Whoever saves, loses!

Who saves, loses! Pff! And who wants to lose?! Nobody! Me either! And, yes, I lost! I lost a lot of years!

As someone who has been saving since childhood, this statement hurt me. I think it would hurt everyone who goes to work and saves from their salary for various goals: home renovation, vacation, home purchase, child support, retirement.

Who saves, loses! Yes! They waste time and money. Why?!

The statement does not belong to me, it belongs to Robert Kiyosaki.

Discussing the tax law, in America it is a little different than in our country. Those who have a certain amount of debt are exempt from tax and those who save are taxed. If I look at us; it is true. We do not have tax exemptions for debtors, but savings are taxed, as are investments. Not all of them, however. The statement of losing refers to the fact that the amounts that are just saved receive a much too small profit. After all, you can save a small amount, it is diminished by the payment of tax.

The solution is to benefit from tax-exempt investments. Evrika! Yes, I saved a lot and I lost. I lost money because I did not receive a higher return and because my money was taxed. I have been investing for 5 years and benefit from the exemption from paying profit tax.

 Who saves, loses! Why?

Before we can invest, the first necessary step is to save. We don’t lose when we save for unforeseen situations: a burst pipe, boiler, refrigerator, washing machine or stove. For these unforeseen situations, a saving of 3,000 lei can be enough. Saving that we don’t lose refers to creating short-term reserves. You can use the money in case of losing your health for a period of time or your job. For your safety, you need 3 to 12 months of expenses set aside. The more you are a person focused on safety, the recommendation is to have 12 months of income set aside, on the other hand, if you are a person who does not feel a great need for safety, then 3 months is enough to have set aside.

Another set of short-term goals for which saving is not a loss are those such as: vacations, home renovation. All of these goals require you to have money set aside to achieve these expenses/goals. The goal with this saved money is to have it on hand (more or less), without aiming to make a profit. It just needs to be available to access when you have an unforeseen situation, when you go on vacation or when you change your car.

Money – the engine of our financial goals

The money saved for all categories of expenses/goals, listed above, is recommended to be kept: at the “mattress” – in an envelope/jar/diary, etc.  

As I said, here we will have small amounts, which we will only touch when we need them. We do not pursue profit, and the “loss” due to taxation does not affect us much.

Where do we lose money?

We lose money when we save for medium and long-term goals, such as: early loan closure, financial support for children’s studies or retirement. In the case of long-term goals, we lose money by saving. Being long-term goals and having limited possibilities for saving (because if we had the necessary money, then these goals would no longer be long-term and would no longer be important in value) we need to save for a longer period. If we receive 1-3% interest per year on the money saved, from which we pay 10% profit tax, these goals become unattainable.  Saving solutions are not suitable for achieving these goals, but investment solutions.

Investments are solutions that allow you to make money with the money you save.

How not to lose money? 

There are several investment solutions on the Romanian market and they have different characteristics, suitable for certain objectives.

If we are to respect the statement of not losing money and using it for our objectives, exempting ourselves from paying profit tax, then they are:

• Mixed life insurance is a category of financial product whose purpose is to protect your money and offer you an interest rate between 2-5% per year, exempting you from paying profit tax. This category of financial product is suitable for financially supporting your children’s studies and for retirement. Considering that a student starts college at the earliest at the age of 18, the insurance is concluded for a period of up to 25 years of the child, during which the amounts saved are capitalized. More about capitalized interest, find here: https://laurentiumihai.ro/puterea-dobanzii-compuse/ The fact that it is an inflexible product from which you cannot withdraw money can be seen as an advantage or a disadvantage. The advantage lies in the fact that you will achieve your proposed financial objective without having access to them except for the set objective. The disadvantage is that you can use the money for another purpose. It is just that here it is important to have a savings fund for unforeseen situations.

• Private pension pillar III is a category of financial product that aims to achieve the financial objective: pension. The sole purpose: ensuring additional income from retirement does not allow access to money, except at the retirement age, minimum 60 years. Exemption from paying profit tax and capitalization at a yield of 4-8% propel it into the category of financial products that help you achieve this financial objective in the long term. Exemption from paying profit tax targets the amount of 2000 lei. What does it mean? At the end of the contract, you can choose to take the entire amount at once or to spread it over 5 years. The amount withdrawn from this account if it exceeds 2000 lei is taxed at 10%. The profit tax rate is 10%.

Where is it said that the most money is lost? Is it true?

• Unit-linked life insurance is a hybrid between life insurance and an investment fund. The money is invested and generates an average of 9%/year. Once you put the money to work for you and benefit from the tax exemption, you can close the loan for your home early. You can also support your children in their studies and yourself in retirement. Being an account that has flexibility in withdrawals, you have access to multiple objectives. If the amount allows you to do so, you can achieve 2 or even 3, 4 objectives. This way, you don’t have to worry about financial losses and investment strategy. You can have your home sooner. https://www.e-learning.psihologiabanilor.ro/cum-este-mai-bine-sa-stai-in-chirie-sau-sa-iti-cumperi-propria-locuinta/

No, you don’t lose money with this insurance! On the contrary! Whoever saves, loses! Yes! You can save money with this insurance, but it is not for saving money, but for investing it, exempting it from taxation.

All these recommended solutions come from market research and information held as an independent financial planner and consultant, but it does not replace personalized financial counseling. When choosing the categories of financial products that will help us for our future, we must take into account several aspects.

If you want to benefit from a course in the company where you work, you can contact me. https://www.e-learning.psihologiabanilor.ro/cursuri-de-educatie-financiara-in-companii/

Success in becoming aware of money and ways to manage it!