“And let them collect all the food of these coming good years, and let them gather the grain under Pharaoh’s hand, food in the cities, and keep it. Thus the food will remain as a reserve for the land for the seven years of famine which will be in the land of Egypt, so that the land will not be destroyed by the famine.” Genesis 41:35-36
In last week’s Torah portion we read of Pharaoh’s dream and the interpretation provided by Joseph. I don’t want to get in to the whole issue of whether his plan on a national level was appropriate or not. After all the Egyptians managed to make it through the famine but they did so by becoming slaves. Would a market-based approach have been more successful and kept the Egyptians free? That is for another column. What I do want to focus on is his approach to saving. After all Josephs plan was not to get carried away with the ‘go-go’7 years of plenty. To the contrary, he was the ultimate example of saving for a rainy day.
Blow the bonus
How many of us put away money when times are good in order to fund those economic challenging times that we come up against? When you get a bonus from work do you go ahead and spend it all on vacations, home improvement or buying a car? Unfortunately I see time after time people blow through newfound money faster than it took them to get it in the first place. This past Passover I received a call from someone that in the past I had tried to help get out of debt. I hadn’t heard from him in 2-3 years. He filled me in that he stopped contacting me because his mother gave him a gift of over 2 million Shekel 2 years ago, and he spent it all on a home. Didn’t pay off debt, didn’t put any money in savings, put it all in an apartment. Why did he reach out to me all of the sudden? Because it was just prior to Passover and they had zero money, and couldn’t afford to buy wine and matzo.
While this may seem to be an extreme case, I am sorry to report that I can rattle off many similar cases, maybe not to such an extent, but with the same principle.
You never know
Because we don’t have same level of prophecy of Joseph, we need to be extra careful to plan for bad economic times. We can do so in two distinct ways:
- Set up an emergency fund. I know that I sound like a broken record but when the fridge breaks, or you need some unexpected dental work, having that money available is a big help. Try and keep 3-6 months of expenses in the fund and keep it liquid. The point of this money is not to make you a millionaire; it’s to have a chunk of cash readily available n case of emergency.
- Long-term investing. Start thinking long-term. I know it’s hard to imagine thinking of goals and potential need 15-25 years in the future but you need to begin. The earlier you start investing for the long-term the more secure a retirement you will have. In addition just because times maybe good for you now doesn’t mean the money will be rolling in in another 5-10 years. This is another reason to start with a long-term plan. You can get your money working for you and with a long time horizon you may be able to grow the money significantly. This will help cushion and slowdown you may have.
Let’s learn from Joseph the importance for long-term saving and not spending everything that you make. Put money away and you will be able to survive those lean years and still have enough left for a comfortable retirement.
The information contained in this article reflects the opinion of the author and not necessarily the opinion of Portfolio Resources Group, Inc. or its affiliates. Aaron Katsman is author of the book Retirement GPS: How to Navigate Your Way to A Secure Financial Future with Global Investing (McGraw-Hill), and is a licensed financial professional both in the United States and Israel, and helps people who open investment accounts in the United States. Securities are offered through Portfolio Resources Group, Inc. (www.prginc.net). Member FINRA, SIPC, MSRB, FSI. For more information, call (02) 624-0995 visit www.aaronkatsman.com or email email@example.com.