Americans Risking Financial Disaster
The over consumerism of this country has created an obsession with an unaffordable lifestyle. Households are going further into debt in order to keep up with luxurious living, rather than saving it. A recent survey shows just how abysmal Americans’ savings habits are, reporting that 7 out of 10 Americans only have less than $1,000 in their savings account.
Last year, GoBankingRates surveyed more than 5,000 Americans only to uncover that 62% of them had less than $1,000 in savings. Last month GoBankingRates again posed the question to Americans of how much they had in their savings account, only this time it asked 7,052 people. The result? Nearly seven in 10 Americans (69%) had less than $1,000 in their savings account.
Breaking the survey data down a bit further, we find that 34% of Americans don’t have a dime in their savings account, while another 35% have less than $1,000. Of the remaining survey-takers, 11% have between $1,000 and $4,999, 4% have between $5,000 and $9,999, and 15% have more than $10,000.
Furthermore, even though lower-income adults struggle with saving money more than middle- and upper-income folks, no income group did particularly well. Some 29% of adults earning more than $150,000 a year, and 44% making between $100,000 and $149,999, had less than $1,000 in savings. Comparatively, 73% of the lowest income adults (those earnings $24,999 or less annually) had less than $1,000 in their savings account.
Americans’ Risking Financial Disaster
Simply put, the goal any emergency fund or savings is to carry us when plans don’t work out. Unemployment is always something to plan ahead for and recent unemployment rates, according to the Bureau of Labor Statistics is at 5% of the U.S. population. Many believe each household should have six months of salary saved up and/or an emergency fund to fall back on in case of job joss. Moreover, experts recommend saving 15% of your income to put towards savings. If you save and additional %5 of your income, it can be used as an emergency fund to keep you from using savings. This can be achieved by breaking down your monthly budget:
85% – monthly bills
10% – savings/retirement
5% – emergency fund
As with all budgets, sometimes this figure fluctuates, so if you are able to put more or less into savings, then adjust as necessary. One could even break the budget down further and have a savings for vacations or family centered activities.
Build your Savings in 5 Easy Steps
1. Get out of debt. Your primary goal is financial freedom. Paying off your debt is first step toward freeing up money. Only paying the suggested amount on your credit card debt will not make a dent in the overall debt due to the interest. Organize and list your debts from the smallest to the largest and start paying the smallest debts first. Using a budgeting tool can help. Once the small debts are paid off, move on to the next largest debts on this list and snowball the payments. Essentially, you are creating a snowball effect with your payments and freeing up additional money in your budget for other uses – like an emergency fund.
2. Have an achievable monetary goal set. Starting small and build upon your initial investments for your savings is an easy way to start and not get overwhelmed. (i.e., I want to have $1,000 in savings by Christmas). Some people start with saving $1,000 and many can find this amount hiding in their budgets. We all know that many emergencies can be very expensive (i.e., medical emergencies). Therefore, once you reach your $1,000 goal, move on to saving an additional $1,000 and so on. Read more below on how to slash the budget.
3. Make it easy on yourself. One way to easily begin building your savings is to create a separate account in your bank and set up automatic monthly transfers to easily move money into your account. There are some who prefer to have multiple accounts in order to organize their income better. Some have accounts strictly for emergency funds, savings, vacations, etc. This will help you organize your budget and steadily build your savings.
On the other hand, there are some who do not prefer to keep their money in the bank due to concerns of economic uncertainty. In that case, you can hold your money in a safe or, consider taking your saved money and investing into precious metals. This ties the money up into a tangible investment and keeps you from spending it. It also makes it a little more difficult to cash in and spend it. That said, if the day came and you needed your money, all you needed to do is run down to the precious metals store in your area. Who knows, you could be getting more money than you started out with! As well, by using this method of saving, you could easily begin a very lucrative long-term savings method.
4. Start slashing the budget. Start eliminating the budget busters and nonessentials. Do you really have to get a four-dollar coffee at the high-end coffee house on your way to work? By cutting this small indulgence, you will save over a thousand dollars a year! In an article by The Organic Prepper, she explains how cutting the budget down to the essentials can save you lots of cash.
Now, let’s look at a bigger example. Let’s take the average 10 hour workday (including commute, lunch breaks, etc.) Now spend that day productively at home. Here are some things you might do that other people pay for:
- Growing food $20
- Yard work $40
- Cleaning house $50
- Preparing food from scratch $30
- Mending clothes and doing laundry $20
- Childcare – all day, simultaneous with other tasks $75 for 2 kids
- Bathing and grooming the dog $65
- Walk the dog at lunchtime $10
- Make your own cleaning products and health and beauty aids $20
If you add all of those things up, you are talking about a LOT of money. I based my totals on the prices of those services and goods in my area, and on an average day, I could “earn” $330. Tax free. On an annual basis of a 5 day work week, that is the equivalent of just over $85,000 per year. Again, let me reiterate: tax-free, which can save you another 15-30%.
As well, you can research more gas efficient ways to drive to work or run errand and make goals to cut your gas budget by $50 a month. Moreover, finding a co-worker that lives in the area and carpooling to work can also save you lots of money. If you live close to work consider riding your bike to work or public transportation.
5. Don’t stop saving! What happens when you meet your financial goal? Keep going! Don’t take the extra money out and splurge. Start saving for another type of emergency. There are some who get hit with double whammies and have multiple emergencies at once. Let’s say you saved money for the car repairs example listed in the second tip. When you hit your goal, move on to another one. You could start saving for an even loftier goal like saving six months worth of salary for a job loss.
Life happens and sometimes it doesn’t work out in our favor. Organizing your finances and finding ways to free up some of your money for an emergency will help you create a personal safety net. These are steps that anyone can do. When you have amassed enough money to make your financial goal, you will sleep better at night knowing that you can take care of life’s unexpected events.
Tess Pennington is the author of The Prepper’s Blueprint, a comprehensive guide that uses real-life scenarios to help you prepare for any disaster. Because a crisis rarely stops with a triggering event the aftermath can spiral, having the capacity to cripple our normal ways of life. The well-rounded, multi-layered approach outlined in the Blueprint helps you make sense of a wide array of preparedness concepts through easily digestible action items and supply lists.
Tess is also the author of the highly rated Prepper’s Cookbook, which helps you to create a plan for stocking, organizing and maintaining a proper emergency food supply and includes over 300 recipes for nutritious, delicious, life-saving meals.
Visit her web site at ReadyNutrition.com for an extensive compilation of free information on preparedness, homesteading, and healthy living.