Your Savings Rate: Keeping the Good Habits Once the Recession Is Over
Americans are nothing if not resourceful. Confronted with lower incomes and a scary financial outlook during the recent recession, Americans not only got by with less, but they actually increased their savings rates during the crisis. Now that the recession may be ending, it's time to keep up the good work.
For all their resolve and resiliency in the recession, many Americans were forced to recognize that up till then, they had been a little lax about savings. Average savings rates were virtually zero leading up to the recession, leaving many people with little in reserve to meet the setbacks that followed. Next time around it can be different, if you extend some of the good habits you acquired by necessity into the next economic expansion.
Here are some cost-saving measures you may have taken in the recession -- and how they can really pay off once the economy recovers.
- You refinanced. One of the biggest silver linings of the recession was that it brought current mortgage rates down to record lows. People found they could save huge amounts of money by refinancing. Now, just make sure you've locked in those low rates with a fixed-rate mortgage, so you can keep the savings going.
- You ran your household on a smaller paycheck. Some people had to take lower-paying jobs, some had to do without bonuses, and some households dropped from two paychecks to one. Whatever your situation, it may well get better as the economy improves. However, don't automatically ramp your lifestyle back up. As your income improves, earmark some of that additional money for savings.
- You ate out less often. Cutting back on the restaurant habit really adds up over the course of the year. The nice thing is, once you break a habit, you miss it less and less as time goes on.
- You consolidated your credit cards. As credit card rates rose, savvy customers consolidated their balances into the cards with the lowest rates. Keep this habit -- it will not only mean you pay less interest, but the fewer credit cards you have, the less likely you are to run up debt.
- You saved on insurance. Those commercials are often correct -- people really can save hundreds by shopping around for insurance. Get the most out of this effort by putting the money you saved into savings year after year.
- You downsized your cable package. It's amazing how things like cable TV packages get ramped up over time. Once you realize you can survive on dozens rather than hundreds of channels, there's no need to go back.
- You shopped for the best savings account rates. Perhaps it was CD rates or money market rates instead, but when bank rates started falling, consumers became more active in hunting for better deals. Keep in mind that the banks offering the best savings account rates may change from time to time, so don't get complacent.
Perhaps the big lesson here is not to look at any cut in your budget a one-time savings. Even when you have the income to restore some of those cuts, make them ongoing savings by instead paying that money into a savings account. By multiplying those savings over many months and years, and earning bank interest rates on top, you'll really make your good habits pay off.
During crisis, people saving more, cutting debts • Oct 02, 2009 • The Poughkeepsie Journal: http://www.poughkeepsiejournal.com/article/20091002/BUSINESS/910020327/During-crisis--people-saving-more--cutting-debts