How to Upgrade your Savings Plan

From the national unemployment rate to the stability of a job market that was previously in a state of influx, the financial outlook for the masses, yourself included, seems anywhere from encouraging to thriving depending on your perspective and, ultimately, how you’re doing as far as retirement planning, saving money and eliminating debt.

Based on 2018 being well beyond the halfway point and 2019 just around the corner, how would you assess your financial planning and well being as the year comes to a close sooner than later? The national unemployment rate is at an all-time low, 3.9 percent as of September 2018 numbers; that is the lowest it’s been since March of 2018 and an improvement on 2017, which started at 4.8 in January of last year.^[1]

Recent reports that date back to May 2018, when the last graduating class hit the ground running and looking for employment were greeted with statistics that would make any recent graduate smile.

Roughly 80 percent of companies surged by Career Builder plan on hiring student right out of college, compared to 60 percent 10 years ago, with salaries beginning around the $40,000 mark backed by, again, the lowest unemployment rate in 17 years.^[2]

Another report shows that college graduates are averaging a little more than $50,000 per year on average in 2018, as far as starting salaries go.^[3]

Even the average income for an American worker is at the $44,000 mark.^[4]

But despite the fact that these numbers look good on paper, you can’t discount the financial trouble that some can’t escape or the worry that goes along with saving money or retiring at a reasonable age.

Inflation is cause for concern since the cost of living is rising in most states versus how much more we’re making, with examples of only about a 10 percent increase in what we’re making nationally since 1973 and house prices growing 83 percent from 1970 to 2000.^[5]

Money, in general, is what keeps most people worried more so than any other facet of their life, and that figure is around 65 percent who say this is a constant state of concern.^[6]

What makes the job market and wages versus cost of living discussion, along with your savings plan or lack there of, is that 62 percent of the population has less than $1,000 saved, with a staggering 21 percent not having one dollar being denoted on their budget as “saved.”^[7]

So if you look at the financial outlook of Americans topically, here’s what you come up with: we aren’t good at saving even though salaries aren’t bad, but cost of living is what is causing a disconnect versus paychecks and expenses.

While that statement and sentiment might be true to an extend, you also have a number of individuals who aren’t doing their due diligence when it comes to managing a budget or having a savings plan that is anything more than rhetoric without action. Also, take into consideration, the number of people who are living beyond their means, who are basking in that mid to high 40s or low 50s salary they’re earning, but spending double that, because of how “good” the economic thrust has been in recent years.

All of this can be traced back to one simple plan and how you’re saving money.

Maybe your savings plan needs a boost or you need to go back and review how you’re spending, why you can’t save and if changes are needed as the flow of money either increases or remains status quo.

Here’s a few ways to upgrade your savings plan, versus what you’re presently doing:

Live Below Your Means: Start cutting to start saving

Previously noted as the housing market being on the rise between the years of 1973 and 2000, and with that has created a thought process and buying mentality that ensures Americans are going to spend what they are approved for, house wise.

If you get approved for a $250,000 house and payment are around the $2,500 mark, you’d assume that you’d want to make sure you can afford it, from one month to the next, right? That isn’t always how this works.

Sure, what you get approved for takes into consideration your debt, income, savings, etc., but not utilities, housing repairs, cell phone service, bills and medical expenses, all things you may forget about when you’re in the process of buying a home.

And that is just one example of how our savings plans get off track because we live beyond our means.

You have about 55 percent of the U.S. population that is living paycheck to paycheck, and further breakdown of that figure suggests that 36 percent fall into the true paycheck to paycheck category, while 19 percent actually don’t even have that luxury and simply have to wait for the next check to even pay a round of bills upcoming.^[8]

Aside from not being to ever save money as a result of this, you also run into issues should an emergency arise or if a job loss occurs and part of some of your income is no longer available.

You can see how this paycheck to paycheck philosophy can wreak havoc financially.

In order to save money, and stop this trend, you need to take a hard-line approach to your expenses, and that money in turn becomes able to be put into your savings account.

