Personal Savings Rate Declines. Already?
Posted by Valley Insurance Associates, Inc. on Fri, Oct 21, 2011 @ 11:40 AM
Over the past three years, you have learned to save more and to rely on debt less. We watched this happen across the country as we headed into recession and credit became difficult to find. But can you keep it up? Can we keep it up as a nation?
By mid 2010, the American personal savings rate had increased to 5.8% from a paltry 1% prior to the recession. We had learned to save! Many financial planners rejoiced in the belief that as a citizenry, we had rediscovered the importance of saving. We hoped that this was a lasting change. It appears we may have been wrong.
According to The Kiplinger Letter, the personal savings rate has already begun to drop, and at a fast rate. Since the high of 5.8%, our personal savings rate has fallen to 4.5%! In just over a year, we have experienced a major turnaround in savings rates. And this while confidence in the economy has remained very low. It's not a good sign that we have changed our habits.
Fortunately, you can maintain the habits you formed during the recession. You've learned to live on a bit less and to put money aside for another day. You have adjusted your lifestyle and realized that you already have much to be appreciative for. You have recognized that stuff is not what makes life good. Remember these lessons.
There are strategies you can use to remember them well. Spend some time over the next few months journaling what you have discovered about life and money. Write yourself reminders that having more for the sake of more does not make you happy. Spend a few minutes each day acknowledging what made you happy and what you appreciate that day.
At some point, our economy is likely to improve. We will feel like our finances are in great shape and that we can have what we want. There will be a renewed focus on "more" and the savings rate will likely continue to drop. Be aware of this. Consider whether you want to be in that group that returns to a paycheck-to-paycheck life, or would rather continue to have a little less in order to have a lot more happiness and freedom.
Nathan Gehring, CFP® writes weekly in his Financial Friday column. He can be contacted via email at ngehring@cfpi-wis.com.