Harvest Time

We spent the weekend in our yard preparing for winter. Picking up leaves, dumping flower pots and giving the grass one last mowing...mostly to pick up any stray leaves rather than for any grass cutting...so that everything will be ready for next spring. We also planted some winter landscape flowers to brighten the long winter days ahead. And besides all that, who likes to make a snowman in the winter and have a bunch of dead leaves hanging all over him because the leaves of fall haven’t been removed yet?

The cycles of life are never ending and constantly moving around us. God tells us in Genesis 8:22 that:

“While the earth remains, Seedtime and harvest, and cold and heat, and summer and winter, and day and night shall not cease."

Yet it is amazing how few people really plan for the seasonal changes in life. According to the Employee Benefits Research Institute the average American saves, on a daily average, only $0.10 between ages 18 and 35. Between ages 36 and 44 the saving rate increases to $2.30 per day. Then through age 54 the savings rate average is $3.00 per day but it peaks between ages 55 and 64 at $4.10 per day. This provides the average American a savings of about $69,000.00 at age 64.

George Clason in his book The Richest Man in Babylon wrote nearly 100 years ago that everybody should save 10% of what they make because this savings is the seed which will produce for you when you can no longer produce for yourself. In fact, it will produce right along with you as long as you are producing, but it will out produce you because it will continue to produce long after you can no longer produce.

The question becomes where is the best place to put this 10% savings? Ideally it should be put in a place that is providing a secure, safe, liquid, beneficial, tax free environment with little or no risk, opportunity cost, or penalties for accessing it. The sad news is that there are few places left in our economy which allow all of these factors to be lined up in your favor in this manner. That is one of the major reasons that so few people save...because they are not rewarded for it. Yet without savings the capital necessary for an economy will decline and when capital declines economies collapse. This is what caused the Soviet economy to collapse, and it is what causes all economies to collapse...lack of capital.

Consider the fact that, “Prior to the bursting of the credit bubble, the public was shocked to learn that our biggest investment banks where levered 30-to-1. When asset values fell, those banks were quickly wiped out. But now the Fed (Federal Reserve System) is holding many of the same types of assets and is levered 51-to-1! If the value of their portfolio were to fall by just 2%, the Fed itself would be wiped out.” [i]

Today there are few options remaining where you can securely and safely receive a guarantee when you deposit your savings. This is because of things like excessive taxation, poor liquidity, high risk, opportunity costs, penalties, fees and service charges. So if you’re unawares of what options you have that do offer security, safety and guarantees, then you are less prepared for the seasonal changes that are coming to your way much sooner than you think. A little preparation now will stave off a lot of disappointment in your future. Besides do you really want a bunch of dead leaves hanging all over your snowman (retirement?) It’s time to spend a weekend or two in your financial yard so that your spring will be a productive one for you. Call me. I can help you. And Happy Thanksgiving to you and yours!

By Tomas McFie
[i] Forbes, The Next Financial Crisis will Be Hellish, and it’s on its way, Addison Wiggin November, 2011