By rule, you should be saving 20 percent of your income each month and have about six months of savings put aside at any given moment.^[9]

If you’re about even every month (or worse), you can say so long to cable television, eating out or other expenses that are negotiable at best, and thus transform into money you can put aside.

Wasteful Spending: Stop wasting money by eliminating these things from your budget

For some, wasting money is hardly a black-and-white, cut-and-dry discussion and instead is more about perspective than fact or hard-nosed truths.

Some households argue they need a vacation every year or, on a smaller scale, a larger cell phone plan, cable television and enough channels that you might watch all of them at least once in the course of an entire year.

But the truth is you are wasting money, and that is a way to derail a savings plan, without fail.

Part of what you can consider wasteful in terms of spending is really more about things you don’t really need but also luxuries that, while are obviously enjoyable, are costing you money that belongs in your savings account.

This isn’t to suggest that you can never take a vacation, go to the movies or enjoy anything that isn’t an electric bill or rent payment, but more about building up that nest egg that is nonexistent in the face of spending on top of spending.

Something as simple as how you get your coffee or how much bottled water you drink or lunches you eat out at work can cause a serious problem for you financially. You don’t stop and think about money lost mostly due to how convenient this is.

One study showed that you’ll pay three times as much if you buy a single-brew, K-cup coffee machine versus an entire bag of coffee to brew at home. The study showed a few years ago that 25 percent of the population owned a Keurig, K-Cup system, and that an $8.99 for a one-pound bag of coffee translates into 40 cups of coffee versus 12 cups on the K-Cup system.^[10]

You also can chalk up $232 per month on food eaten outside the home.^[11]

Consider that $232 being put into a savings account, and how that would translate into $2,784 into a savings account.

Again, out of sight, bred out of convenience, makes it easier to justify the expense, even though your savings account is sitting at a modest number.

Budget Properly: Keeping track of expenses means doing that in its entirety

If you’re unable to save money, ask yourself a very important question.

“When was the last time I checked my budget?”

If the response to that question is that you don’t have one, that’s a problem, more so than those who respond by saying they haven’t check their budget, well, ever.

Most Americans don’t really track their spending, and that explains the $1,000 savings plateau most can’t seem to get past.

The hilarity that ensues by not having a budget seemingly doesn’t affect individuals when asked if not having money saved is a problem.

Most say, not really. In fact, almost 20 percent aren’t concerned with their lack of money saved.^[12]

As much as the trepidation isn’t there, neither is the money saved.

That’s why budgeting is paramount to save money more so than playing the guessing game as far as what was saved and spent.

Only 2 out of 5 people actually carry a legitimate budget, and that means more than half have really no idea what they're spending.^[13]

And even those who have a budget in name alone really aren’t doing what they need from a savings plan. The “name alone” means they’re not accounting for incidental spending that occurs daily or weekly, and then isn’t tracked properly.

If you’re only tracking big-ticket items, like a car payment, mortgage or school loan payments, you might miss hundreds of dollars, and the come to the realization that while your budget shows a profit each month and money that should be saved, you’re actually not able to save whatsoever.

A budget truly only is worth having if you’re keeping the detail that is needed beyond just the “big stuff,” and if you’re not keeping track of anything, so goes the idea of saving money, too.

Reviewing and making hard and fast recommendations and changes to your savings plan isn’t always easy.

No one likes to admit financial fault, but if you’re making a decent salary and struggling to save or feel as though money runs out quicker by each paycheck, then some sort of upheaval in your savings plan needs to occur.

Part of that study showing how few Americans have even $1,000 in their bank account also details that about a quarter of those who have a financial emergency borrow money or use credit cards.

That patter is one that will not only lead to a lack of saving money but also more debt, which is the exact opposite trajectory you want to take.

And speaking of taking, stop and smell the proverbial roses and take in how the economy and job market is doing in 2018, but your situation is unique to you financially, and rather than romanticize how everything is perfect, make hard and smart decisions on how to save better, rather than keeping your head in a set of clouds that could burst at any moment.