You have to recognize the drill by now. Right about this time every year, the financial doomsayers stand up behind their pulpits and declare that the end is near. Americans aren't saving enough to retire, much less pay off their debt. We're doomed, the sky is falling, and so on and so on.
Have you noticed this story seems to pop up each year right about tax filing time? Is this an odd coincidence or something else? Whatever it is, let's look at the facts and see if we can make some sense of what is really going on.
Why Personal Savings Sucks More than the new Star Wars
From one perspective, it appears that consumers are back to their old ways. Yes, it is true that there were a lot of cutbacks in consumer spending since the beginning of the Great Recession. Yet, now that the money news seems to be more upbeat and positive, many consumers have responded by upping their spending. Actually, in an unwelcome sign for our national economy, the level of consumer debt is increasing again, the same way it was prior to the recession.
If debt is increasing, it makes sense that the savings rate is flat or stagnant. You can see this in the results of a recent survey conducted by the Consumer Federation of American along with the American Savings Education Council. This survey was conducted at the end of a special promotional event to encourage Americans to save more called "America Saves Week" (learn more here). This survey revealed that 63 percent of those surveyed reported their savings progress as either "none" or "fair." Uh oh, not looking so good after all.
Should we be concerned?
Yes, and here are the reasons why: You already know that private pensions are pretty much done and gone. As far as government pensions? Well, you know that strapped local governments throughout the nation are doing whatever they can to get out (weasel out?) from under their pension obligations. To add fuel to the fire, there is also a dismal participation rate in employer offered retirement options such as 401k plans.
Is there anything you can do? Yes, read on.
3 Things Spock Would Say About Personal Savings
1. You have to take charge of your own personal finance. Wake up, smell the poop you just stepped in and resolve to take care of it yourself. It is "illogical" to expect that your government is going to take care of you or to hope that you are the next winner of the Powerball Lottery. At this point, we don't even know how much longer Social Security will even be around. Have you noticed they keep pushing the eligible age further and further away?
2. Doing Personal Savings the right way. Google personal savings tips and you will be handed more solutions than you could ever possibly use. That being said, one commonality to take note of is the importance of making savings a priority. Some personal finance advisors even advise paying yourself first. This is ridiculously easy nowadays with options such as payroll deductions, auto debits from your checking account and the like.
3. Consider unconventional strategies. No, this is not about investing in exotic metals or any other such nonsense. This is about pulling your head out of the sand and taking a good look around. Look at what's working and what's not.
For example, did you know that many checking accounts offer higher interest rates than a savings accounts? What is that all about? Who cares? Just take note and position your money appropriately.
That being said, if you are concerned that you or your spouse will fall for the temptation to spend the money in a checking account, just open another checking account. Then transfer the money from one account to the other. In other words, take advantage of the higher interest rate by stashing your emergency funds in another checking account instead of a measly zero percent interest savings account.
Another strategy is to take a good hard look at your retirement savings, 401K plans and the like. Consider overhauling your retirement plan options. For example, there are real action steps you can take today as explained here.
As you can see, the naysayers may indeed be correct about the average consumer's savings. However, that should not matter to you. The real power is in your hands. Now its up to you to step up to the plate and do something about your personal savings.
