MORE MONTH THAN MONEY

Running out of money before running out of month is a common problem not restricted to working class people. Our national savings rate reveals that, on the whole, Americans are pretty dismal savers. Having a hefty income, more often than not, appears to mean hefty expenses as well.

For quite some time now we have been spending as much or more than we earn and consumer debt levels are at or near all time highs. Our political leaders seem to want us to both spend more to stimulate the economy and save more to fund the deficit. A neat trick, if our incomes don't go up and we're already up to our necks in debt.

I for one am a strong advocate of increased savings. Our personal balance sheets need the strong dose of equity corporate America is currently giving itself. Since we can't sell shares in ourselves, let's all resolve to save more. Saving just $25 per month, invested at 6% yields over $25,110 in 30 years. Anybody born after 1965 has at least 30 years before they turn 65.

This is a hypothetical illustration and is not intended to reflect the actual performance of any particular security.

How do we help ourselves to increase our rate of savings? First, establish a long term goal. A well established, written goal is the foundation of all financial planning. Increased savings may appear to come at the expense of one's current lifestyle, so a goal that's worth working for is essential if you want to have any hope of success.

The next rule is, pay yourself first. When you sit down to pay the monthly bills, you should write the first check in the form of an investment toward a long-term goal. The use of automatic debits to the checking account and/or payroll deductions is a marvelous way to begin this program. It will also illustrate the amazing powers of compound interest and dollar-cost averaging over time.

Third, avoid the over-use of consumer debt, even if it means cutting up a credit card or two. Go ahead, you'll probably feel better and your wallet will close easier. Almost anyone with a credit card can get a 12% to 19% guaranteed return on their investment just by paying off credit card debt. As a society, we need to learn that the offer of a pre-approved credit card with a $5,000 limit does not translate into a $5,000 increase in lifestyle.

You'll notice an absence of budgeting in these suggestions. It's not that budgeting is a bad idea, in fact it's a pretty good one for some people. However, most seem to lack the discipline it takes to really make a budget work. It's far too easy to rationalize a budget-busting expenditure, as politicians in Washington are constantly proving.

Most people spend to the level of their income. Their lifestyles automatically adjust upward with every increase in salary. By paying themselves first and avoiding the credit card temptation, their lifestyles will miraculously adjust to their new level of income. After a few months, they won't even miss the money they've begun to save.

Dollar cost averaging does not assure a profit and does not protect against a loss in declining markets. This type of investment program involves continuous investment in securities regardless of fluctuating price levels of such securities. Investors should consider their financial ability to continue their purchases through periods of low price levels.