In the classic film and book Gone with the Wind the protagonist Scarlett O’Hara is a bit of a procrastinator. She takes comfort in believing that “tomorrow” she will handle things, saying “tomorrow I’ll think of some way… after all, tomorrow is another day.”

Unfortunately too many folks take that same procrastinator attitude when it comes to managing their finances. Folks fail to realize that the time to start saving for retirement, investing, or building savings habits etc. was yesterday; but if you did not start yesterday don’t be like Scarlett and put it off till tomorrow. Start today.

One barrier I see time and again is this myth that to start investing a person should have a large idle sum of money laying around. Then that person waits until they get this large sum of idle money that never arrives. For most people the best way to invest/save is to do it incrementally over time. Budget out a small portion that can be saved each month and have it automatically contributed to the savings or investment account. Then periodically evaluate and increase that contribution amount.

Below is an excerpt from an article I was reading the other day that ties into the above text.

If you think getting a late start saving for retirement of just six years is no biggie, think again. A 26-year-old who makes $40,000 a year, gets 2% annual raises, saves 15% of yearly pay and earns 6% annually on his savings would accumulate a nest egg of just under $1.2 million by age 65. If that person waits six years until age 32 to get started, his nest egg would total roughly $855,000. That’s $345,000, or almost 30%, less for missing just those initial six years. If our fictional 26-year-old holds off 10 years until age 36, the nest egg shrinks to $685,000, some $515,000, or nearly 45%, less than with the early start. As Gilbert says in the commercial, “This gap between when we should start saving and when we do is one of the reasons why too many of us aren’t prepared for retirement.” Walter Updegrave – Money.com

Now for some very grim numbers that a friend sent me in an email, he said this was pulled from a John Mauldin newsletter. I have seen slightly different numbers depending on the sources, but wherever they come from they always seem to paint a grim picture.

The average savings of a 50-year-old is only $42,000. The average net worth of somebody between 55 and 64 is $46,000. A couple at age 65 can expect to pay $218,000 just for medical treatment over the next 20 years. Eighty percent of people between 30 and 54 believe they will not have enough money to retire. One in three people have no money saved for retirement at age 65, and almost 40% are 100% dependent on Social Security.

Written May 2nd, 2016

The graph above is very powerful stuff. It shows S&P 500 calendar year returns and the biggest intra-year declines that occurred. Notice that 27 of the last 36 calendar years had positive returns. Notice also that in many of those positive calendar years there were very big intra-year drops. This helps to illustrate that volatility is normal, and market corrections in the midst of a bull market is normal.

Written April 20th, 2016

There is no such thing as a safe investment. Cash isn’t safe, money markets aren’t safe, bonds aren’t safe, stocks aren’t safe, gold isn’t safe, real estate isn’t safe, and the list goes on and on. It’s sad news, but when you are dealing with your money it’s better to have the sad truth than blissful ignorance.

Cash is not safe; in fact over long-term periods it almost always loses purchasing power because of inflation. The loss in purchasing power means that in “real” economic terms holding cash over long-term periods results in negative returns.

Gold is not safe; historically gold has had lower long-term returns than many other asset classes such as stocks or bonds while also being more volatile and unpredictable. Gold has often performed well in periods of panic, and physical gold tends to move along pretty well with inflation over long-term periods. There are few investors with a goal to “have the equivalent portfolio value 25 years from now as I have today in terms of purchasing power.” Most investors need much more than that from their portfolios, meaning in most circumstances gold is not safe.

Real estate is not safe; real estate like owning physical gold has the positives and negatives of being a tangible asset with low liquidity vs. most other asset classes. The typical real estate investor (home buyer) does not achieve good capital returns compared to alternatives such as stocks or bonds over their time horizon. In fact a huge percentage of home buyers have negative returns over their time horizon, but still achieve their primary goal of having a home to live in. If the person’s goal is to have a place to live, then compared with the alternative of renting, buying a home (real estate) is often very attractive. But when the goal is strictly capital return on investment there are many statistically superior options to real estate.

There are potential upsides and dangers for every asset class, these examples could go on and on. The key is matching the appropriate mix of the different asset classes.

Every investment has opportunity costs, and probabilities of success. The key to selecting the right asset is to properly evaluate the time horizon, and objectives; then compare outcome probabilities of the various asset options.

Always remember that with financial planning and investing there are no certainties, only probabilities.

Written April 13th, 2016