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Some tips for budgeting and saving
Henrico-based financial firm offers targets to help direct your dollars
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Published: July 13, 2008
Americans aren't saving enough.
According to data from the Bureau of Economic Analysis, Americans have saved less than 1 percent of their disposable income. Some experts say the current rate of savings hovers around zero - or even below that. Meanwhile, personal debt levels continue to rise at alarming rates.
Bruce McClary, spokesman and former corporate trainer for ClearPoint Financial Solutions Inc., a nonprofit credit-counseling firm based in Henrico County, answered questions about how consumers can help dig themselves out and save more.
Here is an edited version:
. . .
Q: What should the breakdown for a family budget be?
A: This all has to do with priorities and should be based on what you get after taxes and deductions come out of your paycheck.
Savings should be a minimum of 5 percent of the monthly budget and should always come first.
After that, you should factor a maximum of 25 percent for housing, 20 percent for food, 10 percent for energy costs and a 15 percent maximum for personal credit debt. That leaves 25 percent of your budget for other necessary items.
Anything left over at the end of the month should go into savings and pay down high-interest consumer debt.
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Q: What are five things consumers could give up to help them pinch pennies?
A: Savings is not always about sacrifice, yet it does require a change in the way we approach things we do daily. Here are five suggestions:
Give up the daily trip to your favorite coffee shop.
Cut back on meals out and replace them with bagged lunches or dinner at home.
Limit grocery shopping and other chores to a single trip each week.
Buy store brands when you grocery-shop, instead of the more expensive brand-name items. Use coupons.
Adjust the thermostat. That makes a difference. Just a one-degree adjustment can save hundreds of dollars each year.
. . .
Q: What is the most important step a family can take to help them save?
A: The most important step toward saving is to identify where expenses can be cut with a carefully prepared budget. Once a budget is created, you can see exactly where the money is being applied.
A couple of areas where families and individuals commonly overspend are television (cable and satellite) and communication (phone and Internet).
Trimming or eliminating duplicate services can save hundreds.
. . .
Q: Is the downturn in the economy and other factors a wakeup call for Americans who haven't saved? What can they do now to get them on the right track?
A: The fact that the cost of living is steadily increasing in a weak economy has not helped matters for American consumers who do not have any savings.
We think of savings as insurance against difficult financial times, but it cannot help us if it is not there.
For someone who is not saving at all, they should start now by trimming their budget to make room for savings. Start small and expect it to take some time to build up to the recommended amount of three months of net income.
. . .
Q: What can consumers do if they are caught in the economic downturn or if they lose their job?
A: If you have savings for emergencies, this certainly counts as one.
Create a lean emergency budget and use your savings only for expenses that you consider to be absolutely necessary.
While doing that, you can determine how much time you have to reconnect with employment.
If you don't have any savings, see if you are eligible for unemployment benefits while looking for ways to generate cash by selling things you don't need.
Quickly contact your creditors and utility providers to see if they can offer temporary hardship assistance.
. . .
Q: If consumers haven't spent their economic-stimulus checks, what should they do with it?
A: Ideally, everyone should put that stimulus check into savings as soon as it arrives.
For those with any past-due consumer debt, it is also a good idea to use some of it to help get back on track.
. . .
Q: With inflation continuing to rise, is this still a good time to save? Why?
A: It is always a good time to save. The question becomes how to save in order to beat inflation.
As inflation rates increase, look for options that will produce a higher rate of return than the basic checking or savings account.
Be careful in selecting the right savings plan. Higher rates of return come with increased risks. Select a plan that you are comfortable with.
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