Saving Money is Hard? Not At All, Maryland Financial Advisers Say
By Greg Wright
There is a silver lining to the recession. Consumers, unable to get more credit and afraid they will lose jobs, are saving more money to weather the economic storm.
The personal savings rate hit 6.9 percent in May, up from 5.6 percent in April and well above the national average of the past decade, according to the latest Commerce Department data.
Padlock the wallet and save money.
The personal savings rate is the percentage of disposable income consumers sock away in savings. Americans used to save at a healthy clip from the 1960s to 1980s but the personal savings rate dipped to a negative 2.7 percent in August 2005 at the peak of the housing bubble. In other words, folks were living beyond their means.
“I’m making a conscious effort to save because the economy is bad and my job is slowing down,” said Ron Douglas, 57, a home repair and improvement contractor who lives with his wife and two children in Upper Marlboro. “Every time I get paid I put something away so if I don’t have a job I have money. You don’t know if you will have a job tomorrow and you have to pay to live,” he said.
Saving money is not as hard as you think. Here are some tips from Gary Williams (www.williamsassetmanagement.com), a financial planner in Columbia, and Scott Stark, president-elect of the Financial Planning Association – Maryland Chapter. Stark also runs Stark Strategic Capital Management (www.sscm-inc.com) in Freeland, Maryland.
Ideally. you should save three to six months of living expenses to get through an unexpected illness, job loss or other emergency, Williams said. Stark says people like Douglas who work on commission or have fluctuating incomes should save even more than six months worth.
Go on “autopilot” or “forced savings,” Stark said. Have a percentage of your paycheck automatically deducted and put in a savings account. To make sure you aren’t tempted to blow these savings on a whim, make sure you cannot access this account by check or ATM machine.
Do a budget Williams said. Review your bank statements and credit card statements to see where you can cut back. Could you eat out less each month? Do you have to buy a new dress or tie every payday? Save that money instead.
Shop around for less expensive car or home insurance, Stark said. Divert the money you would have paid for higher insurance into savings.
Save money first before investing, Williams said. Investing is more risky.
Pay down debt as quickly as you can, especially on higher interest accounts, Stark said. Once you pay down or pay off the debt save the money that you would have put on that bill.
Participate in your employer 401K retirement savings program, Stark said. Many contribute 50 percent of what you contribute. That is free money so take it, he said.
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