In my financial planning practice, I see far too many people that speculate and gamble in the financial markets. I find this behavior fascinating because as with most types of gambling, the more you do it, the more you find yourself falling behind your intended objectives. Casinos have long figured this out. Wall Street has as well.
U.S. households clearly have a saving problem. They also have a debt accumulation problem. The two problems are certainly related to flawed principles and beliefs.
Investing is something that is supposed to improve your future. That means tomorrow should be better than today. When you save money and invest it wisely, you get to spend MORE money in the future because you have the original savings PLUS INTEREST and investment returns.
Debt works the opposite. When you take on debt and spend it on immediate consumption, you get to spend LESS money in the future because you already spent the money but then have to pay back the loan AND THE INTEREST DUE.
The vast majority of U.S. households are woefully under-saved for retirement and emergencies. They also have ever increasing debt levels that eventually reach saturation points that no longer can be expanded upon. When earnings peak or even decline with maxed out debt loads, financial pain follows.
The response to this financial behavioral loop is usually not what you would imagine. The solution is clear; save more, invest wisely, and work to eliminate personal consumer based debts. But that is not what is happening. Rather, households continue to spend, continue to borrow, continue to increase debts, and continue to invest very little. What little they do save and invest, they gamble and speculate with hoping that the stock market will offer some kind of magic potion to correct their financial ills.
Your future successes and happiness are contingent upon your ability to save money. It all starts with saving. If you can’t save money, you are making your future life more difficult than your current life. I can assure you that it doesn’t have to be this way. There are people that have figured this out before you and have improved lives that include less stress, anxiety, and uncertainty.
Financial stability often leads to more control over your time, more options, more freedom. It also provides resources that could be used when life throws you some curve balls. Trust me, we all get thrown curve balls with our careers, our personal lives, and our health. Leave yourself some wiggle room. Live with a margin of safety. Living on the edge always sounds liberating and exciting until you realize you are on the other side of the edge with nothing but gravity pulling you towards the depths of despair.
There is no better time to start saving money than right now. Likewise, with financial markets great/extremely over-valued, there is also no better time to stop gambling and speculating with your hard earned savings.