According to the Living Balance Sheet, 29% of Americans have savings less than $1000, 56% have savings less than $25,000, 97% of baby boomers have not saved enough for retirement, and 55% of Americans have not saved one penny last year. Our credit card debt is at an all time high of $772 Billion dollars and college graduates collectively owe more than $1 Trillion in student loan debt.(1) To put that in perspective Greece’s national GDP in 2013 was $242 Billion and the national debt was $424Billion(2).
How could this be? How have we done so poorly in saving for the future? This two-part article explores some of the causes to this failed level of personal savings and what we can do to change.
Vague Goals. Your goals should be clear and measurable so you know when you’ve accomplished them. For example, “I want to do a better job saving money” is not a goal. It is a statement of intend. Instead, “I want to save $600 by Oct 1, 2015 for a new ski season pass.” would be a much better goal. It specifies the amount, the purpose and a time frame. This way you’ll know when you get there.
Underestimate the true cost of living. Few people can very accurately track all the money we spent. We eat out more often, spend more than we remember, loose track of pocket cash and fail to predict unexpected expenditures. Regardless the reasons most of us underestimate by 5-10%, some even 20%.
We feel that we “deserve nice things.” Personally I can totally relate to this. Behind the glamorous life style of Silicon Valley is this relentless culture of work-life integration. Smart phones, smart watches and push-notifications keep us mentally engaged all the time. Corporations’ insatiable appetite for efficiency pushes their work force to an ever-higher breaking point. For many, spending money becomes an outlet to deal with stress.
Unrealistic reliance on mental strength instead of a system and structure. Creating a Savings means a change in our (spending) habit and it is by definition not natural. Initial enthusiasm and excitement will fade over time. Without a system and structure to serve as a continuous reminder of our mission will only create stress and will not produce our desired outcome.
As a result, many families start on the journey to create savings but ultimately give up. After repeated failed attempts we start to lose trust in ourselves and choose to become overwhelmed by the daily demands.
This absolutely does not have to be the case. You must approach this with the intent of creating a new habit and not conquering a goal. I have taught many people a simple system to achieve this. Read more about it in Part II of this article.
This article was written by Peter Mu
Registered Representative and Financial Advisor of Park Avenue Securities LLC (PAS), OSJ 20 Bicentennial Circle, Suite 100, Sacramento, CA 95826, 1-916-379-0200. Securities products/services and advisory services are offered through PAS, member FINRA, SIPC, Financial Representative of The Guardian Life Insurance Company of America (Guardian), New York, NY. PAS is an indirect, wholly owned subsidiary of Guardian. Pacific Advisors, LLC. is not an affiliate or subsidiary of PAS or Guardian. Insurance Products offered through One Pacific Financial & Insurance Solutions LLC, DBA of Pacific Advisors, LLC. Pacific Advisors, LLC. is not a registered investment advisor. CA insurance license 0E19513
This material contains the current opinions of the author but not necessarily those of Guardian or its subsidiaries and such opinions are subject to change without notice. Material discussed is meant for general informational purposes only and is not to be construed as tax, legal, or investment advice. Although the information has been gathered from sources believed to be reliable, please note that individual situations can vary. Therefore, the information should be relied upon only when coordinated with individual professional advice.
Links to other sites are provided for your convenience in locating related information and services. Guardian, its subsidiaries, agents, and employees expressly disclaim any responsibility for and do not maintain, control, recommend, or endorse third-party sites, organizations, products, or services, and make no representation as to the completeness, suitability, or quality thereof.
The Living Balance Sheet. The Living Balance Sheet® (LBS) and the LBS logo are service marks of The Guardian Life Insurance Company of America (Guardian), New York, NY. © Copyright 2005-2017 Guardian
2. The World Bank. http://data.worldbank.org/indicator/NY.GDP.MKTP.CD
Image is public domain, free for commercial use. http://thestocks.im
#2017-43108 (Exp. 7/19)