How Advertising Distorts the Need for Saving

The “branding” of America is the most insidious part of our culture.  Now, entire personalities are subsumed into brands.  Lebron James is a brand.  Jerry Bruckheimer is a brand.  Every supermodel and pop singer is a brand.  There are few places you can escape logos such as the Nike “swoosh” or Mickey Mouse ears.  The brands scream only two messages at us: “You’re not good enough,” and “Spend.”

Advertising is a huge reason why people don’t invest.  Advertising is a shell game that sets us up for the quick thrill, eternal youth in a bottle, sex at the beach by drinking a brand of beer and buying a lot of things that do absolutely nothing for us.  Instead of saving the money we would be spending on some gadget, vehicle, or wardrobe, we could be could be investing in our children and ourselves.  Advertising is the deep end of the ocean.  When we succumb and sink into it, there’s no bottom to the spending. 

Turn Off the TV and Start Saving

The more TV a person watches, the more he/she spends (based on the advertising they absorb).  Actual research by Dr. Juliet Schor from Harvard found that for every extra hour spend watching TV, the subjects spent an additional $208 per week.  On average they spent an additional $2,300 a year in unplanned expenditures. 

TV and Advertising distorts the view we have of ourselves.  Advertising is designed to make you feel uncomfortable about yourself, your possessions, and everything around you.  If you are perfectly secure and comfortable, then you won’t feel the need to buy the thousands of products being marketed. 

Be Careful When Browsing the Internet

Personally, I use the Firefox browser with an Add-on called Adblock.  What this does is prevent website ads from appearing when I visit sites online, thereby removing my temptation to buy some gadget I won’t have use for after two days of purchase. 

The Real Truth about Saving and Spending

If you take away nothing else from this on cutting out the influence advertising has on your life, know this: If you spend less, you’ll quickly save more.  I know this sounds like a big “duh,” but there is a powerful spiritual component to savings as well.  Being in deep debt is a form of slavery-to your creditors.  If you are working just to pay bills, you are shackled to what you owe.  It’s a lonely impoverishing situation. 

Mother Teresa noticed it when she visited the United States:

“There are many kinds of poverty. Even in countries where the economic situation seems to be a good one, there are expressions of poverty hidden in a deep place, such as the tremendous loneliness of people who have been abandoned and who are suffering.”  

Overcoming Investing Hurdles

I’m sure you have many reasons for not starting an investment program.

• No money.
• No knowledge.
• No time.
• No broker.
• Too old.
• Too young.

I’m sure you think these are legitimate reasons.  They are not. 

There are no good excuses for not investing.  I don’t care how young or not so young you are.  How rich or not so rich you are.  How much you know or don’t know.  It has never been easier or cheaper to invest. 

If you have just $50, there are literally hundreds of investment opportunities awaiting for you, including with our own firm, CAM Trading.  If your employer offers a 401(k) plan, you can invest as little as 1% of your salary.  That means if you make $400 a week, you can invest as little as $4.00. 

Four bucks.

And you don’t need a broker to invest.  You can buy some of the best companies in the world without a broker and for little or no fees.  Nor do you need a broker to buy some of the best mutual funds in the business. 

In short, there are no excuses for not investing.  So, start now and get in the habit of it, you’ll appreciate the results in the future!

Start Them While They’re Young

If your youngster shows an interest in investing, it has never been easier to get him or her started regardless of age.  Once an individual reaches the age of majority (eighteen years in most states), he or she may have an investment account registered solely in his or her name.  Youngsters under the age of eighteen are not permitted to have their own brokerage accounts.  However, several ways exist for parents to introduce interested youngsters to investing. 
Dividend reinvestment plans (DRIPs) may provide an interesting investment vehicle for kids.  Many child-familiar companies offer DRIPs-Walt Disney, Mattel, just to to name examples.  Since many DRIPs permit very small investments, the programs are a good way for youngsters with limited funds to start investing in the stock market.  Through Sharebuilder, youngsters can have an account setup for them to buy stocks in specific dollar amounts automatically.  Don’t have $300 to afford a share of Apple stock?  No problem, Sharebuilder offers fractional share purchases.
If you decide to establish an investment account for a minor, consider carefully how you want the account registered. If you choose to have the account in your own name, you will be responsible for taxes on the account.  The good thing is you will also retain complete control over the account for as long as you want. 
An alternative is to set up the account as a Uniform Gift to Minors Account (UGMA) through reputable brokers like Rydex, Fidelity and Cam Trading. Funds in the account are in the minor’s name and Social Security number and are considered to be owned by the minor.  Dividends paid on the account are taxable, most likely at a preferred tax rate.  The adult custodian is responsible for the account until the minor reaches the age of majority.  Parental control is lost at the age of majority, which can be seen as a downside to UGMAs. 
Lastly, certificates of deposit and savings bonds are okay investments, kids should own stocks or stock mutual funds.  Risk is the last thing your child needs to worry about in an investing program.  He or she needs to capitalize fully on the power of time in their investment program as they have the advantage of time working for them. 

