The Saving and Investing Crisis

Monday, 25 Mar 2013 07:39 AM

By Sean Hyman

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Right now, investors are holding their breath as they await the outcome of the ordeal in Cyprus. The world is looking to see how bad it gets over there and if it spills over into other parts of the world. They’re wondering if they’ll get the bailout that they need and how much it will cost them to get the bailout.

On a broader scale, investors are still worried about Europe and the future of its currency, the euro.

There are many worries out there that are out of the investor’s control. However, one of my biggest concerns is the saving-and-investing crisis that we’ve got going on right now here in the United States, which can be controlled.

We’ve become a nation hooked on debt and very comfortable with it. We’ve become a nation that saves and invests little because we want everything now. However, this type of thinking will end up biting us in the behind in the end.

Take, for instance, a recent survey by the Employee Benefit Research Institute. They found that 57 percent of people surveyed had less than $25,000 in savings and investments outside of their home. How are these people going to retire?

Remember, the days of pensions from companies are mostly gone. That means your retirement is up to you now, through your 401(k) and IRA, etc.

To prepare my kids for this era in which we now live, I’ve tried to teach them a simple ratio to follow with their money — 10/20/70.

Where did I get this ratio? It comes from the Bible.

The Bible instructs people to give a tithe of 10 percent.

The 20 percent comes from the story of Joseph in Genesis. Joseph interpreted a dream that foretold of seven years of plenty, followed by seven years of famine. God’s answer was to save up a “fifth part” (20 percent) of the wheat crop during the seven good years and it would be enough to take them through the seven bad years.

This is why I teach my kids this. It still works today. If it took them through a seven-year famine, it will take my kids through recessions. I wrote about this in more detail in a book that I wrote titled The Six Keys to Financial Success.

But back to my kids for a moment.

They give at least 10 percent of their money to God through their church and they are to save (and eventually invest) at least 20 percent of their income from day one. That means that they should live off of no more than 70 percent of what they earn.

By living this way, it will get you out of the financial traps of life very quickly; I tweeted about that last week. I said, “Financial traps have been set in your future. Depending on how you save money now will depend upon how quickly you get out of those traps.”

Some people will cut a check and be out immediately. While others will take years to dig out of that one hole because they were totally unprepared.

Now I know you’ll not get most Americans to live this way. They think it’s crazy. However, the average person in Asia saves between 30 to 33 percent of their income. So there are people on the planet who do live this way.

By the way, it’s those same people who are “taking the world by storm” right now too. They’ve been great stewards of their wealth and now they are reaping the rewards of that kind of activity.

Another reason we need to be prudent to save and invest is because of the time in which we live.
If you study history, you’ll note that most civilizations last about 200 to 250 years before the decline of their civilization begins.

Well, 2013 marks the 224th year for America. The average decline begins at around the 200th year. I believe that’s the case for us. The decline has been under way for a while now — I believe since the early 1970’s when the inflation-adjusted wage peaked out.

Then, what one income took care of now takes two incomes for most families. Yet their only way out of this dilemma is to do the part that they can control. They can control if they save or invest or not. Oh, it may take some painful downsizing at first, but everyone can do it. Many will just choose not to. They’ll sacrifice their future for the “moment” of today.

But if you don’t believe me about the decline of our nation, remember these wise words from someone who has studied the rise and decline of nations.

Nations go in this sequence: From bondage to spiritual faith; from spiritual faith to great courage; from courage to liberty; from liberty to abundance; from abundance to selfishness; from selfishness to complacency; from complacency to apathy; from apathy to dependency; from dependency back around to bondage.

Where do you think that we are now in that sequence? I’d say we’re in dependency on our way back to bondage as a nation. Why do I say that? As of March 8, we’ve gotten the latest “food stamp” report. It shows a record 47.8 million people on food stamps.

Why would we go into bondage? The Bible states that the borrower is slave to the lender. We’ve got trillions of dollars in outstanding debts. Our creditors have the power and say now. It will be obvious of their control once we can’t pay the interest on our debts, which will happen within just a few short years … and those creditors exercise their control. Who do we owe? Foreigners, mainly China and Japan. They own the lion’s share of our debt.

Since it’s difficult to control what our nation is doing as a whole through bad decisions from our politicians, let’s do what we can control.

We can control how we save and how we invest. Don’t know what to invest in? Come join me in the Ultimate Wealth Report at www.ultimatewealthreport.com and I’ll help you. Make the necessary changes now, so that you’re not stuck only having $25,000 to your name to retire on. Those people will be forced to work their entire lifetimes. I don’t want this for you.

About the Author: Sean Hyman
Sean Hyman is a member of the Moneynews Financial Brain Trust. Click Here to read more of his articles. He is also the editor of Ultimate Wealth Report. Discover more by Clicking Here Now.

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