What Counts as Saving and What Does Not?

People I talk to are always confused about what counts towards “savings”. You may have heard my reference to saving 15%-20% of your gross income to be successful in your financial plan, but here is the list of items that count and the ones that do not.

Here’s what counts:

  • Retirement account contributions (like 401k, 403B, 457, pension plans, IRAs of all types, etc).
  • Permanent life insurance (that has a cash value).
  • Non-qualified investment accounts.
  • College savings accounts like 529 plans.

That’s it! But extra credit for 401k match (as long as you get it), and any other retirement contributions your employer gives you, like pension, stock, stock options, etc.

Here’s what does not count:

  • Regular savings accounts you use for everyday expenses and emergencies or expenses that pop-up.
  • Mortgage payments, real estate down payments, additional mortgage payments, or accelerated mortgage payments! Your home is not a “bank that you live in” as one client once told me and many learned the hard way.
  • Investment or assets held within your own business: the real estate your business owns, or any hard or soft assets therein do not count. You can’t use your restaurant inventory to pay for your kids college!
  • Any speculative investments that you are making: If you have a brokerage account that you like to buy individual stocks on hunches or tips; or you own gold because you believe that the financial system is going to collapse; or you have friends who have an idea and you put money with them hoping for some kind of return; or your buddy opened a restaurant and you want to take on 5% so you could sit down and get free drinks and say you’re part owner of the place. All things like that you should not consider long-term savings. They are too risky and too illiquid. I hope you do well with them but they can’t be counted on to produce the resources for the future needs that you have.

I hope this helps you stay clear about what is really helping you win financially in the long term!






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