Earlier this year, a national survey conducted by BankRate.com found that nearly two-thirds of Americans (63 percent) don't have enough in savings to cover a $500 car repair, and only 23 percent thought they could handle the unexpected repair by cutting spending in their budget.
These numbers are scary, and they underscore an important point: Many Americans are not saving enough. Data out of the Federal Reserve Bank of St. Louis estimates that the U.S. savings rate is about 5.5 percent at the time of writing. When you consider that a savings rate of 10-15 percent is considered to be a reasonable benchmark-and sometimes, a savings rate of 15-20 percent may be required to meet savings goals-it puts into perspective the importance of boosting the amount we're saving, whether it's for a rainy day or for retirement.
Now, there are those who simply don't have the resources available to save more, and we aren't insensitive to that fact. As much as we stress the importance of saving, it may not be feasible to do so at this moment.
We also recognize, though, that there are readers out there who aren't saving or aren't saving as much as they may want to, and who have the wherewithal to increase the amount they're saving.
If you're looking to give your savings a boost, consider these two tips to help make increasing the amount you're saving an easier task to complete.
ADVERTISEMENT
Pay yourself first
The primary reason why people don't save more is because they aren't automating their savings. Rather than having a portion of their paychecks diverted to a savings or retirement account, they instead wait until the end of the month and then, after paying all of their bills, they plan to save whatever is left over.
There's only one problem with this strategy: There's never anything left over! We tend to spend the entirety of our paychecks. When the end of the month arrives, our monthly budget has been entirely allocated. If you have your savings automatically deducted from your paycheck, you'll naturally curtail spending and learn to live off of what's left.
Gradually increase your savings rate
If you feel like you need to be saving 15-20 percent to reach your goals but are only saving 5-
6 percent right now, saving an additional 10 percent of your income immediately may not be practical.
The drop in your paycheck would probably be quite shocking, and it may not even be feasible depending on your current budget.
An easier way to reach your savings goal is to increase your savings rate by 1 percent annually until you get to your target. Timing that increase when you get a raise will make the savings rate easier to manage as you shouldn't see a drop in your paycheck. Some employer plans have the option to automatically increase your savings rate if you want to avoid having to manually do it yourself.
ADVERTISEMENT
That said, we know that many families have been experiencing stagnant wages for a number of years, and increasing the amount being saved isn't a realistic option. Strive to save as much as your budget allows in the interim until you, hopefully, begin to see an increase in your wages.
Saving more is something that we all acknowledge we should be doing, yet actually following through can be easier said than done. Working to take advantage of automation will help take the task of savings off of your mind and help prevent spending money that may be better off saved for tomorrow.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
By Bruce Helmer and Peg Webb, financial advisers at Wealth Enhancement Group and co-hosts of "Your Money" on KLKS 100.1 FM on Sunday mornings. Email Bruce and Peg at yourmoney@wealthenhancement.com . Securities offered through LPL Financial, member FINRA/SIPC. Advisory services offered through Wealth Enhancement Advisory Services, LLC, a registered investment adviser. Wealth Enhancement Group and Wealth Enhancement Advisory Services are separate entities from LPL Financial.
