When we start figuring net worth, we compare what we owe to our assets. According to a recent study, many of us will come up short in this area, especially when it comes to one of the riskiest types of credit.
Current numbers by Bankrate.com tell us that only 52 percent of us have more money in savings than in credit card debt. This is a change but not in a positive way. The last research, a year ago, said 58 percent of us had more savings than debt. Probably more sobering than this is that only 38 percent of us have between $500 and $1,000 in savings, which covers the cost of the average emergency expenditure. We need to improve our savings habits. Here are four ways to jump-start or increase our savings rate.
Pretend you make less than you do. The problem is that many of us do the opposite of this — we pretend we make more than we do and park the rest on our credit cards. By underestimating our income, we should have money left at the end of the month that can be moved to a savings account. One strategy is to keep the same budget when our wages go up, allowing for more money left after bills are paid. Or you might consider that annual PFD or tax refund as income that you forget about. Whatever works for you to pretend you make less, do it.
Know where your money goes. This step usually goes hand in hand with developing a spending plan. If you know where your money is going, you can control it and make positive steps to change if need be. Nearly all of us find out some surprises when we carefully examine where our money is currently being spent. Does your money go to the corner coffee shop or on restaurant meals? Don’t completely rule out these expenditures if you truly enjoy them. Just reduce the frequency and save the difference.
Consider downsizing. Whether you are talking about a smaller house, a smaller vehicle or even fewer “toys,” when you have less outgo, you will have more money left at the end of the month. If you are holding onto a house or a vehicle when a smaller one will do, make that change. If you are making payments on a snowmachine or a boat, even if you don’t have enough equity in the item to make money when you sell, divesting yourself of the payment can free up money to add to your savings account.
Take a second job, but be sure to consider all the costs before you do. If it will cost you more in child care, clothing, transportation or food, it might not make sense for you. Also think about the type of jobs that might be available to you. You might be better off to add additional work time to your current job instead of taking a second job. Once, when my kids were young and I was home with them, I took a short-term job on the swing shift to help us get our finances in order. It helped us get over the hump, but it wasn’t something that we could commit to for the long haul. Consider all the factors before deciding whether a second job makes sense for you.
You may have other ideas that might jump-start your savings, but remember that recognizing that we need to change our savings habits is the first step to an improved financial situation.
Roxie Rodgers Dinstel is associate director of Cooperative Extension Service, a part of the University of Alaska Fairbanks, working in cooperation with the U.S. Department of Agriculture. Questions or column requests can be e-mailed to her at email@example.com or by calling 907-474-7201.