Lack of savings is a crisis in the United States–but we may not have known just how severe the problem was until now. According to a new survey by GOBankingRates, one-third of Americans were unable to contribute to their savings this year.
In addition to the dangers a lack of savings poses to your retirement (it can and will wreak havoc on your golden years), there’s a number of other ways in which not saving this year is a huge problem.
You’re Vulnerable During Emergencies
Perhaps the most significant repercussion of not saving this year is being potentially caught in the lurch when an emergency strikes. “Not having savings leaves you vulnerable to unexpected medical emergencies or sudden expenses such as car repairs, a broken AC or a leaky roof,” said Melissa Cid, consumer savings expert for MySavings.com.
You Can Quickly Spiral Into Credit Card Debt
When you don’t have enough money in your savings account, you may be forced to lean on your checking account, and when you deplete that amount, you’ll have no choice but to put expenses on a credit card. Because of their high interest rates, credit card debt is toxic to your financial health.
“Not having money in savings can snowball quickly to incurring credit card debt,” Cid said. “Once you find yourself financing big purchases on a credit card, you are now subject to high interest rates, making these purchases over 20% higher if you don’t pay off your balance right away.”
It’s Harder To Enjoy Life to the Fullest
Although it has been said money doesn’t buy happiness, it’s indisputable that money nurtures the freedom to enjoy and participate in the things that bring us happiness. For example, if you lack savings, it’s difficult to travel for leisure or attend certain events.
Increased Stress Level
When you have no savings, you’re more likely to be stressed about it. This is because lack of financial security takes a toll on our mental health. According to a study by Thriving Wallet, 90% of Americans are stressed out because of money.
Being Unable To Buy a Home
Buying a home in the U.S. is more expensive than ever, but regardless of the housing market climate, buying a home requires a substantial down payment–in cash. If you don’t have enough savings, you won’t be able to make the leap into home ownership.
Lacking Generational Wealth
If you don’t have sufficient savings, you won’t be able to build generational wealth. This ultimately means that when you die, you won’t have much to give your heirs.
No Career Cushion
If you don’t have a nest egg in place, how can you navigate a layoff or another bad surprise pertaining to work? No backup money means no backup plans, in many cases. This is a negative place to be in.
Why Aren’t People Saving?
There are several reasons why people aren’t saving enough or at all, including inflation and the increasing cost of living. “There are still significant pressures inflation is placing on people, and as the prices of goods and services increase, purchasing power decreases, making it harder to set aside money to save,” said Chris Keller, CMO of Empower FCU.
“In parts of the United States, rental prices have skyrocketed, causing people to allocate a significant amount of their earnings toward ensuring proper housing. Consumer debt repayment has been a priority for Americans, causing a tradeoff between paying off credit cards and building an emergency fund.”
Furthermore, social norms and society may play a part in our lack of savings. “With the rise of our influencer culture, there is pressure to keep up a specific lifestyle in the public eye,” Keller said. “This can cause a significant increase in non-essential spending and can be tied directly to a high level of consumer debt. Together, this leaves little room to build your savings.”
How to Get Better About Saving Money
Once you get used to not setting aside money for savings, it can be quite tricky to get in the habit. Here are some ways to get better about saving money.
Yes, three to six months of cash in an emergency fund is strongly recommended– but no, you don’t have to save this all overnight, nor should you expect to. Start small and focus on practical, easy ways to save.
“If ‘conscious saving’ doesn’t resonate with you, there’s a trick that can make saving feel like second nature,” said Joseph Camberato, CEO at National Business Capital. “Set your bank account to move a portion of your paycheck directly into your savings account without doing anything. Lock that savings stash away for a while, so spontaneous spending urges don’t throw you off course. You don’t even need to allocate a big chunk for this. You can even set aside 1% to 5% and that can build up nicely over time.”
Get Discounts and Rewards Where Possible
Not all savings you have to work for; some you can get by practically doing nothing. There are so many apps out there that help. “Saving money on groceries and household items is easier now than ever and all you need is your phone,” Cid said. “Use digital coupons and rebate apps to immediately start saving money on groceries.”
You should also seek to save when dining out. “Look for special weekday promotions and use coupons,” Cid said. “Signing up for restaurant loyalty clubs can even get you free food just for becoming a member.”
It may not end up making much of a difference, but it’s important to try. Be sure to negotiate bills, including your utility bills and cell phone charges.
“Negotiating lower bills can be an effective way to save money on various expenses like car insurance, cable and internet, credit card interest rate and medical bills,” Cid said.
Cancel or Downgrade Subscription Services
How many streaming services do you have? Paring down on these can help preserve your income and make saving easier. “Re-evaluate if having five streaming services is really necessary or if it’s burning an unnecessary hole in your wallet,” Cid said.
Make a Budget and Stick to It
It’s the most obvious tip, but it must be mentioned: make a budget and stick to it. “You need a clear picture of what your current financial situation is by making a list to weigh your income against your current mandatory expenses (rent, car, medical) and discretionary spending (entertainment, cable, travel),” Cid said.
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