Ramp up your savings
How to track your spending and free up cash to stash away
Unless your savings were stashed under the proverbial mattress, they almost certainly took a hard hit this past year. Any money you had invested in the stock market is probably down by one-third to one-half. And even if you were holding safer money-market mutual funds or bank CDs, those instruments are paying much less than they did the year before. So with the stock market still volatile and interest rates near historic lows, you might be wondering whether you can ever get your savings program back on track. You can.
Granted, it could be an uphill struggle—in part because so many of us have a mixed record on savings. For the past few decades, Americans have tucked away less on average than people in most other developed countries. We saved less than 2 percent of our earnings last year, for example, compared with a savings rate of more than 12 percent among the French and Swiss, 11 percent among the Germans, and 3 percent among the Japanese. Add in the investment losses, plus a drop in home values and rampant layoffs, and no wonder people are feeling queasy. Indeed, half of those polled in a recent survey by MetLife said that if they lost their jobs today, they would run out of money in a month.
The result has been a kind of financial paralysis that makes recovery all the harder. "A lot of people facing hard times are just stuck in their sense of loss," says Jayne Ferrante, a financial planner in Fresno, Calif. "But when something happens bad [you] have to step back and take a hard look at it." Specifically, you should start taking positive steps to rebuild your savings.
Below you'll find five key strategies to get your savings back in gear, including big-picture moves such as setting an overall goal as well as mundane but important ways to cut everyday expenses. You'll also find suggestions for where to put your money. And you'll learn where to seek additional information and advice, both in this issue and on the Web.
Our aim is to offer a one-stop guide for today's economy to help you head toward a firmer financial footing. The first and most important skill to master is that of saving. Even if you already are a highly effective saver, you can always sock away more.
