How to Avoid Savings Pitfalls

In a word, how would you describe your ability to save?

“Good,” “bad,” or perhaps something a little harsher one way or another.

Consider that one of the reasons you may not have money saved or are having a hard time planning, prepping, budgeting or holding on to the almighty dollar could stem from bad advice to ignoring your finances altogether.

You also could be someone who makes some of the more common money mistakes and missteps and unfortunately commits them to memory, thus repeating history and finding yourself woefully short of your financial goals.

You’re not alone.

Saying that most people are concerned about money is like the proverbial “the sky is blue” analogy, but to what degree are people fretting about their finances.

That is a question that is received with a stark, stunning answer.

Reports have shown and survey conducted that 65 percent of Americans lie awake being concerned about their finances, with most of that health care and retirement savings being tops on the list at one and two, respectively (38 percent said its healthcare and insurance bills).^[1]

The rising concern year after year and on a consistent basis is surprising on one hand given that the job market and unemployment rates are stable, if not better than anticipated.

A more competitive job market has allowed for unemployment rates to hit a 3.9 percent low, the best it has been since 2000.^[2]

Even with that nudge in the right direction, the financial situation hasn’t improved, when you consider aspects of saving such as a savings account, emergency funds, retirement accounts or borrowing money.

All of those aren’t doing so great, when you look into the numbers.

A study done in June 2017, one year ago, says of all Americans have zero dollars put away for retirement and less than $1,000 saved; 35 percent have only a few hundred dollars and 34 percent have zero dollars in a savings account, with only 15 percent having around the $10,000 mark.^[3]

If the job market is up, unemployment is down but no one is able to save money, you’d have to assume there is a disconnect from savings, spending and budgeting, among other cornerstones of your finances.

That would be drawn back to things we’re doing on a daily, weekly and monthly basis with our finances, from not paying ourselves first and setting aside a certain percentage of funds to a savings account to ignoring budget or living beyond our means from one paycheck to the next.

The idea behind a robust economy, stable job market and more people working is to find the means to be able to save money, put it aside for the “rainy day” and start thinking about how to catch up or start a retirement account that matters.

All of these are afterthoughts for a variety of reasons, the savings plan that is non existent or simply isn’t followed through with despite the best attempts to do that by the masses.

The intent and want is there, but the execution leaves a lot to be desired, not to mention a willingness to not learn more about what you’re doing wrong.

If you still don’t believe saving money isn’t a high priority consider the study done that says 36 percent of the population is more interested in having money for a vacation than the 32 percent that are focused on retirement accounts and funds of that ilk.^[4]

Still not sure you’re ignoring saving money or making mistakes?

Here’s what you’re doing wrong, why you’re broke and the reason you aren’t saving, as a means not to point out flaws but fix what is broken:

Warning tracker: If you’re not budgeting, you’re not saving

Have you found yourself leery or scared, even, to check your bank account information? Have you turned off those alerts about a low balance and would rather “take your chances?”Sounds as though you’re someone who has opted to ignore the idea or concept of budgeting, and would rather fly by the seat of your proverbial pants and hope for the best.

Not a smart idea.

Budgeting is the most important part of not only spending but saving money, as the latter simply can’t happen if you aren’t tracking expenses, even down to the last bottle of water or cup of coffee you’re having from one day to the next.

Some argue that budgets don’t work or are a bad idea, but mostly that opinion is derived from fact but instead looks at budgets that are unrealistic or simply can’t be followed because they’re disjointed or aren’t really following a blue print for success.

An unreasonable budget is a lot like a weight loss plan that says you have to eat celery and water all day versus the burger and fries you’re having instead: too drastic of a change.

If you are new to budgeting, keep it simple and use the 50/30/20 rule that suggests 50 percent goes to needs, 20 percent toward retirement and savings accounts and 30 percent for whatever else you want.^[5]

This approach allows you to have money for fun stuff, trips and other expense that aren’t utility bills and your rent, but also gives you the opportunity to save and set money aside properly.

