If there is one thing that over fifty years of combined experience in the financial world has taught us, it is that most people who become wealthy do so because they save and invest. And statistically, the wealthier they are the more they save and the less they spend as a percentage of their income.
Apparently, this is still news!
However, recent surveys cast a long shadow on the future in regard to the amount of money that most Americans are saving today. We think you’ll enjoy reading the attached, and encourage you to pass it along especially to friends and family members who will soon be graduating from high school and college. Starting young is best.
It looks like JL Davis still has some work to do!
Best always,
Lee and Jeremy
PS-- A quick note to our advisory and wealth management clients to be on the lookout for upcoming mailing from our broker-dealer, Cetera, announcing their purchase by RCA Capital. Soon to be the second largest BD in America, Cetera and RCA Capital appear to have big plans! Stay tuned.
This Week’s Quote:
“If you would be wealthy, think of saving as well as getting.”
― Ben Franklin
JL Davis Thoughts This Week:
While it’s true that much of our work is with very wealthy families, a majority of our clients are still “on the road” to building their fortunes. Many of them are doing a fantastic job. Unfortunately, much of America is not, it seems.
As recently as 2013, the national savings rate was reported to be a paltry 2.6%. During recent decades, it has ranged from a low of 1.5% in 2005, to a high of around 5.5% in 2008 according to Princeton University professor Sheldon Garon, author of Beyond Our Means: Why America Spends While the World Saves.
A mere 2.6%! It gets even more interesting.
A survey published last month by the American Savings Education Council (ASEC) found that only 35% of Americans feel they are making “good” or “excellent” progress in saving money. Sadly, it appears that almost two-thirds say they're making “fair” or “no” progress.
But not all the news is bad. A majority, 68% of respondents reported spending less than they are currently earning and saving the difference. More than three-quarters said they are paying off their consumer debt, or living debt-free. Those numbers are up.
Not surprisingly, the percentage of Americans who say they are building their net worth through home equity has seen a steep decline, from 68% in 2010 to 54% this year. Interestingly, those who say they expect to pay off their mortgage prior to retirement fell from 78% in 2010 to 68% in this year’s study.
Stephen Brobeck, executive director of the Consumer Federation of America says, "Only about one-third of Americans are living within their means and think they are prepared for their long-term financial future." If he’s right, that’s a scary thought.
It’s no surprise that the savings rate increases as annual incomes rise. More than 8 out of 10 people in the higher income brackets (over $100k annually) said they had a sufficient emergency fund set aside. Just 63% of those in the lower income level ($25-$50k) said they had sufficient funds to cover emergencies.
Does having a plan matter? Americans who report having a "savings plan with specific goals" fell from 55% in 2010 to 51% in 2014. Those whose plan includes an amount set aside for saving fell from 46% in 2010 to 40% in 2014 according to the data. "As numerous studies have shown, those with a plan save much more effectively than those without one," according to Dallas Salisbury, CEO of the Employee Benefit Research Institute.
At JL Davis, our mission is to help our wealthy families stay that way for generations AND to help those families who want to acquire wealth do so intelligently. Never before has it been so clear to us that it takes A PLAN to make those things happen.
We remain dedicated to creating and maintaining those plans as well as to carefully constructing and monitoring the savings and investment foundation they’re built upon!
http://www.americasaves.org
http://www.choosetosave.org/asec/
http://www.wisebread.com/64-funny-inspiring-and-stupid-money-quotes-from-famous-people
http://www.gfmag.com/tools/global-database/economic-data/12065-household-saving-rates.html#axzz2xdfwjWr0
Market Week: March 31, 2014
The Markets
Ouch: Last week was large-cap stocks' time to shine (or at least outperform). The Nasdaq's 2.8% loss represented its worst week since early October 2012, and the small caps of the Russell 2000 suffered even more; both were hurt by selling in the tech and biotech sectors. Meanwhile, the Global Dow rebounded into positive territory year-to-date.
Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments.
Last Week's Headlines
• And then there were seven: The largest industrialized nations of the world suspended Russia's 16-year-old membership in the G8 in retaliation for the annexation of Crimea.
• U.S. economic growth slowed in the fourth quarter of 2013, according to the Bureau of Economic Analysis. The 2.6% annualized increase in Q4 gross domestic product was lower than Q3's 4.1% gain. That helped cut inflation-adjusted GDP for all of 2013 to 1.9% compared to the previous year's 2.8% growth. Meanwhile, after-tax corporate profits were up 2% for the quarter--slightly less than in Q3--and a 3.7% drop in corporate taxes last year left corporate after-tax profits up 6.9% for all of 2013.
• After two months of declines, durable goods orders were up 2.2% in February. According to the Commerce Department, a 1.8% increase in commercial aircraft and parts was a key factor in the nearly 7% increase in transportation orders, which led the overall improvement.
• New home sales fell 3.3% between January and February, and were 1.1% lower than in February 2013. However, the Commerce Department said the average sale price rose for the third straight month, though the $317,500 average price was still below the $335,600 seen in November.
• For the third month out of the last four, personal incomes rose 0.3%, and the Bureau of Economic Analysis said personal consumption rose at the same rate.
Eye on the Week Ahead
Unemployment data will be of even more interest than usual as a potential indicator of any rebound--or lack thereof--from the effects of winter weather. A speech on Monday by Fed Chair Janet Yellen will be closely watched for any follow-up on her "six months after tapering ends" remark about the potential timing of Fed interest rate changes. The European Central Bank also is scheduled to meet, and global investors will want to know whether any additional steps will be taken to fight less-than-desirable inflation. Additional data on manufacturing and services also is on tap.
Data sources: All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. News items are based on reports from multiple commonly available international news sources (i.e., wire services) and are independently verified when necessary with secondary sources such as government agencies, corporate press releases, or trade organizations. Market data: U.S. Treasury (Treasury yields); WSJ Market Data Center (equities); Federal Reserve Board (Fed Funds target rate); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); www.goldprice.org (spot gold, NY close); Oanda/FX Street (currency exchange rates). Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. All investing involves risk, including the potential loss of principal, and there can be no guarantee that any investing strategy will be successful.
The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2,000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indices listed are unmanaged and are not available for direct investment.
Prepared by Lee Davis** and Broadridge Investor Communication Solutions, Inc. Copyright 2014
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