Top Reasons Why Americans Are Not Saving Money
Financial Steps to Take That Will Help You Save Money
Saving money is a concept most people believe in yet so few manage to practice. There are many reasons why people may find it difficult to save, but here are a few of the most common excuses:
- I don’t know where to save.
- I don’t know how to save.
- I can’t save.
- I don’t have enough money to save.
- Prices have gone up and now I can’t save.
If you've found yourself relating to one of these excuses you may be having a tough time getting over the mental barrier that prevents you from putting aside a set amount of cash each month. Think back to your days in college. Even though you liked a subject, you HATED one. You would go to the library before an exam motivated by the potential of a good grade. Once you started reviewing the material, you would get frustrated that you didn’t understand it. Then, you would take a break, go back, and continue to be frustrated.
That’s how most Americans feel when it comes to saving. According to the Wall Street Journal, 26 percent of Americans have ZERO emergency savings. Don’t let yourself become part of that statistic.
Here are some smart financial steps to take if you need help overcoming your own mental barrier.
Pay off your debt: Now this may not seem like saving but it absolutely is. When you get rid of debts such as student loans and credit cards, you are laying the foundation you need for financial stability in the future. While you are paying off these debts, make sure you aren’t continuing to take on more debt.
Build emergency reserves: Emergency reserves are just that, money used only in case of emergencies. Use this for unexpected car repairs or a medical emergency, not on a trip to the Caribbean. All that said it may sound like a lot of money, but building up your emergency fund is just like saving for a new car: Set up an auto-deposit from your paycheck into your emergency fund, and let it grow. Hopefully, you’ll never need to use it.
Short term cash: Keep this money in safe investments such as cash or a CD for an upcoming expense like an engagement ring.
Match and max out your 401k: If your company offers a 401k, increase your 401k contribution amount to be at least what the company is matching (if they are matching at all). This is a deal you’ll want to take full advantage of.
The max that we can contribute to our 401ks is $17,500 per year ($23,000, if you are 50 years or older). So, set a goal for an amount that gets you from your contribution to your maximum ($17,500 or $23,000).
Put money into a brokerage account: Many refer to this just as an investment account. No maximum amount restrictions or investment restrictions. It’s an account that allows for you to invest in any type of investment, such as a stock (Apple, IBM, etc.) or bonds. There are no tax benefits to a brokerage account, but it is very useful for your financial foundation.
It can be easy to lose motivation while saving because results are not immediate. But, to complete the steps to financial stability we need to find a way to stay motivated throughout the savings process. One way is to break down your savings into monthly goals. When you reach those goals be sure to reward yourself with a dinner at your favorite restaurant or maybe a piece of jewelry you’ve been eyeing. Remember not to use all of your savings for your reward, just a small piece of it. The goal is to save, but the mentality with this program is that if you save $200 and spend $50 of it, you have still likely saved more than you would have if you didn’t reward yourself.
Unfortunately, most people wait until it’s too late to worry about their savings. Now, that you are aware of the barriers and hurdles that are not so difficult to overcome, it’s time to begin the process that will allow for you to say down the road, “thank goodness I started saving early.”