Clarks Green Office

285 East Grove Street,

Clarks Green, PA 18411
Spend more, save less?

Spend more, save less?

May 30, 2018

Americans are spending at rates we haven't seen in decades.  Economic outlook and consumer attitudes have shifted with the implementation of the new Tax Bill and Jobs Reform Act, which ultimately has left Americans with more money at the end of the month. (See: What the new tax bill means for you). However, what does this mean for savings?

"Americans’ rate of saving dropped to a 12-year low last month as consumers spent more, reflecting their modestly higher incomes as well as rising stock and real-estate prices." - Wall Street Journal (U.S. Consumer Spending Rises in December; Saving Rate Hits 12-Year Low)

Americans, now spending at record levels, are neglecting their savings and retirement accounts while ultimately bolstering the economy with consumer activity. Good for the nation, bad for the pre-retiree. Here's some hints on how to add more to your annual savings without making major lifestyle changes.

1.) Set a goal: As financial advisors, much of our time spent with clients is occupied by goal setting.  Determining a goal, writing it down, and developing a plan of achievement is a must when developing a new habit. Start by creating a monthly balance sheet, (Expenses vs. Income). Determine what your total fixed expenses amount to and how much you could comfortably save on top of that amount. Start small and incrementally increase the amount until you reach your ultimate savings goal.

2.) Set up automatic withdrawals: The old adage, "money burning a hole in your pocket", is tried and true. Even the most disciplined saver will be tempted to spend down their financial cushion if it is readily available. Setting up automatic withdrawals can help one gain a better sense of what they really can afford to spend each month.  With bills, retirement contributions, and emergency fund accounts being automatically withdrawn each pay period, the pressure for one to manually do these tasks is alleviated. 

3.) Audit your closet: For all you hoarders out their, your closet, basement, garage, and attic could be holding buried treasure.  With technology advancing at rapid speeds, we now have the ability to market our unused belongings to the masses! No longer do we have to wait until the family yard sale each year to de-clutter our homes. Mainstream marketplaces like Amazon, Ebay, Facebook, and letgo will let you use their platforms to sell your items for little to no commission. Online selling not your thing?  If you donate goods to organizations like the Goodwill or Salvation Army, you could possibly use the charitable donations as an itemized deduction on your current year taxes. (Consult with your personal accountant for further details).

4.) Try a spend free month: Tried everything and still can't hit your savings goal? A spend free month may be the answer. Although this is certainly not the answer for everyone, those looking to jump start their saving habits have turned to spend free months to jolt them into financial discipline. A spend free month is exactly what the title states. No spending on anything discretionary for one month. That means, no eating out, no movies, and no shopping trips.  Extreme?  Undoubtedly. But, finding out exactly how much it takes to survive off the bare necessity's for a month can be priceless.  Although this is not a sustainable month-to-month endeavor it can create some survivor saving traits that may make you rethink your normal spending habits. 

Saving for the future doesn't have to be a frightening task.  Small steps can make all the difference!