save, save, save

last year, i lost somewhere on the order of 50 pounds, but before that, i had yo-yoed, like many people do -- gaining 5 pounds here, losing 10, gaining another 15. i had tried a lot of fad diets with some success, but it wasn't until i dedicated myself and really learned about fitness and nutrition was i able to lose the weight and keep it off.

now, what does this have to do with personal finance? at first glance, absolutely nothing, but i think a lot of people fall into the same weight loss traps with their savings. i mean, it's easy to stash some cash away one day but find it gone the next, get a raise or bonus and find your spending magically drift to that level, or diligently contribute to your savings but break into it because you 'need' that next great thing. we've all been there -- nutritionally and financially.

i read somewhere recently that the us savings rate for this past year was something like -1%. that means that as a people, we were spending more than what we made last year. now, i know that this doesn't take into account other measures of worth like unrealized gains in equities or real estate, etc., but, it seems like a pretty alarming statistic to me. at this rate, we'll be broke in a few years!

personally, i am an aggressive saver -- it has saved me from myself those times that i have been an aggressive spender. i've heard all sorts of numbers, rules of thumb, etc. on how much we should save, but i've never paid much attention to those -- they just seem way too low. i put away 10% of my after tax pay directly into a separate account, but beyond that, i contribute 5% to my 401k plan, put another 35-40% into equities or other savings vehicles and live off the remaining 50%, which largely falls into my mortgage, bills, and other spending. these percentages have stayed pretty much static throughout my professional life. it's rather unfortunate, but what that means is that i am spending way more today than i was when i was bringing home 20k a year. i think that makes me pretty typical, too, though.

i guess the point to my whole rant is this . . . einstein is credited with saying that compound interest 'is the greatest mathematical discovery of all time'. i don't have a lot of knowledge in the stock market or real estate or other investment vehicles (these are all part of my portfolio, but we'll get to that in a future ramble), so one way that i can make sure that i can participate in this great discovery is to save. whether that be a money market account, savings account, cd's, or what-have-you, i save a bit every month.

whether you put away 5, 10, 20, or more percent of your take home every check, it's all getting you the game of the great discovery of compound interest. it may not seem like that much now, but after it doubles in a few years, and doubles again a few years after that. it's just like dieting -- one or two pounds this week or next doesn't seem like much, but after 25 weeks, you've lost 25-50 pounds!