The data is clear: Americans are not saving enough. Forty percent of all Americans are living paycheck to paycheck. Forty-three percent of Americans do not pay off credit cards every month with an average household credit card debt of $15,000. Of the 40% that live paycheck to paycheck, 24% make between $100,000-$150,000 a year. Forty five percent of Americans do not save at all. These statistics are alarming.
We are a culture that likes to consume which is creating financial hardships for our future selves. We like to spend money more than we like to save. For example, did you know that 30% of American’s buy their pets Christmas presents? Yes, I am a part of this statistic. (But let’s be honest, they probably deserve presents more than half the people on our shopping lists.)
The majority of people know that they should and could be saving more. There is something that everyone could be saving for – maybe building up your emergency fund, a down payment for a house, college for your children, or the big one – retirement. Well, I am here to tell you that building up your savings is not going to happen overnight and the strategy to save is not one-size-fits-all. It usually starts with a budget where you have to give something up that your present self wants to provide for your future self. I like to compare it to dieting; it is a lifestyle change and you won’t see results overnight.
As we have just passed through one of the biggest spending times of the year – the holidays – I thought I would share a few creative ways to start saving money.
- Don’t buy cheap for cheap’s sake. Everyone knows that person, or is that person (no judgement) that tries to buy goods or services for a really good deal. I am here to tell you that (in a lot of cases) you get what you pay for. When you are buying a big ticket item or paying for an expensive service, do your research. Ask yourself, why is it such a good deal? You don’t want to buy something you really don’t need or pay for someone to fix something you bought on the cheap.
- Don’t buy it on sale if you wouldn’t pay full price for it. Did you know that your brain gets a dopamine hit when you spend money? Did you know that the dopamine hit is even bigger if you got it on sale? This is why so many of us like to brag about how much we saved on something. If you wouldn’t pay full price, then you probably don’t need it.
- Remove your credit card numbers from your online accounts. Does anyone else feel like when they buy something online (Amazon) it’s so easy that you don’t feel like you have even spent any money? I have a confession: sometimes I do online shopping in bed before I go to sleep. However, if I want to buy something, but I have to get out of bed to get my credit card, I won’t buy it. This is the one time that my laziness works in my favor. But if the website has my account number saved I usually end up buying it. Moral of the story: make it harder for yourself to spend money. Try not to memorize your credit card number either.
- Designate one day a week that you do not spend any money. You may need to pack a lunch for work or maybe brew your own coffee. This may seem impossible, but trust me, you can do it.
- Open an investment account with a friend. You and a friend, family member, or coworker could each open an individual or joint investment account. Together you can commit to a certain amount to save each month and work together to invest it. It is similar to having a workout buddy; you can keep each other accountable. It is also a nice opportunity to learn about investing.
- Calculate purchases by hours worked instead of the cost. Let’s say that you make $15 an hour. Now let’s say you indulge in a Grande Dirty Chai Latte every day from Starbucks before work. At almost $5 a pop, five days a week, that is $25. That is almost 2 hours of work that you spent on lattes this week (and 1,500 calories). Kind of makes you reconsider the coffee that is brewed at work instead, right?
- Rotate your streaming services. There are so many subscription services out there (Netflix, Amazon, Hulu, HBO, Starz, etc). Try rotating through the difference services on a monthly basis. If there is a show on Netflix that you are dying to watch, pay for Netflix for month so you can binge watch it. Then switch to HBO next month so that you can catch up on Game of Thrones before the final season next year. This will save you from paying for all of the services at once, while keeping you up to date on all of the good shows. You will never have FOMO (fear of missing out) again!
- Don’t spend your emergency funds on emergency “funs”. Your emergency funds should only be used for real emergencies. A last minute vacation may seem like an “emergency” but it’s not. Don’t do it. Create an emergency “fun” account on the side for these types of emergencies.
- When you buy something non-essential, match the cost and add it to your savings. This is a difficult one. But imagine if every time you bought that latte you put that same amount into a savings account. This either forces you to put more money into your savings or not buy the latte in the first place which means more money in your savings. (I apologize for picking on all of the latte lovers out there).
- Take advantage of matching contributions in your employer sponsored plan. Okay, so this tip isn’t very creative…but if your employer offers a match in your 401(k) or other employer sponsored plan, contribute at least the minimum amount to the plan to receive the full match. If you don’t, you are basically saying that you do not want the “free” money that your employer wants to give you. It is literally FREE money! Do it!
My final piece of advice… don’t start a new budget and diet at the same time (I have lost friends this way.) Albion has created a budget worksheet that can help you get started with a savings plan that works best for you. Contact us through our website for a copy.
Danielle Gregory, Wealth Builder Advisor
Albion Financial Group