From The Ramparts

Pay Yourself First

Pay Yourself First

“A recent study by the nonprofit Employee Benefit Research Institute found that 51 percent of workers are falling behind in their retirement savings because of the high expenses of daily bills, child care and medical costs. A separate study by the same organization found that half of those surveyed had to reduce their general savings or 401(k) contributions in order to pay medical bills. These results show families face more risk today, not less. Day-to-day living expenses continue to rob the middle class of its ability to save for retirement. Compounding these challenges, American families have in recent years witnessed a sea change in the traditional retirement savings structure. Once, the average American could achieve retirement security by building a three-legged stool: a company pension, personal savings, and Social Security. For millions of families today, Social Security is the only leg remaining. For middle-income retirees, it is the predominant source of retirement earnings -- making up 64 percent of retirement income. With pensions in peril and middle-class families squeezed by flat wages and rising costs, the savings rate has declined from 10 percent in 1980 to just 1 percent in 2004.” Illinois Congressman Rahm Emanuel 04-22-06 Chicago Sun Times

Most of us are on the proverbial financial treadmill running harder, exhausting ourselves but getting nowhere. Wages are stagnant, rising costs and taxes are eating our paychecks. To compound the situation we are all living outside our means. The banks, credit card companies and advertisers encourage us to spend, spend, spend and take no thought of the long term consequences of our fiscal irresponsibility. For every action there is an equal and opposite reaction. If we spend more than we make the difference is debt. The more we spend the deeper in debt we get because not only do we owe the amount we have over spent; we also owe the interest. Once we get on the negative side of compound interest it makes it increasingly more difficult to get out of debt. Once upon a time in AmeriKKKa thrift was a value, we were encouraged to save, save for the consumer goods we needed, save for education and save for the proverbial rainy day. Now we are encouraged through the psychological manipulation of the media to spend carelessly for the gizmos and gadgets that have a short shelf life or which will depreciate shortly after the purchase, (our homes or real estate being the other exceptions). Few of us have savings or future financial security plans. I remember when I was in elementary school we purchased US Savings Stamps, we had vacation and Christmas saving clubs. Those entities aren’t popular now because savings are not encouraged. As a result AmeriKKKa went from being a lender nation to a debtor nation and individually we went from a nation that promoted thrift to a nation obsessed on conspicuous consumption. As a result we are drowning in a sea of debt.
An article by Illinois Democratic Congressman Rahm Emanuel in the 04-22-05 Chicago Sun Times points out just how tenuous most AmeriKKKan families financial situations are. “With pensions in peril and middle-class families squeezed by flat wages and rising costs, the savings rate has declined from 10 percent in 1980 to just 1 percent in 2004. Only half of U.S. workers participate in employer-sponsored retirement plans, and 80 percent of small business employees have no plan at all. Nearly 40 percent of all households have no retirement savings accounts of any kind beyond Social Security. Half of the households headed by a worker aged 55 to 59 have $10,000 or less in a 401(k) or in an IRA. Of that age group, 36 percent have no 401(k) or IRA savings. For single women, the problem is even worse. Only 38 percent have 401(k) plans from a past or current job, with a median balance of just $8,000, as opposed to married females, who participate at a 54 percent rate with a median balance of $27,000.Given the reality of the savings deficit, we should devise new ways to help Americans save for retirement.” While the gist of his article was about promoting ways to save money for retirement, saving in general is an important issue. We need to save just for what the old folks used to call GP; general principle. Africans in AmeriKKKa need to promote thrift, we need to move away from Pavlovian consumption and develop savings and investment strategies as part of building an ethnocentric economic infrastructure. We need to investigate ways to start savings and investment clubs, credit unions and banks. We need to better understand how compound interest works and how it can work for us! We need to save and start credit unions and banks so we can finance businesses in our communities, buy land and help revitalize and transform where we live.
I know times are tough, all the more reason to work diligently to get out of debt, stop wasting our money and start paying ourselves first by establishing a habit of saving. When I was working I got into a deferred compensation plan. It helped me save because the money was taken right off the top. I didn’t miss it. As time went on, I was able to increase the bi-weekly deduction. My only regret is I didn’t get into the program earlier. Now I am retired. I have a pension, my money in the account is growing. I have funds I can fall back on in later years or use now, if I choose to pay the withdrawal penalty. There was a time when we didn’t have financial advisors and planners in our community but we had leaders who promoted thrift and savings. I must admit there is little incentive to save due to low interest rates. Nevertheless, compound interest works whether the interest rates are high or low. Eventually you will reap the benefits of it. Start a savings plan, even if it’s only a few dollars a week. Start an investment or savings club with a group of trusted friends or family members. Begin today get on the positive side of the compound interest wave.

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posted by Junious Ricardo Stanton @ 5:06 AM