The Saving Series - My Opinions

As I established in my last post in order to have a Savings we need to start Saving.  Living in a consumerist dominated society as we do this makes it difficult to look to the future when the newest pair of Tod's are available @ Holt's or the desire to grow your Club Monaco scarf collection intensifies as more and more colours hit the shelves but the recession we are currently experiencing serves as a reminder that there is no time to save like the present. 

In the coming weeks, I will attempt to communicate what I believe are effective measures to take when saving for the future. Topics will include everything from How to start saving? to simplistically describing what a T-bill is or the difference between an TFSA and an RRSP. 

By no means, am I am an expert in this space and never will I claim to be so but I believe that our society is currently suffering from financial illiteracy. I believe it is important to make society aware of the options that are available to them in laymen's terms. Saving is not only for the wealthy is what we need to understand. 

I hope what I write will be of some use to those readers who's financial understanding is not as clear as they would like it to be.  As I write  these posts in the coming weeks please feel free to leave comments and questions. It is my hope that you will gain a better understanding of what you need to secure a prosperous future.

Saving vs. Savings...The Future of the Gen Y

Saving vs. Savings? Is there actually a difference? Are they not the same? Well as a matter of fact, No, they are not one and the same. Wikipedia differentiates the two defining Saving "as the act of putting money away for future use" and Savings as the state money is in once saved. It is obvious that you cannot have one without the other. That being said they are direct complements of one another. 

The bigger question is why do we need to save? What do I use my savings for?

Now, I know for those of us in the Gen Y category, we particularly don't care for saving or savings. That's why we have hard working,frugal boomer's for parents. As a member of the Gen Y, I think that it is a fair assumption that we have been handed most everything on a silver platter. I am not saying that there are not Gen Y's in the world who struggle day-in and day-out but for the majority of Westerners, we have lived relatively hardship free lives. 

But the day is coming that we are put out into the wild to fend for oneself. No more parents to provide free handouts such as food, shelter, and clothes. When that time comes, the first thing on our minds should be to save every last bit of our meager entry level paychecks to ensure that we are able to insulate ourselves from economic ups and downs similar to what we are experiencing right now. 

It's a fact we are very much consumers vs. savers. According to an MSN Money 2008 article, the average Gen Y is faced with over $8000 worth of credit card debt. This level of high interest debt is unsustainable for future wealth accumulation. Add-in the average student debt of nearly $40,000 in both Canada and the U.S., beginning to save becomes even more crucial. 

Even with our meager paychecks, Saving only $200/month for the next 40 years a return of 6%/a gives us $371,428.72 for retirement. It may not seem worth saving now but with maturity your savings per month will easily quadruple that plus the additional income provided by a spouse or partner. 

As a consumer generation it is critical that we start taking responsibility for our savings and start saving.

Historic Day....Madoff Pleads Guilty

Today marks a historic moment for the financial world as Bernie Madoff,  fraudster of the world's largest Ponzi scheme (over$60B) plead guilty to the 11 charges brought against him including securities fraud, wire fraud, mail fraud, and money laundering. The 70 year old Madoff is seen below entering the Manhattan courthouse where he inevitably faced his death sentence. 

Madoff's guilty plea to all charges comes as no surprise the scope of his scheme has affected investors of all types from the local blue collar worker to charitable foundations and even celebrities such as Steven Spielberg and Kevin Bacon. Madoff expressed deep regret as he read his 10 minute apology stating, "he was so deeply sorry and ashamed" for his role as mastermind behind the largest Wall Street scheme in history. 

When all is said and done, Madoff defrauded almost 4500 investors out of over $64B US worth of assets. His guilty pleas only confirm that he will likely parish into history behind bars as his charges total over 150 years in prison. As a result, we should all take the story of Bernie Madoff as a lesson learned and remember "if it's too good to be true, it probably is." 

I'm Still Rich....

Even amongst all this market turmoil Bill Gates is still able to find a way to make headlines.  

Forbes.com, recently released its coveted Top 50 Richest People in the World and despite losing $18 billion in the las 12 months, Bill Gates remains at the top. You would think Windows Vista would of knocked this guy down a couple of notches? I guess not. 

Can you Trust your Financial Advisor?

These are the thoughts that are currently going through the minds of millions of people around the world. Can I trust my Financial Advisor? Many people seek the advice of an investment professional because they either don't have the time to monitor their situation or do not have the knowledge to make wise investment choices. An investment professional is like a lawyer or doctor in that they are specialists in their own field. Many would agree that they wouldn't consult a lawyer to perform surgery or vice versa. 

However, given the current mess that we are in the credibility of investment professionals has been tarnished. Alas, the losses that you are experiencing are not solely the fault of the investment professional's advice. 

The mess that we are currently in is not on the advice that has been given but the advice that they have been given. As advisors, they base your investment portfolios on the advice of the research that has been conducted by their research department as well as the various portfolio managers that run their asset management portfolios. 

Add-in the lax government policies in the mortgage and complex investment vehicles that only a handful of people can begin to comprehend and voila we have the current crisis. The investment professionals that we deal with day-to-day are not too blame as they are merely selling you products that fit your needs based on recommendations that they have received. They are at a primitive level sales people. 

So next time you want to yell at your advisor, just remember that the key to Sales is that you only need to know a marginal amount more than your client to succeed.