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Wait a Minute — Americans Are Saving More Money?
Americans are saving, earning more and spending more money according to July data released Monday by the Bureau of Economic Analysis. The personal savings rate as a percentage of disposable income was 5.7%. Personal income rose 0.4% in July, and personal spending increased almost as much — 0.3% — much of which was spent on new cars and manufactured goods. The increase in personal income was due to a lift in wages and salaries.
The report uses quarterly wage information from the the Bureau of Labor Statistics and is in line with economists' expectations. It also indicates a strong third quarter.
If you're one of the lucky ones whose wages increased, it's a good idea to resist the urge to upgrade your lifestyle and bank the raise instead in an emergency fund. We all know that life can suddenly get expensive. Cars break down, puppies get sick, phones smash and unexpected expenses can leave you grappling for pocket money. Almost a third of us, or 29%, said monthly expenses stressed them out while 26% are worried about credit card debt, according to a survey by Schwab Retirement Plan Services.
Having an emergency fund can give you the extra cash you need in order to make regular payments, pay off credit cards and keep your credit clean for when you want to buy something big. And if you ever want to quit working one day, it's also good to get an idea of how much money you'll need to save in order to retire.
To keep the process virtually painless, consider having a certain amount automatically withdrawn from your account each payday, and put the spare cash into a separate account that's harder to draw from (maybe even keep the debit card for your emergency account in your sock drawer, not your wallet).
If you have no clue just how much you'll need, you're not alone. Only 43% of people with 401Ks said they know how much they need to save to retire comfortably, according the Schwab survey. Various retirement and debt calculators are available online. And, if you are already in debt, it's always a good idea to check your credit report to find ways to improve your score. You can view two of your credit scores for free by signing up for an account on Credit.com.
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