Are you saving anything?


What’s your contribution? With the average savings rate in the United States at zero now (yup that’s nothing, zilch, nada) are you bringing the average up or down? I’m doing my part to keep the average up. By the time I wrote these words, the savings rate dipped into negative territory. The July figure was –0.6% meaning Americans took money from their savings rather than adding to them.

If you’ve read this site then it’s no secret that my household income is quite high and so when I tell you that so far this year I saved $41,000 you might think, “well I could save that much too if I had Rich’s income.” But when I tell you that’s a savings rate of 25.7% you might not think it’s so easy after all.

If you can’t figure out your own savings rate in a few seconds then you aren’t doing enough to keep records. You’ve got to stay on top of your finances, be able to find out the answer to any question I might ask.

How much did you spend eating out last year? I spent $3,355 in restaurants last year and all I had to do to find out was click a few buttons on my mouse.

Saving money doesn’t have to be difficult but people need all kinds of tricks and cute sayings to help them. We hear the phrase “pay yourself first” which is supposed to make you save by treating savings as another bill you need to pay. But why trick yourself? Be honest with yourself and say I’m going to save X% of my money – then just do it, to steal Nike’s slogan.

The key to saving money, however, is knowing where your money is going. If you don’t keep track of your spending then you’ll never know where you should cut back or what the true cost of all those lattes are.

Once you have a track record, say three months of spending, then you can start to see that maybe you spend too much on eating out or buying DVDs or who knows what. Then you can get down to business and start saving. Maybe a good place to start is by testing yourself. I was forced into what I call my three month test due to a job loss of sorts but I learned a lot from the experience and I bet you could too.

But maybe you aren’t ready to commit to building real wealth but you still want to save money. Well then look at your spending habits and cut back. There’s two ways to look at saving. The active approach is much like the pay yourself first method I ridiculed above. What I call the passive approach to saving is to simply spend less. If you cut back a little in a bunch of places or even in just a few high cost areas, you’ll notice there’s more in the bank every month and you didn’t really have to do anything.

Once in a while I find myself in a state of mind I call cheap mode. As if someone flipped a switch I suddenly find myself averse to spending any money. This is usually precipitated by a large purchase or just runaway spending on my part. I take this opportunity to pull back, pause and assess my spending habits.

Don’t be one those people dragging the average savings rate down for the rest of us. Join me in lifting the average by saving more. If you’re like the average person then there really isn’t any place to go but up.