Your overall spending, broken down even further, should be about 25 to 35 percent on housing, 5 to 10 on utilities, with 10-15 percent on both food and transportation for each and 10 to 15 percent for saving money; one issue that creeps into most budgets is the 25 to 35 percent for housing with the national average on the high side at around 33 percent.^[6]

Bad tendencies: If you’re financial foresight is poor, you aren’t saving money

Some who budget and spend wisely have that sixth sense, an adept and accurate look at how money should be spent.

Others have bad instincts and tend to overspend as a result.

Yes, not tracking spending is a problem, but they’re also impulsive and don’t worry about the consequences all that much, either.

Consider that 76 of the average shoppers spending decisions are made in the aisles of those very stores on a whim, with 57 percent ending up spending more cash then they planned.^[7]

This is a prime example of why we overspend; we’re engaged and influenced by sales, marketing and clever ways to get us to spend more (think of spend $50 and save $25 when all you wanted was a $10 shirt).

That mentality reeks of the “too good to be true,” but what’s happening is you’re spending when that isn’t your intent.

An interesting study suggested that credit cards and credit limits also influence how we spend or, in this case, overspend. The study discusses that credit limits being higher suggest to a consumer that they’re able to spend that much based on future earnings potential and gives them a sort of false sense of security and stimulates unnecessary spending as a result.^[8]

Debt consolidation: If you’re spending above your means, you’re not saving money

Numbers can always be misleading and statistics swayed one way or another, but you can’t overlook that there is a credit crisis in the United States, and you can’t ignore the fact that most people are trying to keep up with the “Jones’ “ and can’t help but live far beyond their means, including those who fall into and under the paycheck to paycheck category.

The average U.S. household is around $16,000 in credit card debt, a staggering figuring.^[9]

To make matters that much worse, approximately 8 out of 10 individuals state they live paycheck to paycheck, meaning 80 percent aren’t able to save anything and rely on simply waiting and hoping that two week period (or however often you get paid) away just to break even again.^[10]

And don’t let the title of this heading fool you, this isn’t a call to action to start consolidating debt (although that isn’t a bad third or fourth option) but instead being more inclined to budged, cut expenses that you don’t need and start putting money toward paying down your debt.

Consider this as an option: take the lowest balance credit card you have and pay as much as you can toward it budget wise and then the minimum payments on everything else. Once that lowest amount is paid off, take what you were paying on that and put it toward your next highest balance, keeping the minimum payment plan on for the rest of your debt. This inverted pyramid method of sorts allows you to see progress and start paying down (and off) debt that you’re carrying.

As far as the paycheck to paycheck piece, you might want to take a second look at that budget.

Gone from it can be high-priced cell phone bills, take out food orders and cable bills that can be cut in half.

Roughly 72 percent of Americans visit a fast-food place for lunch, with 20 percent doing it every single week at least once per week; food and drink sales soared just three years ago to 745.61 billion dollars n the United States with 49 million visiting fast-food restaurants and 19 million full-service restaurants, and that was just in one season (spring, 2016).^[11]

The average person spends $232 eating out each month, so that’s a nice piece of change for someone who is having trouble saving money.^[12]

That $232, even if just cut in half, can equate to almost $1,400 in your pocket by the end o the year. If you’re someone who has $16,000 in debt, that money can get that debt paid off in 11 months.

Those who are able to save will argue up and down, tooth and nail, that the process is hardly easy or a foregone conclusion.

As stated, the majority of people want to save money but quite frankly don’t know how.

To tell the average person they should be saving 15 percent of their income is almost laughable or you’ll have that same person look at you as though you’ve lost your mind. But that 15 percent number is what you should be saving on average.^[13]

If you’re not hitting that goal or aren’t able to save, you’re doing something wrong.

The good news is fixing it doesn’t have to come with heartache, pain, blood, sweat or tears, but instead a more specific path of travel, a budget that is realistic and working and expenses that are focused on what you need rather than what you want.

This isn’t to say you can never spend dollar one on something like a vacation or wardrobe but doing so in good financial health is what the focal point should be.

So the next time someone asks you how your finances look, you’ll have a much better answer prepared for them, rather than being sheepish, solemn or so deeply rooted in sadness about your savings that mum is the more popular word as a response.