I’m getting a little worried, I’ll be honest. The housing and stock markets have been on fire for many years now, and of course will need to correct eventually. They always do. And the best thing I’ve found to protect ourselves and our families is having money in the bank. The more the better!
Unfortunately, reports just came out stating that, as a country, we are saving the least amount of our income since 2005! So how much are YOU saving consistently each month? From my experience, the “consistently” part of that question is what throws off many answers from my own clients.
Are you satisfied with how much you are saving? Historically, many of us here in the U.S. have been horrible savers. Financial experts have long told us that we should be saving 10% to 20% of our personal income to achieve our long-term financial goals. Yet, I rarely see reports that show us as a nation saving more than 5%. And now, we are hovering back down close to 2% – the lowest since 2005.
Why is this? Typically this drop in personal savings happens when we “FEEL” wealthy. First, there’s housing. House prices have been rising quickly and steadily for all of us homeowners since the Great Recession. It’s easy to understand. The past few years, I would help a client buy a $400,000 house, and a year later the market says it’s worth $440,000…and you feel like you just made an extra $40,000 that year. So why not go buy some stuff, right?! I get it.
Add to housing the insane rise in the stock market! The DOW raced 25% higher in 2017 alone. The S&P 500 index grew 19%. Theoretically, if I have a $100,000 invested in the S&P 500 index at the start of the year, I just “made” another $19,000! Here’s an article on this if you want to read further: http://money.cnn.com/2017/12/29/investing/stocks-2017-wall-street/index.html
And there’s one more thing adding to my growing concern – the increase in personal spending looks like it’s outpacing the growth in personal incomes. What does this mean? More people are spending at a faster pace than they are earning! And that’s not a sustainable formula.
Even though much of this article sounds pessimistic, I’m naturally a very optimistic guy. But I think we all learned a great deal from the Great Recession. And for me, I define financial safety as having lots of money in savings. This will get me through the tough times when they do come.
What should you do? Of course, save as much as you can each month. Secondly, take advantage of our complimentary Mortgage and Money Review. This is a simple 15-minute phone review where we look at your current mortgage, any consumer debts you have, and your savings goals. Let’s figure out if there are some ways we can free up extra cash flow to boost your savings! Just email my team at firstname.lastname@example.org with “Review Request” in the subject line.
PS – if you want to read up more on what spurred this blog, here’s a good article: https://www.washingtonpost.com/news/wonk/wp/2018/01/26/americans-are-saving-at-the-lowest-rates-since-the-housing-bubble-thats-a-big-red-flag-for-the-economy