The Answer to the Million-Dollar Question

By eliminating what I call Million-Dollar Habits, (e.g., failure to exercise spending discipline, smoking or vaping, excessive dining out, etc.), almost all of us will rediscover a few dollars we didn’t know we had.

Good Will is Not Bad

Shoot, I’ve had astute but cash-strapped young couples – particularly those with new babies or those buying odds and ends for apartments or first homes – tell me they easily save $100 a month by shopping at Goodwill. Not interested? Try it, you might like paying 10-15 cents on the dollar for virtually new items (toys, baby clothes, kitchen items, knickknacks, etc.).

The Savings Ingredient

The savings ingredient in investing is simple, yet critical. If you don’t start saving early in life, you miss the cornerstone of what makes The Amazing Power of Compounding amazing (for a more detailed explanation of compounding, go to my blog titled Before You Get Rich You've Got to Master the Basics). To demonstrate your potential loss, let’s resurrect my stale old example of saving $100 per month, investing it in a Total Stock Market Index Fund (hopefully in a Roth IRA), earning 7%, compounded quarterly, for 45 years. What does it get you? Close to $380,000 before inflation upon retirement. And that’s in addition to Social Security, your 401(k) and other shrewd investments you make along the way.

By the way, you’ll soon learn that I stress simplicity throughout my blog postings, but let’s be quite clear about simplicity. The simplest things in life are very often hard to do. And saving early and often is one of them. You’ll quickly learn why if you haven’t already experienced it.

Ah, Those PDQ Principles

In an early posting on my daughter’s blog, I introduced those very clear, very simple, very basic principles that I try to adhere to in my own investment program: the PDQ Principles. These principles hold to yet another important principle – that most successful investors are also reliable savers who adopt an investment strategy that combines patience with a portfolio of diversified, quality assets, and then dare to be average! I will devote a later, more detailed blog on daring to be average, where the term is applied only to investing. And, of course, the PDQ Principles strategy, like all savings strategies, requires discipline.

The Wazoos (Proceed With Caution)

Humankind tends to complicate things far beyond what is usually necessary. Complex strategies are mostly devised by a group of folks I endearingly call the Ivory Tower Boys (Wazoos) who help the average small investor not one whit! And it’s the “small investor” I want to help, a category that includes me. This green eye-shade, Wall Street crowd devises complicated strategies to convince you that you need them to uncomplicate what they’ve creatively complicated. Granted, complex fortunes (the billionaires among us) require greater sophistication, but most of us don’t have complex fortunes. We save a few bucks a month to invest somewhere that, hopefully, over time will grow into a meaningful retirement fund. And the process does not have to be complicated. In fact, it can be quite simple…the simpler the better.

Don’t be fooled by all the bulls**t. And those green pastures (the internet) are littered with that commodity. Some facts are good to know, but you don’t have to possess a full vocabulary of buzzwords. Join me in this effort. Toss most of this recently digested hay aside, adopt a few basic principles of saving and investing, and over time, you will accumulate a nice nest egg for retirement. And yes, you do have the time. Question is, do you have the discipline? All it involves is spending less (saving) by simply delaying gratification – and avoiding those Million-Dollar Habits.

Buy the Haystack

To sum it up, let me quote the small investor’s dearly departed friend and Vanguard founder, John Bogle who said, “Beating the market is a zero-sum game for investors. Money managers, as a group, must provide the market return, but that return comes only before their exorbitant fees, operating expenses, and portfolio turnover costs are deducted. The zero-sum game before costs becomes a loser’s game after costs.”

In his highly publicized support of index funds for the little guy, Bogle also wisely counselled,

“Don’t look for the needle in the haystack. Just buy the haystack.”