A Couple of Articles on Household Savings

[myrdale]

A headline on Drudge caught my eye, "Half of All Americans Fall Deeper in Debt"

https://www.cnbc.com/2022/07/26/nearly-half-of-americans-fall-deeper-in-debt-as-inflation-boosts-costs.html

What I found really interesting about this article is the graph they give of peoples emergency savings:

23% have no emergency savings.
28% have <3 months
22% have 3 to 5 months
27% have >5 months savings

But this got me to thinking about a similar article I read last month, "More Than Half of All Americans Live Paycheck to Paycheck, INCLUDING 30% of Those Who Earn $250,000 or more".

https://www.cnbc.com/2022/06/27/more-than-half-of-americans-live-paycheck-to-paycheck-amid-inflation.html

The claim is 58% live paycheck to paycheck. I've heard similar statements in the past, so this isn't news. And I guess this matches with the previous data, if you're living paycheck to paycheck then by default you're not saving anything. You could have money in savings and still be living paycheck to paycheck.

As far as the rate people who are saving, are saving, there are several articles that state the average rate is around 4.4%. I believe this is a bit misleading as an average.

Around 60% of people have access to 401k, but only 40% of people contribute.

The average 401k contribution is around 7%, and only 22% of people save 10% or more.

Personally I have 10% of my pay going towards a Roth 401k, I hope to max the IRA out every year going forward, and I still manage to put back $1,000 or more each month for the future rental property. If you ad that all up my savings rate is actually closer to 25%.

I am left wondering if it is as much an income problem as much as it may be a spending issue. And its not that prices haven't increased significantly as much as it is people not budgeting and living beyond their means?

[disneysteve]

I am left wondering if it is as much an income problem as much as it may be a spending issue. And its not that prices haven't increased significantly as much as it is people not budgeting and living beyond their means?

I think it is, and has always been, a combination of things. If you're earning 250K+, it's clearly a spending issue. Anybody anywhere should be able to live on that and still put a decent amount into savings. But what if you're making 27K? That's minimum wage here in NJ for a 40-hr/wk job. If you're on your own, it will be pretty tough to save much of anything after you pay rent and food and basic living expenses.

What people of all incomes fail to realize is that having a plan is critical no matter how much you make. And at nearly any income except the uber-rich, there will always be sacrifices one has to make. You can't have everything even if you make $1 million a year and certainly not when you make 50 or 60K.

[kork13]

Totally agree with Steve. While income is a factor, especially in the lower half of households... The much more impactful factor is going to be having a plan, and sticking to it. With that, you can manage your spending to cover your savings & essential needs FIRST, then the remainder opens up for discretionary use. Unfortunately that just isn't how most people look at their money (if they even put any thought to it). When savings is an afterthought, it'll never happen, and you'll remain trapped by your own impulsive spending habits.

Even saving just $50-$100/mo on a consistent basis is enough to get started with securing your family's finances. It builds the habit, enables you to slowly add more to it over time, and creates a valuable safety cushion in the event of the unexpected.

Intentionality is the key.

[ua_guy]

To put the statistics a different way, 17% of households have no emergency savings (83% do, even if some don't have a lot).

"More than half of all Americans live paycheck to paycheck." Look at median and average individual and household incomes here in the US. Is anyone surprised? Many basic expenses cost what they do, regardless of income, so that says "more than half" of Americans, many who make less than an average or median income are already dealing with basic expenses which eat a higher percentage of their income. Add high prices into budgets that already don't have a lot of discretionary spending.

[LivingAlmostLarge]

Which is odd because so many were supposed to be better off from covid and all the stimulus money was used to shore up EF and to pay down CC debt.