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June, 2017


From "Good Financial Cents" and "AARP Bulletin," here are ten nifty ways to almost painlessly get enough money for our investments which, thanks to compound annual returns, can become impressive retirement nest eggs:

  1. Begin a year of saving extra nickels - Start with one, double that the second day to a dime's worth, triple it the third day to fifteen cents, etc. Keep this up for a year. The maximum daily input to one's piggy bank (achieved on day 365) will be $18.25. The total saved in one year will be $3339.75.

  2. Direct the amount of any bonus, promotion, or pay increase into a savings or investment account. Our lifestyles are not diminished, but the added dollars will mount up, usually to multiple tens of thousands of dollars over one's career.

  3. If married and both spouses are working at least some of the time, live only on the earnings from the spouse with the primary income. Apply the balance to investments.

  4. Put every $5 bill received (for instance, as change) in an envelope. Once every 3-6 months, deposit that total in the bank and use these extra amounts to fund new investments. Folks have noticed this can gradually add $500-$1500 a year to assets that provide good returns, and the $5 at a time set aside are often not missed .

  5. Put all loose change in a can or jar. When it is full, deposit the total into one's credit union or bank account, and use these extra supplements to fund new investments.

  6. Write out one's saving and investment strategy, and update it every few years. Simply lacking a carefully thought out plan to which we can refer keeps nearly 90% of us from maximizing our potential for long-term financial independence.

  7. Use grocery lists, and stick with them. Many consumers spend a significant amount each year on accumulated impulse buys at the supermarket. (This tip can also help us keep off the extra pounds.)

  8. Drink more water and eat less meat. Special bottled beverages, coffee mixes, and sodas frequently cost much more than either tap water or bulk purchases of bottled H2O. Everything else being equal, meat is one of the pricier items in one's diet. Food costs might also be reduced by obtaining much of the veggies from a home garden.

  9. Maintain our transportation. Regular oil changes, diagnostics, tire checks, and routine engine servicing can prolong a car's useful life, keep gasoline mileage lower, and help us avoid big ticket repair and replacement surprises.

  10. Establish and sustain good credit. Over one's lifetime, there will almost certainly be occasions for borrowing, as for a house, car, education, etc. Usually, the higher our credit scores, the easier it is to borrow and the lower the interest rate, potentially saving us many thousands of dollars in extra interest payments. Obviously, the more money we do not have to pay out to others, the more is available for investments that can provide us with valuable dividends and capital appreciation.

Using one's best picks among such money saving suggestions, several hundred to a few thousand dollars a year more will be available for starting or adding to good stocks or stock mutual funds. From 1970 to 2016, a portfolio like the following (see table) would have averaged returns of about 12% a year:

Low Fee Mutual Funds with Above Average Returns

Mutual FundTicker
Franklin Dynatech Fund, Class AFKDNX$58.7110.10%0.91%low
Morgan Stanley Inst. Growth AMSEGX$43.4810.25%0.91%low
T. Rowe Price QM U.S. Small-Cap Gr. Eq.PRDSX$31.559.93%0.81%low
USAA Nasdaq-100 Index FundUSNQX$16.1611.70%0.54%low
Vanguard Health Care Fund Investor SharesVGHCX$207.6911.06%0.37%low

Though these assets are definitely volatile and involve greater risk for short periods than a traditional combination of bonds and stocks, the lowest overall return of a portfolio of such funds if held for several decades has been about 10% annually. It is suggested that equal investments be made periodically in each of the relatively low-cost mutual funds or exchange traded funds chosen. Generally, folks who dollar-cost-average their investments, adding roughly equal amounts per interval, for instance every quarter or 12 months, do even a little better than this historical 10-12% range for buy-and-hold investing returns. There are no guarantees that similar outcomes will prevail in the decades ahead, but chances are good we shall in the next multiple of years see typical up and down markets, when this strategy would likely again be lucrative.

A person in his or her 20s who begins with $6500 and adds $3300 a year for 30 years at an average return of 12% (in tax-deferred accounts from which no money is taken out and with reinvestment of all distributions) would after three decades have over $1,000,000.

A husband and wife of course normally require just a single residence, so they can save money while adding doubly to their savings and investments toward long-term goals. Even taking into account average levels of inflation in the years ahead, an extra $2,000,000 or so by around 2047 could come in handy, especially if hardly missed in the acquisition phase. The $6500 initial investment, in the above example, is 11.7% of average U.S. annual income, but can be achieved by saving up over a few years. That illustration's $3300 in annual additions to a growing nest egg is 5.9% of average income in this country. Yes, we would notice it, certainly, but once the savings and investing habit is established and part of our family budgets, its burden would normally become more inconsequential over time.

Nor does this have to be the only source of financial security. One can also gain equity in his or her home or through rental real estate ownership, invest in a 401K plan at work (often supplemented by partial matching contributions from an employer), cash in a maturing life insurance plan, work part-time to benefit from a hobby for which one has a passion (as my wife, Valerie, does with music as well as with nature photography), etc.

May we all enjoy life's many rewards and, along the way, a successful and enriching plan for saving and investing.

Primary Sources:

87 Super Easy Ways to Save Money. Jeff Rose in; March 23, 2017;

Power Your Portfolio With Value. Paul Merriman in AAII Journal, Volume XXXVI, No. 6; June, 2017;

Saving Tricks That Work. Eileen Ambrose in AARP Bulletin, Vol. 58, No. 5; June, 2017.


Larry is not a professional. Don't take him seriously!

Actually, the investment article provided here is for general information only and should not be considered as professional advice, a solicitation to buy or sell any security, or the Word of God. Investors are encouraged to do their own research while considering their personal goals and circumstances, or consult their own professional financial advisors, before making investment decisions. Neither Larry nor LARVALBUG will be liable for any losses sustained by any visitor to this site.

(Disclosure statement: Larry and Val have holdings in some of the suggested assets but do not "make a market" in any of them and do not derive any direct benefit from recommending them, except perhaps for a bit of smug self-satisfaction.)

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