Out of Sight

We received a lot of feedback about saving money; keep it coming.

This contributor proves anyone can save…

“I’m of the opinion that people can’t save because they subscribe to ‘instant gratification’.

“I only get $550 a month from SSI; from that is taken fees for insurance. So I net about $440 every month.

“I have about $7,000 in savings and add a minimum of $50 every month as soon as my check hits my bank [account].

“Then again, I have zero debt. I save for what I want to purchase instead of borrowing. That, to me, is just throwing away more money in interest when borrowing for discretionary items.

“I just don’t get the ‘I gotta have it now!’ mentality.”

Kudos to our reader for prioritizing savings. Along those same lines a reader suggests:

“We manage to put $1,000 into savings every two weeks. What helps is to have the money taken out of our paycheck via direct deposit. If you don’t see it, you don’t miss it.”

Last, a reader has an unconventional take on saving money…

“Saving for an emergency — well, that’s always on my mind. I’ve put approximately $25 a month in penny stocks hoping one of them will GROW.”

Like we said, unconventional.

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Your Rundown for Tuesday, February 5, 2019:

Whodunnit? Inflation!

A reader raised an interesting point:

“From the ‘U.S. Personal Savings Rates’ chart you published it appears that the rates started the downward trend just after the dollar was disconnected from gold and the inflation started in earnest.

chart

“Would be interested to see how this chart compares to the wage growth rates for the same years.

“Ongoing inflation raising living costs without corresponding wage increases would be the main reason the savings rates would go down. And just saying people still need to save money will not fix that disconnect.”

The U.S. effectively unpegged the dollar from the gold standard in 1933 but the final thread was cut completely between the dollar and gold in 1971.

From the chart, other than recessions in the mid-seventies, post-Great Recession and — to a lesser extent — early eighties, personal savings rates have declined steeply since 1960.

But I think the reader’s onto something; the downward slide — except for the aforementioned spikes — started in earnest in 1971. As did inflation.

Wage growth is a key factor, to be sure, but the reader hit the nail on the head with inflation. Inflation — the rate at which the price of goods rises relative to the purchasing power of the dollar — might be the culprit for Americans’ limited savings.

The following chart’s illuminating…

chart

Sure, Americans’ paychecks are bigger than they were some 40 years ago but their purchasing power hasn’t changed. Meaning the average hourly wage in 1964, $2.50, has the same buying power as today’s average hourly wage, $22.65.

So — yes — we concede inflation’s a culprit when it comes to Americans’ personal saving habits. The need to save, however, hasn’t gone away. It’s going to take creativity and grit (see first contributor above).

Market Rundown for Tues. February 5, 2019

S&P 500 futures are up 5.25 points to 2,726.50.

Oil is down 75 cents to $53.81 for a barrel of WTI.

Gold’s down 40 cents to $1,318.90.

Bitcoin is up $7.01 to $3,438.90.

Have a good day. We’ll talk tomorrow.

For the Rundown,

Aaron Gentzler

Aaron Gentzler

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Aaron Gentzler

Aaron Gentzler is the publisher of Seven Figure Publishing. He is also the editor of The Rundown and has been with Agora Financial / Seven Figure Publishing since 2005. He's been covering technology and markets for over a decade.

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