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We Feel Like Fools for Saving Our Money

by Steve of Brip Blap on 04/24/08

I came across this sad piece while looking through CNN Money recently:

“My wife and I have been saving our money for many years in hopes of buying a retirement home and living off our investments. No matter how much we saved, it seemed that housing prices continued to escalate beyond any reasonable bounds. We feel like fools for saving our money, which only gets eaten by inflation.”

Inflation is not the only problem. In the article above, another woman mentions she has to declare bankruptcy for a lack of health care. Another couple is about to lose their home for lack of health care. A health care disaster is the main cause of severe financial difficulties in America today. Entitlements are teetering and the impending demand from retiring Baby Boomers may push these programs over the edge into insolvency (although I’m sure we’ll tax our way out of it). The government bails out investment banks, rescuing the bonuses of top management (which would have been reclaimed in bankruptcy) but refuses to do the same for homeowners swamped by overwhelming mortgages. The Federal Reserve (and other central banks) continue to pump paper money into the system, creating a long slow death for the US dollar. Ridiculous measurements are used to gauge inflation while we all know that the price of living soars past any reasonable measure of inflation when you consider the cost of gas, heat, milk and even basic foodstuffs. A war in Iraq – whether you support it or not – will suck trillions of dollars out of the budget for a generation to come (don’t believe anyone who says they are withdrawing the troops – the troops will still be there in 2012; we can’t even withdraw our troops from Germany yet). People are whispering the “D” word.

My fear is that too many people (including me) buy into the aphorisms: the market always goes up over time. Index funds are a great way to invest. Real estate always goes up. The US can’t just collapse – we aren’t the Soviet Union, or the Weimar Republic. Banks are safe. The US dollar is the best currency in the world.

Let me tell you what IS true: Your greatest asset is, now and always, yourself. Don’t be cheap, be frugal. Buy high quality goods that last a long time, because they will always have value. Do not ever believe that someone will be there to help you when times get bad: not the government, not your employer, not your neighbors or even your family or friends (because they may have troubles of their own). Expect times to be good, but prepare for times to be bad. Stay healthy; the single greatest risk to your wealth in America is to GET SICK.

That may seem overly pessimistic, but it is true. Don’t assume that dropping 15% into a 401K, having $1000 in an emergency fund and having a “steady job” are enough to protect you and your family. True protection comes from staying healthy, diversifying your income streams and investing nonstop in your greatest asset – yourself. You have to keep investing and saving and buying houses and paying down your debt, but never forget that even the most brutally frugal lifestyle is absolutely no guarantee of financial safety – or even stability.

Steve S. is the author of Brip Blap, a blog about personal finance, health, career management, productivity and self-improvement. He lives and works as a contract governance and audit consultant in the New York City area, and has lived in Germany and Russia. He is an active lender at Prosper.

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6 Responses

ChrisFS | April 24th, 2008 at 6:37 pm

Health care costs are the biggest single problem for ordinary people today and something needs to be done about it. We are the only industrialized country without some sort of national health plan. England, Germany, Japan, Switzerland,Taiwan all have something in place to prevent ruinous health care costs.

As for housing prices, I figured I would buy a house, but the way things are going, I just might…

ChrisFS | April 24th, 2008 at 6:38 pm

ack I meant, I wouldn’t be able to buy a house, but now I just might

Real Estate Investing | April 25th, 2008 at 6:17 am

Hi, thanks for your valuable suggestions. You have mentioned a good quote in your site that is “Your greatest asset is, now and always, YOURSELF” i liked it very much. And i do agree with you that no one will be there to help us when times get bad.So, we must prepare for everything.

Four Pillars | April 25th, 2008 at 10:04 am

Excellent post.

Unfortunately, while you can increase your odds of being healthy via diet, exercise etc – some illnesses and accidents will happen anyways. I guess it’s just luck of the draw.


Brip Blap | April 26th, 2008 at 6:20 pm

Thanks all for the comments! ChrisFS, you’re right – it amazes me that politicians in the US continue to dismiss the idea of national healthcare. And Four Pillars (Mike), it’s just like driving – of course you can wear a seatbelt, drive slowly and be blindsided by a drunk driver… but you’ve got a better chance of surviving if you haven’t been drinking, too. I’ve seen some people get sick for seemingly no reason, but I’ve seen many more people get sick when they don’t take care of themselves. It’s all playing the odds…


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