Start Saving Today

From the President's Desk...

We all know the importance of saving money. Whether it’s for a short-term goal, such as planning that dream vacation, or a long-term objective like retirement, saving money is critical to financial success and independence. Yet, as a nation, the United States has a modest personal savings rate (4.51% of disposable income in 2023).

Given today’s challenging economy and inflationary environment, many people are finding it difficult to save. Here are some tips that may help you think about several small changes that over time, thanks to the power of compound interest, could make a meaningful difference.

Income Tax Refund: IRS data indicates 64% of filers in the 2022 tax year received a federal refund, averaging $2,753. Frequently those dollars are spent before they arrive, including the use of tax refund anticipation loans. Those loans sound appealing, but typically come with exorbitant costs, as much as a 35.9% annual percentage rate (APY). Don’t sign up for those loans! Instead, save your refund to build an emergency fund to protect your family from future unforeseen expenses. Even better, adjust the federal withholding from your paycheck to eliminate large tax refunds. Remember, a tax refund is nothing more than the government returning your money that you overpaid during the prior year. You weren’t paid interest on those funds. If you do this, you’ll receive a “raise” with every paycheck throughout the year, which can again be saved for a rainy day.
Review Subscriptions: The average American spends $219/month on various subscription services. Often people have forgotten about these recurring costs, which frequently are set up on auto pay using a credit or debit card. Take the time to review these costs, cancelling those subscriptions that you no longer use, and instead put that money into a savings account.
Debt Payoffs: When you pay off a debt, it’s easy to simply spend that money elsewhere. Instead, every time a debt is retired, take that old payment and put it into a savings account each month.
Sell Personal Items: Most of us have things around our homes that we don’t use. You may be surprised how much someone else is willing to pay for them. Make this an annual routine as part of your home’s “spring cleaning” exercise and save the money you make.
401(k), 403(b), or Other Retirement Plans: These are today’s best retirement savings vehicles. Contributions come directly from your paycheck, before you have a chance to see or spend the money. Many companies provide matching contributions, so be sure to enroll and contribute, at least enough to receive the “free money” match from your employer. Starting early, even in a small amount, can add up to significant retirement savings in the future.

As with most things in life, many small changes made at once can add up to something meaningful. Make 2024 the year you make those changes and watch your savings grow!