5 Ways You Think You're Saving Money

But you're NOT! In today's economy, everyone seems more conscientious about what they are spending, how much debt they have, and ways to save more. Maybe you've been reading articles about how to save pennies, dollars, or even more, but what if you're not really saving money at all? Here are 5 places where people think they're saving money, but they actually may be losing in the long run.

1. Saving money in the bank (piggy or building)


I love my piggy bank because he's cute, but I also know he's really not the best place to save. Saving has been in fashion for the past 2 - 3 years, but where are people saving? For most, the logical answer seems to be the bank. However, with the rates of return banks are giving customers, as well as the ever-increasing fees, the bank is actually a place where you are losing value.

With inflation at 3.2% over the past 12 months as of April 2011 , a savings account returning <1% is not keeping pace. While you think you're avoiding risk, you are actually risking your purchasing power, because the value of every dollar sitting in the bank is continually decreasing. The dollar you're putting away today will not be worth a dollar 10 years from now.

Don't get me wrong, I'm not saying you should spend all your money. The key will be finding an investment that can average the inflation rate (say 2-4%) just to stay even. In today's environment, that may mean corporate bonds or dividend paying stocks, but until interest rates rise, the bank will remain a bad deal for "safety."

2. Driving to find cheaper gas


As gas prices go up, people find ways to economize their travel. If you're like my dad, you talk about which station gas has the cheapest prices. The caveat is that this gas station may be 10 miles away from the house. So how much will you be saving to go to this gas station? Probably nothing!

If the gas is even 10¢ cheaper per gallon, for a 15 gallon tank of gas, you may be saving up to $1.50. But how much did it cost to get to the gas station. My car gets about 20 miles to the gallon in the city, maybe 25 miles on the freeway (if I'm not stuck in LA traffic). So for a roundtrip to the cheap gas station, I've used approximately one gallon of gas. With gas at $4/gal., I've now lost $2.50 on this gas excursion. Not much of a way to save, is it?

3. Timing the stock market


Buy low, sell high. Somehow, this is more difficult than it sounds—much more difficult. Over the 20-year period from 1990 - 2009, investor returns underperformed the S&P 500 Index's annualized returns by 5%, where the S&P 500 returned 8.2%, and the average investor returned 3.2%. Unfortunately, many investors don't invest for the long term. As humans, our memories are short, and losses impact us more greatly than gains. We act emotionally, so as markets go up, we feel confident to invest, and therefore buy high. When times are tough, spirits are low, and it seems like there is bad news every day, we tend to sell, and sell low.

About half of the potential clients I meet every week are reticent about investing in stocks and bonds, but currently, there are few other investments to grow your money (See #1). As Warren Buffet, king of buy and hold investing says, "Be greedy when others are fearful and fearful when others are greedy."

4. Shopping at outlet stores, using Groupon, etc.


This includes coupons, or slickdeals, or any other "great" deal. My husband has recently fallen prey to a slickdeals.com addiction. It started around Christmas, when he was trying to find the best after-Christmas deal for a new TV. Somehow we were getting a bigger TV as each day and each deal went by. We don't need a 55" TV, nor can we fit it in our living room, but hey, it's only $2200. A steal! And then there were the emails and texts I'd get in the middle of the day. Do we need tuna? We can get 30 cans of tuna for $12! We eat tuna, just not that much tuna.

The same goes for outlet shopping, using Groupon, using coupons, etc. You may find the greatest sales, or the best deals, but first and foremost, Do you need this? Of course if you find a deal on something you use regularly or were specifically shopping for, taking advantage of a sale is a great idea, but buying things just because you it's such a great deal you can't pass it up is the easiest way to waste your time and money. At the end of the day, a dollar spent is a dollar spent.

5. Not hiring a professional for certain tasks


I am absolutely guilty of this one. I am the ultimate do-it-yourselfer. Knit your own scarf, yes I can! Make an ice cream cake, okay! Change the car's motor oil, yessir! Paint the house, absolutely! File my own taxes, of course! Somehow I think I've been on the losing end on at least half of these tasks. And, incidentally, I currently have a half-painted front door.

For certain things, it makes sense to do it yourself. I'm handy, resourceful, and well-read, so in certain cases I do save money by addressing it myself. However, I think it's important to know your limitations and be able to get professional help when you need it. This may mean keeping the plumber's number handy or finding a trustworthy attorney; and it definitely means regular visits to your favorite financial planner.

Wendy Wan Turk
Gerber Kawasaki Wealth Management
2716 Ocean Park Blvd #2020
Santa Monica CA 90405

310-399-6397. www.gerberkawasaki.com

Securities offered through LPL Financial, member FINRA/SIPC. Investment advisory services and fixed insurance offered through Gerber Kawasaki, Inc., a registered investment advisor and separate entity from LPL Financial.

This material contains forward looking statements and projections. There are no guarantees that these results will be achieved. Investing involves risk including potential loss of principal.