Here’s the essential problem, as The New York Times recently pointed out in a front-page piece – if you’re actually one of those Americans who saves money, you’re screwed!
Interest rates have now plummeted to terrifying lows, forcing anyone who hopes to watch their savings (safely) grow into choosing mutual funds, bonds, equities, ETFs, gold, anything illiquid, but not a CD or money market account.
Do you feel comfortable investing in the U.S. economy right now? Really? Maybe if you work on Wall Street.
I read all the financial press. I’ve read all sorts of investing books, from Andrew Tobias to Suze Orman. I still end up overwhelmed and confused. Like many women, I fear an old age of ramen and a cardboard box under a bridge somewhere.
I do have some savings, but how to grow them?
I’m thinking safe, boring stuff like…Canadian banks. Seriously. Check ‘em out.
Canadians never had the luxury of writing off the interest on their mortgages nor of obtaining zero percent, interest-only “loans” – a license to print money for banks, attorneys and mortgage brokers. While U.S. banks handed out mortgages to anyone who could fog a mirror, Canadian bankers quaintly insisted on old-fashioned, tedious stuff like actually having saved 20 to 30 percent of your home’s price as a down payment. So, if you couldn’t pony up, say, $120,000 down for a $600,000 Toronto house (cheap at that price), you’d be renting until you could. Or you’d settle for a condo.
And I’m thinking BRIC, Brazil, Russia, India and China, whose economies are red-hot. What do I actually know about each of these economies and their companies? Not as much as I should. I’ll learn. I will. I will! (When?) Inertia, laziness, fear and ambivalence are forever my worst enemies.
There is such a mixed message in telling people, (which is a wise choice) to save 10 to 20 percent of their income every year. You know, intuitively, that having $10,000 or $15,000 or even $2,000 stashed in a bank in cash – for when you lose your job and can’t find another one and/or your partner/kids/husband does – is a very good idea.
But when your hard-earned money sits in the bank flipping you the bird, “earning” 1 percent, you think: screw it! I’m going to Paris/grad school/buying that motorcycle.
I told a friend my theory – that saving is for suckers. But she called my bluff. Both freelancers who own our own homes, we’re both frugal and save.
“So, where should it go?” she asked. “Real estate,” we replied in unison.
I was lucky enough to buy my apartment in 1989, in an area and a building that have retained their value and appreciated. While it still has a mortgage, I’m marginally comforted by living somewhere I really like, while knowing all those payments will come back to me when I sell.
When I open the door, at least I know where my money has gone.