How the Rich Got Rich and Stayed Rich

I’ve been reading a lot of books lately on the consumption lifestyles of the ‘average’ wealthy individual.  No, these are not the stereotypical 'Hip-Hop’ glamour image you see on MTV – there are no oversized gold clocks hanging to their belt lines.  These are folks you’ll likely find shopping at Walmart for the best deals around!  They’ve amassed a sizeable portfolio of businesses, stocks and other investments to get to where they are.  More importantly, they were patient and thought long term.

Here are some of the most common traits found among them.

1. They stayed married an average of thirty-two years.  Divorce is really expensive.  Just ask Donald Trump, or more recently, Tiger Woods!  Donald Trump’s parents (his source of initial wealth) stayed married all their lives.
2. They held on to the same job for a long time.  Job-hoppers have trouble building wealth.  You’ve heard sensational news before of people who worked for UPS (or some other job) for all their lives then suddenly bequeath millions to charity upon their death.  It’s no coincidence that they got so rich when compounding is at work. 
3. They have invested over their working careers: an average of thirty years!
4. They had no investment experience when they started, 85% of the millionaires surveyed knew nothing, but they were eager, lifelong learners and learned as they went along.
5. They considered themselves “frugal.”  Some 80% saved by not spending.  And, those BMWs you see everywhere?  Don’t let them fool you.  98% of buyers of luxury cars are not rich.  The auto makers know this, that’s why they market their brands in rap videos for all the wannabes who are watching.
6. They held investments for more than five years.  Some even longer than ten years. 
7. They used their parents as models for saving and investing.  Of course, when you get older and realize that your parents are not the money role models you can or should follow, then I advise you to hit the local library and find books on the subject matter. 

For a fascinating look into the true lifestyles of real millionaires, turn off MTV and grab a copy of this book: “Stop Acting Rich” by Thomas J. Stanley

Invest Every Month, No Matter How Small the Investment

Being a successful investor is all about keeping your money in play, especially during various cycles in the economy.  When you’re starting out, it’s reasonable to believe that you must deploy your large pile of savings to buying stocks and be done with the process in a matter of minutes.  Success in investing is hardly a one and done activity.  What builds true wealth is investing on a regular basis (at least once a month).

Investing means you’re not spending.

When you don’t invest regularly, you’re not keeping your money in play.  Money that’s not in the market doesn’t reap the benefits of time and compounding.  Of course, many will argue that it would be safer to stay on the sidelines for now, because of current economic conditions.  But the fact is, money that’s not invested in some way is eventually money that’s spent on worthless stuff.  And money that’s spent creates a negative return.

I’m guilty of it too and I still spend on worthless stuff, but the spending on me has been replaced with spending on ‘them’ (i.e., kids).  The stuff you buy usually costs more than the initial price tag.  Homes require insurance, maintenance, utilities, and furniture.  Autos require gasoline, insurance, and maintenance.  Clothing requires cleaning and mending, not to mention new clothes to go with the clothes you just bought.  Computers require Internet connections, printers, toner cartridges, software, and paper.  And so on.  It’s rare to find something that costs no more than the initial price you paid.

If you spend instead of invest, you’re not just losing returns on the money you spend.  The money you spend generates negative return because you spend more money to support the stuff you buy.  That’s why spending is so dangerous (and I won’t even go into the dangers of spending on credit)!  It has a negative multiplier effect and it’s the opposite of compounding rate of returns. 

If you invest every month, even if it is only a few bucks, you rid yourself of money that, if spent, will cost you even more money in the long run.  That’s why it pays to invest even a little amount each month, $15, $100, whatever you can afford.  Don’t wait until you save a larger amount to invest.  The problem with waiting until you accumulate funds is that the money is readily available and tempts you to spend on some foolish toy.  Get the money into your investment account as soon as possible, automate it whenever necessary so it becomes part of your daily life.  You’ll be much better off in the long run.