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Saving: The new American way

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POSTED: April 17, 2009 10:54 a.m.
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Marty Durrence

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Americans are saving for the first time in decades.
After more than half a century of increasing debt and diminishing or non-existent saving accounts, we’re finally beginning to buck the trend and plan for tomorrow rather than spend for today.
As recently as 2006, Americans’ savings as a percentage of disposable income had been less than 0 percent. But the U.S. Commerce Department’s Bureau of Economic Analysis reported in November that that rate increased from 1 percent in September to 2.4 percent in October. Economists are predicting that the rate could reach as high as 3 percent or 5 percent this year or even as high as 10 percent, according to Goldman Sachs.
Already, economists like Robert Sumichrast, dean of the University of Georgia’s Terry College of Business, are predicting the economy will begin to pick up in the third quarter of 2009. Those who have played it close to the vest will have the opportunity to reap the benefits of the comeback because the bottom of the curve is the best time to ride the wave of prosperity. Entrepreneurs with a little liquidity, a good credit history and a strong game plan will have a great opportunity to build on an existing business or start a new business.
With any luck, however, the impending recovery will not erase from the American psyche the desire to save. Saving should be a part of everyone’s long-term financial plan rather than discarded at the first sign of economic recovery.
Every family needs an emergency fund that would pay its bills for at least six months in case of a layoff or medical emergency that might keep a family member from working. If you’re not a natural saver, this may seem like an impossible task. But with a little discipline, planning and an examination of your finances, it can be achieved.
The first step to developing a habit of saving is to make a budget. While it might seem painful, it can save you a lot of trouble in the future. Start by keeping track of everything you buy in a week, so you really know where your money is going. Many people can cut their expenses as much as 20 percent by balancing the difficult decisions between “needs” and “wants.”
Next, make a list of your monthly, quarterly and biannual expenses, such as rent or mortgage, groceries, utilities, childcare and automobile insurance. Then, decide on an amount that can be put away monthly into a savings account and treat that amount as one of those essential items as well.
Probably the easiest way to start a savings account is to set up a direct deposit or automatic transfer from your checking account to a savings account. This is also the easiest way to avoid the temptation to spend your saving money. Anywhere from 5 percent to 15 percent of your paycheck is generally a good rule.
If you don’t think you can spare even 5 percent of your paycheck or if you are not comfortable with automatic transfers, there are other ways to save. Many people receive an annual raise or bonus. Instead of spending the cash on the latest and greatest shiny gadget, you could put that money into savings. You have already been living without it, so you shouldn’t miss it.
When it comes to saving, the important thing is to start somewhere with whatever you can afford. And, of course, the earlier the better.
Some people have blamed the federal government for setting a poor fiscal example by deepening our nation’s national deficit. As unfair as it may seem, we must develop the discipline to live within our means and not spend money we don’t have. Because unlike the federal government, we can’t print money — at least not without risking federal charges.

Durrence is the Liberty County market manager for The Coastal Bank.
 

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