Are you savvy about saving or do you need a new strategy?
February 25 – March 2 marks the 7th annual America Save Week. Government agencies, nonprofit organizations and private businesses come together to help average Americans develop more effective strategies for saving. With that in mind, we’ve put together this infographic provides some insight into the saving philosophy of the average American.
Why aren’t Americans saving more?
When asked why they aren’t saving, most Americans point to debt repayment as the main reason they don’t save consistently. Essentially, most households are focusing so much of the income in their budgets towards eliminating debt – particularly credit card debt and student loan debt – that it’s leaving nothing to save.
While debt elimination is key in maintaining financial stability in the here and now, having no saving strategy in place puts non-saving households at high risk for financial distress. One expensive unexpected event or accident can throw a budget completely off track.
With that in mind, there has to be a balance between the various financial interests. You have to balance bills, expenses, debt and savings against your income to ensure you’re giving at least some attention and financial love. So 100% of your extra cash should not just be put towards debt elimination. Some should go to repaying off debt, while another part is allocated for savings.
Of course, you may feel like implementing a strategy like this will simply mean you’re going to be in debt longer, but that isn’t really the case. Without savings, every out-of-budget expense that comes up gets put on a high-interest credit card. As a result, you continually add to your debt as you try to pay it off. It’s a cycle that can be almost impossible to escape using traditional means.
One good option for achieving balance is to use debt consolidation to roll similar debt payments into one low-interest monthly payment. Several options exist for credit card debt consolidation, as well as student loan debt consolidation. In many cases, these consolidation options lower your total monthly payments for that type of debt, leaving more cash flow free in your budget to put towards other concerns, such as savings.
“By allocating different portions of your budget to fundamental financial concerns like debt repayment and savings, you can achieve financial stability that stands up in spite of challenges,” says Gary Herman, President of Consolidated Credit. “By extending your focus, you can actually eliminate debt effectively because you’re not forced to add to it every time something unexpected happens.”