Saving money is a job. It takes thought, budgeting and most importantly, money. Let’s start by taking each one of these separately:
Thought: In order to think about saving money correctly, it’s essential to possess financial literacy. This means you need to have a basic understanding of topics related to managing personal finance, money and investing.
Budgeting: In addition to having a basic understanding of finance, you need to create a budget in order to ensure that outflows don’t surpass inflows. There are a number of ways to set up a budget for your specific situation.
Money: It’s pretty simple: You need money to save money. This is where many of the surprising reasons people aren’t saving money come in. Income, debt, emergencies, etc. are all a part of why Americans have trouble saving. See some of the stats for yourself…
4 Top Mind-Boggling Reasons Saving Money is So Difficult
- Income. According to the last census bureau’s American Community Survey, the median household income in the United States was $60,336. Let’s think about that for a moment. With so many monthly bills, credit card debt, mortgage/rent payment, unexpected expenses and more, is there much left of that $60,3361 to put away for savings? It might seem impossible at first, but careful budgeting (and spending) can make the answer to that question a resounding “yes”!
- Debt. The 2018 Northwestern Mutual Planning and Progress study revealed that the average American household had a personal debt of approximately $38,000.2 Much of that is credit card debt which has its own surprising stats: Nearly 1/3 of American pay the minimum due on their card and the average household pays $904 in annual interest.3
In order to lower or wipe away debt, we most likely have to use the money we’d rather use for saving. That’s why getting rid of debt is so important. It’s impossible to save money if we’re too busy trying to eliminate monthly credit card or loan debt. Believe it or not, there are quite several ways to lower and/or eliminate debt so you can start using that money toward savings.
- Emergencies. 66% of Americans would struggle to come up with $1,000 if an emergency or unexpected expense came along.4 Think about it… your car needs repairs, you lose your job, one of your major appliances breaks down. It could be a number of things. Do you have enough in an emergency fund to cover those costs?
If you do, it means your savings are going toward emergencies. If you don’t, it means you’ll have to borrow or use money from somewhere else to pay for the issue at hand. How are you supposed to save money if one or more unexpected expenses come along? This point comes down to learning about finances and budgeting appropriately.
- Generational Issues. According to a study from the National Endowment for Financial Education, only 24% of Millennials demonstrate basic financial literacy.5 In essence, that means about almost three-quarters of Millennials don’t know how to properly manage their finances.
You can only imagine what this means for the future of savings. If one doesn’t know the importance of spending less than they earn, how will they be able to save for retirement or even for emergencies? Once again, proper financial management can be learned and hopefully it will be before this latest generation’s debt overwhelms its savings capacity.
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