Here's an astounding fact: Last year, American families spent more than they made.
That's right. According to the federal Bureau of Economic Analysis, our savings rate (the difference between after tax income and how much we actually spend) has been falling steadily for years. In 2007, it reached a new low of negative 1.5 percent.
Families make up the difference by drawing on their assets (things such as the equity in their home, investments and cash savings); however, declining real estate values and increased costs for essentials such as fuel and food have more households feeling the pinch.
How can you get back on top of the savings challenge?
.Make a commitment: Even with gas, food and housing prices going up, you can squeeze some money out of your paycheck into your savings. However, reversing the spending trend takes commitment. Make a contract with yourself to save a set amount every month and refuse to tap into your savings for any other purpose.
.Be consistent: The basis of any savings plan is a solid budget. Sit down with your pay stubs, bills and statements and figure out exactly what you have coming in and what you have going out. Now, divide the spending into two lists: things you need and things you want. Anything you aren't spending on necessities is money you could be saving. Decide how much of that money you want to save, and stick to that goal each month.
.Get creative: Just as there are new demands on family budgets, there are also new resources for saving:
.Employer matching programs such as IRAs and health care savings accounts use pretax dollars so you pay less income tax. Because they are deducted right from your paycheck, you're less likely to feel the pinch of saving, and since many employers match your contribution, they're a great way to increase your saving power, too.
.Automatic savings plans take the guesswork out of saving. Transfer a set amount to your savings each month or schedule an automatic deduction online for any amount and frequency you choose.
.Direct deposit is another way to automate your savings. Deposit your paycheck in an interest-bearing account and use electronic transfer to put just enough in your checking account to pay your bills.
.Reward programs from your credit card company turn spending into saving. Look for plans that offer cash back and have the bonus deposited in your savings.
.High yield savings accounts maximize savings. Look for one online or ask your bank for their best rate.
.Round up to savings with a debit card plan that rounds up your debit card purchases to the nearest dollar and puts the difference in your savings. They make savings painless and easy. Some banks also match your savings up to a preset level.
With these simple saving plans, you can make saving a household habit and start seeing your pennies add up in no time.
This article was submitted by Van Canada, regional president at Riverside Bank. Mr. Canada can be reached at (386) 547-0716.