I am asked all the time the
question,
"if people don't have a savings account or anything else, where should
they start building a positive financial future?" My answer is always, start at the beginning and what I mean by
that is that folks who do not have any money to start must start by saving
small amounts first and growing into larger amounts. OK but where do those
small amounts come from?
A recent study concluded that
69.2% of Americans had NO savings account and shockingly around 12% had no bank
accounts. That statistic should shock everyone into asking what can be done.
Our nation does not have the resources publicly to take care of 69.2% of the
population because they've failed to build their own nest-egg. Two issues must
be addressed then; a) how does this happen in the wealthiest country in the
history of the world and b) how can it be changed?
In terms of how it happens,
let's recognize that the average American family of four earns around $60,000
per year. After tax, they bring home around $43,000 or $3,600 per month. The
average home when you include all related costs of taxes, insurance, heating,
etc is around $1,400 per month so they're now left with $2,200. Cars and
transportation on average take $500 per month when maintenance and all costs
are considered which now leaves $1,700. Food for four people if you're living
frugally runs about $300 per week which now leaves our average family around
$500 for clothing, activities, & emergencies.
OK if the issue is that taxes
and living take out the lions share so what can you do? There are some basic
things. First, cut up your credit cards... period, no exceptions, no arguments.
Utilize a debit card that allows you ONLY to spend that which you make. Second,
NEVER use your bank to provide short term liquidity by writing checks for which
there are no funds. The average bank charge for returned check is more than $25
per hit and it's shocking how much American's use their banks to float money
only to pay enormous charges. Third, to the extent you have debt payments, or
service for water, gas, electric, cable, etc, make sure you do everything
possible to avoid late charges and over limit fees. The average late charge or
over-limit fee is another $25 so these begin to add up quickly to several
hundred, if not thousands of dollars per year. Fifth, don't hesitate to visit
dollar-stores or places like Big-Lots for basic needs too. You'll be shocked
how much you can save by paying a little less for basic household items.
It's not easy to build
discipline into your life. I know, I've been there in my life too. But the way
out is paved with discipline and you must discipline yourself to begin saving
5% or 10% each month. Just start... Open a savings account and make it a habit
to put that money away. This is a poor analogy perhaps but when people start
exercising, it's typically painful, but after they've done it long
enough, their endorphins begin to flow and they feel good about it to the point
of not wanting to miss a workout. Saving is sort of like that. It's
painful to start, but when you see your money growing you become enamored by it
and actually can get the emotional high from building your savings, rather than
spending your money! As the old adage says "take care of the pennies and let the
dollars take care of themselves!"
0 comments:
Post a Comment