While American consumers are in a better savings position than they were at the height of the economic crisis in 2007, we still have a long way to go.
Only 64% of households have sufficient emergency funds to cover temporary crises like car repairs, medical bills, job loss or some other serious life change. That number is down 7% from 2010. 68% say they are saving more than they are spending, down from 73% in 2010. It seems as though the lessons of the great recession have been forgotten.
This lack of savings puts individuals at risk of financial ruin, but it also places the economy itself in jeopardy. Declines affecting one industry are bad news for the economy, but they don’t trigger a credit crunch without a number of other problems. Low rates of consumer savings and high lifestyle maintenance debt can make job loss a vicious cycle. Consumers with high debt loads find themselves unable to spend, which slows growth in the rest of the economy. This leads to job loss in other sectors, snowballing throughout the economy.
Savings and low debt represent a way to fight back against this cycle. Reducing debt and increasing savings provides a way for consumers to maintain their lifestyles through career setbacks, which prevents the worst parts of economic crises.
1.) Make a pledge and set a goal
By making a commitment to spend less, save more and get out of debt, you can motivate yourself to do just that. It’s a great first step toward building personal wealth and making yourself a backstop against recession.
Also set a monthly savings goal. If you’re just starting out in trying to get your finances under control, you might set a small goal – such as save $40 a month for 3 months. If you’re a veteran saver looking for a way to keep yourself on track toward a goal, work backward from a vacation budget or loan balance to see how much you need to save each month.
Let NASA Federal Credit Union help with your savings commitment. Sign up for automatic transfers from checking to savings to keep yourself honest to your pledge. You’ll be at your goal in no time!
2.) Show the world what you’re saving for
It’s easy to get discouraged when your goal is something abstract. “Savings” is hard to compare in your head to a new cell phone or a dinner out. That’s why it’s so important to make your goal something concrete. Save for a vacation, or for a new vehicle, or for your education.
Picking a concrete savings goal is step one in keeping yourself motivated. Next, you’ll want to document your goal. Snap a picture of yourself with what you’re saving for. If you want to pay off your mortgage, take a picture of yourself in front of your house. If you want a new car, take a picture of yourself behind the wheel at a dealership. If it’s a tropical vacation you’re after, take a picture of yourself in a swimsuit in front of the giant piles of snow outside. Document your goal so you’ll always have something to look at when you get discouraged.
3.) Stay inspired
There’s a rush of enthusiasm that comes from starting a new project. At first, it’s novel and effortless. Then the days drag on. The novelty starts to wear off. The project becomes just another routine. A missed day turns into a missed week. The enthusiasm that characterized the start of the project just isn’t there.
Make sure this doesn’t happen to you with your savings pledge. Take some time to flip through the inspiring stories, like Mary Brown. A Wisconsin resident, Brown spent 7 years in Milwaukee public housing before saving to her goal of $2,000. Now, she’s finished her B.A. and moved her family into their first home. Stories like these remind us of the power of commitment, discipline, and dedication.
Take time each day to reflect on the progress you’ve made and the challenges you’ve overcome. Take a look at your goal and think about how good you’ll feel once you’ve accomplished it. Thank yourself for helping to keep the economy strong and your career on track. Most importantly, keep saving!