Savings Rate Improving, But
"Americans just don't know how to save, anymore!"
While not a direct quote, in essence I hear that sentiment almost daily on television and I'm sure a number of our more seasoned citizens (like my mother) agree with that statement 100%.
(Sign up for our weekly email and I'll send you a Free White Paper with easy ways to save money without sacrificing your current quality of life).
Good News
Here's some good news for all of us - we're better at saving than we used to be.
According to Tiburon Research (as published in the Journal of Financial Planning, 11/2011), the U.S. Personal Savings Rate at 6.0% in 2010. That is a significant improvement over the 2.9% rate in 2008 and 4.3% rate in 2009.
Not So Good News
I wish I could tell you that we're still improving, but I can't. The latest data is available at the Federal Reserve of St. Louis FRED website and it shows that the personal savings rate in the United States is back down to 3.6% and we're heading back in the wrong direction.
Even Worse
What's worse is that even at 6% in personal savings, the average American family is way short of where they need to be in order to be able to retire someday and still enjoy the quality of life they have right now.
For most families, the personal savings rate needs to be 16-20% of gross income (according to recent research), not something in the low single digits. This compares to our in-house target of 20-25% savings rates for our financial planning clients.
That's right. The target is 20% savings. The current savings rate is 3.6%. There is a lot of work to be done.
It IS Possible
The last time I posted these stats (article appeared on Yahoo!Shine this summer), I got a ration of flame mail and nasty comments. Most of the comments went something like, "20% savings is great for rich people, but it won't work for me!"
But it CAN work for You!
While I admit that savings rates of 20% are easier for people who have a higher level of income (something above sustenance), I can say from experience with my own clients (all pretty much average American families) that ANYBODY who is at or above the median family income level ($50,000 per year) CAN save significantly more than 3.6% or even 6% of their gross income without trashing their quality of life.
I have yet to see a client case where we found less than 5% of gross income that was just being thrown away - on $50k in gross income, that's $2,500 being flushed down the toilet each year. With more advanced tools, clients have cut out 15% or more of their expenses without their quality of life taking a hit.
Buyer's Remorse
One key to our process is helping the client understand the difference between an impulsive financial decision and one with a longer benefit cycle (examples in my Free White Paper, "Finding the Leaks - How You Are Throwing Wealth Down the Drain" when you register for our Weekly email). When you understand what's going on in your brain at these moments, it becomes easier to short-circuit self destructive behavior.
Think about this in your own life. How many products did you purchase because you just "had to have it" only to find out a month, week or hour later (once the thrill of spending wore off) that it wasn't so important after all. Ever hear of buyer's remorse? That is a perfect example of what we're talking about here.
There are several other areas where the human brain is hard-wired to blow through cash and we address all of them when working with clients.
No Excuses
At this point you have a choice.
--- You can say that you're case is different and there is no way you'll ever save 20% (or even 10%). That means you will never stop working and enjoy the same quality of life you have today and not need handouts from friends, family members or some government organization. I think you're selling yourself short, but it's your life. Go ahead and flame comment this post. It will make for fun reading for the rest of us.
--- You can admit that as good as you have been about getting control over your money, you could always do better. In that case, sign up for our weekly emails and get the Free Report on Saving Money without Losing Your Lifestyle ... or better yet, take us up on our special offer (below).
John
"SPECIAL" Offer
Call now to schedule 30 minutes or even an hour if you like - more time means finding more money to save. If at the end of our time together you feel there was no value, you owe me nothing. On the other hand, if we can get you more of what's important to you without sacrificing your current quality of life today, then I hope you'll be willing to pay a reasonable fee for that service (far less than the money we'll help you find).
There are no strings attached or future obligations. You have nothing to lose except maybe a little of your time.