Americans Savings Turns Negative 3/11/07

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Americans Savings Turns Negative 3/11/07

Stewart H. Welch III, CFP, AEP
Founder, The Welch Group, LLC

Americans Savings Turns Negative

“American’s Savings Turns Negative”



Last year, the nation’s savings rate fell to the lowest level since the Great Depression. The government reported that consumers spent all they earned and then some, pushing the personal savings rate into negative territory at minus 0.5 percent.  This means that Americans are spending more than they are taking home. The savings rate has only been negative for a full year twice before, in 1932 and 1933, when Americans were struggling with huge job layoffs during the Great Depression.  


Savings is something that Americans tend to struggle with each year. People find themselves living beyond their means and find it very difficult to step down from a lifestyle they’re accustomed to.  Many procrastinate on saving for retirement, justifying their actions by saying they still have plenty of time to start saving.


Some people just need a jump-start and guidance on how to get started saving. By starting to save a small amount now and by establishing an emergency reserve fund you can make a huge difference in your financial situation.


Most people who are not saving will tell you that they simply do not have any money to spare for savings. Yet, we have found that virtually anyone can easily save 10% of their income with little or no pain. You just have to change your habits.  Here are some ideas of how to find some of the money that is spent each month that could have been SAVED!


  • Do NOT buy snacks and drinks at gas stations or office vending machines.  If you skip one 20 ounce drink a day from a gas station at an average price of $1.25, then you would save $38.75 per month or $465.00 per year.
  • Bring lunch to work and avoid eating out.  If buying lunch at work costs $5, but making lunch at home costs only $1.00 to $2.00, then in a year, then you could save approximately $750 to $1,000 per year.
  • Save your loose change.  Every evening, throw your loose change in a jar.  You’ll never miss it and over time this adds up to a lot of money. 
  • Avoid using ATMs of other banks. The fees for using other ATMs can range from $1.50 to $2.50.  Using ATMs two to three times per week can easily waste $150 per year.
  • Avoid impulse buying.  Set a limit of $25 to $50 and commit to postpone purchases for a minimum of 24 hours.  In many cases, this ‘cooling off’ period will change your mind. 

·        Track your spending.  Whatever you closely monitor tends to improve.  For eight weeks, track everything you spend as compared to weekly spending targets.  You will find that this process causes you to make thoughtful decisions about your purchases…and spend less.


No matter how much debt you have, it’s imperative that you begin saving NOW!  It’s OK to start small.  Your best choice is to set up an automated transfer from your bank checking account to a money market account or mutual fund.  Or use payroll deduction into your company retirement account or credit union.  Look for choices that don’t include fees or high commissions.  By taking control, you have begun your journey towards financial freedom.  Next week, I’ll discuss the best places to invest your money when you are starting small.