest that last 5% but essentially ignore the other 95%? Don’t you think that’s backwards?
And notice here that I only mentioned debt payments and taxes. I did not say anything about affecting your lifestyle.
If you can save money by being more efficient and effective when it comes to your taxes and debt, that’s as close to a ‘sure thing’ in personal finance as you can get.
How’s that for your ‘perfect’ investment. When was the last time you thought about your 95%?
Answer to last week’s trivia question: D – 39%
This week’s trivia question: Given the current push for health care reform, what percentage of Medicaid enrollees account for 50% of the program expenses? Is it?
A – 4%
B – 25%
C – 50%
D – 72%
