Thursday, February 01, 2007

Are you saving enough?

Are you saving enough?

Well, if you're like the average American, the answer to that question is a hearty "NO!" According to this article just released today, the average savings rate for 2006 was -1.0%, which means that people are spending everything they have left after paying taxes and then some.

According to this AP article:

"The savings rate has been negative for an entire year only four times in history — in 2005 and 2006 and in 1933 and 1932. However, the reasons for the decline in the savings rate were vastly different during the two periods. During the Great Depression when one-fourth of the labor force was without a job, people dipped into savings in an effort to meet the basic necessities of shelter and clothing."

That's a little scary! Having a negative savings rate during the Depression seems totally reasonable, but wow, I keep wondering about people who don't save and how will they survive once they get older and can't work anymore? The article says that many people may be counting on the increase in their home values and stocks (I guess in their 401Ks) to take care of them.

I think I probably save money...? I haven't been tracking my incoming and outgoing money in months, so it's hard to tell if I've been saving money or not. I know my net worth has increased, but that really could be due to my 401K and investments increasing, not really me saving more cash.

That is something I want to change. I think I'm going to start an automatic payroll deduction to my savings account for 10% of my take-home and see if I notice it missing from my money to spend on bills and fun stuff. If I make it automatic, then I won't even have to worry about tracking my spending etc. Although once I get more into "Your Money or Your Life," I think I will need to do the tracking as one of their recommended exercises. I expect to write about YMYL once I get done. It's fascinating!!

1 comment:

MDK said...

I've been doing 10%-direct-to-savings manually for a while now, perhaps several months.

My mom calls this "Paying yourself first." :)

Good luck!