So Many Shoes, So Little Money – Blog

Luxury versus Necessity

March 10th, 2009

Dorothy Parker once said: “Take care of the luxuries and the necessities will take care of themselves.” She obviously said this before this recession started (plus she died in 1967).

These days, you must take care of the necessities. One important necessity people often forget about is a cash cushion – ideally three months of living expenses. Start by saving up to one month’s worth of living expenses. This may take awhile, but it is really crucial. You want to be able to take care of yourself if you hit any bumps. Work your way up to three months and then promise yourself you won’t touch that money unless there is an emergency.

The sooner you start saving, the better. I urge you to start saving now – even if you only have a little bit left over every month. For example, if you are 21 and do not have any savings, but can start saving one hundred dollars per month (25 dollars per week), and earn five percent interest on your money, by doing nothing more, you will have saved a little over 78,000 dollars by the time you are fifty. (See my January 19, 2009 blog on Interest). If you wait until you are 31 to start saving the same 100 dollars per month, when you are 50 you will have a little less than 38,000 dollars. In this example, by waiting 10 years to start your savings meant you saved 40,000 dollars less. The higher the interest, the bigger the difference will become between saving now and saving later.

Dorothy Parker also said, “I’ve never been a millionaire but I just know I’d be darling at it.”

Fashionista Fact:

Dorothy Parker (www.en.wikipedia.org/wiki/Dorothy_Parker) was an American writer and poet who is best known for her acerbic wit, wisecracks and sharp eye. You could do a lot worse than to read her.

Filed under: Money Management

Tags: saving