Page 71 - Benjamin Franklin\'s The Way to Wealth: A 52 brilliant ideas interpretation - PDFDrive.com

31 NOT SAVING BUT DROWNING

‘If you would be wealthy think of saving as well as of getting,’ says Franklin. While he
clearly advocates saving he adds a subtle point that modern savers would be wise to
heed: ‘the Indies have not made Spain rich, because her outgoes are greater than her
incomes.’

DEFINING IDEA…
People working in the private sector should try to save money. There
remains the possibility that it may someday be valuable again.
~ NORMAN R. AUGUSTINE, US AEROSPACE BOSS AND AUTHOR OF AUGUSTINE’S

LAWS

Outgoings exceeding incomings is an obvious recipe for financial disaster,
but often we simply don’t see that this is what’s happening to us because
we are blinded by names. It’s only human, after all, to think that any
money put into a savings account counts as savings. That’s often not the
case, however, since many of us have money in savings accounts that we
virtuously refuse to raid while still running up credit card debts that are
being charged at up to five times the APR of our savings. In that case a
savings account is nothing of the kind—it’s really a losings account.

Clearly, then, the first step towards saving is to pay off any debts that
aren’t being lent at a true 0% interest rate. That’s a hard bullet to bite
because it means that your savings disappear instantly into the pit of your
outgoings, but without overcoming that psychological hurdle you’ll never
claw your way back into real profit.

The next step is to take a long hard look at your savings account and what
it really offers. There are two main ways in which savings end up as
outgoings and they can both be avoided. The first is tax. If your money
isn’t protected by some kind of tax-free umbrella then any interest it earns
will count as taxable income.

If you still think a savings account is the way to go, or if you have already
reached your tax-free limit for a given year, then make sure that it is at the
highest rate possible to minimise the thieving of the second great savings