America and Military Saves Week are happening now, Feb 22-27.
Saving is something you should be doing on a daily basis. With any luck, you’re one of the 52% of Americans who are saving at least 5% of your household income, a statistic from the 2015 Annual National Survey Assessing Household Savings. If so, this week is the perfect time to review your saving strategy to see what you can do to improve it this year.
For those who aren’t saving, America Saves Week – and it’s counterpart for service members called Military Saves Week – are designed to help you stop procrastinating and overcome whatever challenges may be holding you back. Savings is key to financial stability because it helps avoid debt while supporting your household as you work to achieve your goals. Without savings, you’re at a higher risk for financial distress and debt problems.
With that in mind, we have some advice for everyone of what you can do during this week to help you be a more effective saver for the rest of 2016…
If you haven’t started saving…
Households who aren’t saving consistently usually have one of two problems… or both.
- Every penny of income is spoken for, so you have nothing left to save.
- You have no savings, so it’s seems daunting to save up anything since you’re starting from zero.
If you simply don’t have anything to save because you’re spending everything you make then you have a budget problem. Even without the issue of not saving, you can’t expect to maintain financial stability if you’re one unexpected expense away from financial distress. You have to take action to fix your budget and get debt under control so you can start saving.
In this case, your first step should be a call to speak with a certified credit counselor. During the free consultation they review your budget to see what’s holding you back, along with reviewing your debts to see if consolidation could help you get your budget back into balance. One free call can help you rein in overspending and see if you qualify for a debt management program that may reduce total monthly payments by 30-50 percent.
Then the money you save from reduced debt payments can be used to start saving. If it’s the second reason above holding you back at this point then it’s all mental. Just get started. Having $5 in savings is better than none, then $10 is better than $5. Once you start building it will be easier to maintain momentum.
If you started saving recently…
Building a financial safety net for your household takes time, so see where you are in achieving that basic level of savings. Your net should be able to cover 3-6 months of bills and necessary budget expenses like groceries and gas.
With that in mind, see how much you have and compare that to what you need to have. Can you save the difference before the end of the year with your current monthly savings? If not, can you increase savings for the next 11 months to reach your goal? Also keep in mind that most Americans will be receiving a tax refund in the next few months. Putting it into savings is a good use for that money.
You may also want to take this week to look at different savings tools that will help your money grow faster. If all of your savings is sitting in a basic savings account, chances are good that the rate applied to the money is hardly going to help it grow effectively.
Instead, look into moving all or some of your savings to an account with a higher APY (annual percentage yield) or one that compounds faster. Money Market Accounts often have better rates, but require a large deposit. The money from your financial safety net may be enough to make this kind of account a good option for you. You can also consider CDs that can mature anywhere from six months to a few years.
If you’ve been saving for a while…
If you’ve been saving long enough that your financial safety is in place already, then you should really be saving up for either something specific so you can avoid taking on debt or because you want to build money for new investments.
In the first case, you’re planning ahead so you can use savings to strategically avoid generating debt from things that usually require using credit. This can be anything from taking a vacation this year to generating a down payment for your next car. Look at your life and think about what you may need in the next 11 months. Start saving now for that specific goal and you can pay for all or part of that big expense in cash.
The second part is where many people start to get intimidated. We know – the idea of investing can be scary if you’ve never done it. However, since you have healthy savings already and are simply looking to improve on an already stable financial situation, you’re in a good place to jump in in spite of the risk. Start small if you have to, with safer investments like CDs and bonds, then work your way up.
As you start to get familiar with investments, also take time to review your retirement accounts. These are usually mutual funds that allow you to invest your money over a range of high and low risk investments. This can be a good way to get familiar with how investing works and will help you be more effective at saving for retirement. If you have questions reach out to a financial adviser to get help. Don’t let lack of knowledge or fear of the unknown keep you from taking action that can improve your life.