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Americans Are Getting Dangerous and Desperate With Their Nest Eggs

What you can do to start saving smartly

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Many employees have been making up the difference by stowing more cash in their 401k funds in recent months as some measure of stability has returned to Wall Street and the broader economy (at least compared with the financial crisis). But it’s clear they are choosing retirement planning above any other form of savings.

39% of percent of people surveyed by the National Foundation for Credit Counseling said recently that they carry a credit-card balance over from month to month. That’s down only a tiny bit from the 44% peak in 2009.

A survey from Sun Life Financial shows that only a quarter of working Americans are “very confident” that they will have enough money for basic living expenses in retirement, down from 42% last year.

Oh yeah, and general savings have gone down the tubes. According to, Almost half of Americans say they don’t have a rainy-day fund that will last them three months of expenses if tragedy strikes in the form of illness, joblessness or other harsh events. More disturbing is that one in four don’t have a penny in emergency savings at all.

What to Do?

The million-dollar question Americans have right now is what to do with their money to stay safe and hopefully provide for retirement. Well, here are a few tips — presuming you have the means to be proactive and aren’t stuck in an unfortunate situation where you simply don’t have the income to pay the bills, let alone save.

  • Don’t panic: Money matters are stressful, but if you are gainfully employed and have a sustainable budget, there is no reason to flip out. The most important thing is that, unlike some less-fortunate Americans, you are financially solvent. Take comfort in this instead of freaking out about the flaws in your budget.
  • Build up a rainy-day fund first: If your daily budget is sound, start building a rainy-day fund and have the discipline to leave it alone. Start shuffling a few hundred dollars a month into a savings account that is liquid and at your disposal for emergencies. Don’t spend a dime of your tax return in April, and instead plow it into savings. Give your spouse a “birthday present” of savings. It will take time — maybe a year or two — but is crucial to your financial health. Otherwise, one car breakdown or medical issue could ruin any other plans you have.
  • De-leverage high-interest rate debt if you can: If you have rainy-day funds, then start taking care of your debts by prioritizing interest rates. An auto loan at 3% or less is basically just pacing inflation — so focus on that credit card balance charging 15% instead. Even an extra $20 or $50 in principle each month can dramatically whittle down balances over time.
  • Put money to work, even modestly: If you have relatively low debt and an emergency fund, now it’s time to put your money to work. Contribute the full 6% allowed by tax law into your 401k, or consider opening up an IRA. If the markets scare you, then at the very least consider a CD, even a short-term one, which can offer you significantly higher interest than a retail bank’s savings account.
  • Take the long view: Big financial decisions are not about picking the right number on the roulette wheel for one spin, but about a long-term commitment to your goals. Plot a clear course and revisit it regularly, but have the patience and discipline to see things through. It might seem pointless to save a mere $200 a month here and there or to contribute a mere $2,000 a year to a 401k plan. But if there were easy ways to amass the money you need and deserve, you would be golfing right now instead of surfing the Web for tips. Keep the long term in mind.

Article printed from InvestorPlace Media,

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