I had to laugh when I saw an ad on TV last night for American Express’s new credit card: 1% of eveything you charge on your card is put into a savings account with a 3.15% interest rate. There’s a $35 annual fee for the card.
Okay, so let’s do the math. You wanna save some cash. But you have a hard time putting aside the dough on your own. The solution: keep buying stuff on credit — stuff you probably wouldn’t pay for cash for — and then you won’t have to worry about building your nest egg.
Go ahead and buy that new 42″ plasma screen TV for $2,200 — and a whopping $22 will go into your savings account! What a bargain! Throw a $2,000 Rolex (it’s used, so it’s cheap!) on the card, as well, as you’ve saved another 20 bones. When you substract the $35 annual fee, you’ve come out seven dollars ahead! (Of course, you could always pay cash for a cheaper TV and a less extravagent watch — and save the difference, plus the interest you’d have to pay on the credit card — but we all know what a hassle that can be.)
When most people think about saving money for the future, they try to figure out a way to make more cash — whether it’s through higher income or a hairbrained 1% savings plan like this. It’s much simpler, of course, to simply modify our lifestyles so we spend less than we make. It’s not necessarily easier, but it’s simpler.
One of my favorite passages in Rolf Potts’s excellent book “Vagabonding : An Uncommon Guide to the Art of Long-Term World Travel” is when Potts recounts a scene from the 1987 film “Wall Street.” Charlie Sheen plays a young stockbroker on the make; at one point, he tells his girlfriend that he wants to work hard and make a killing so he can one day retire and “ride a motorcycle across China.” As Potts points out, Sheen’s character — or anyone — could work for a year cleaning toilets, living inexpensively and saving as much as possible, and have enough funds for such a trip.
(Or, of course, assuming the journey might cost $3,000, you could always charge $300,000 on your new AmEx card and have the necessary loot saved for you automatically! Making the minimum monthly payments might be tough, however…)