What's Keeping You from Saving?

Last fall, I had the good fortune to spend a couple days with a bunch of like-minded individuals in our nation's capital. In this day and age, that could sound like a stretch, but it's true.

At the America Saves Savings Summit, leaders from government, nonprofit and corporations came together to discuss America's savings crisis.

Savings crisis, you ask? Yep. Evidence abounds. The Federal Reserve recently reported that 44% of Americans couldn't come up with $400 to fund an unplanned expense. Earlier last year, the Employee Benefit Research Institute's Retirement Confidence Survey indicated that 46% of American workers had less than $25,000 -- excluding home equity and pensions -- set aside for retirement. The savings rate hit a 10-year high of a paltry 8.3% last September.

During the event, the folks at Military Saves released the results from their biennial Military Saves Survey. It's all pretty interesting, but one area caught my attention and directly related to the topic at hand during the summit: Why aren't we saving?

The survey highlighted the main challenges standing between Americans and their savings accounts. As I listened to the presenter share the results, I was struck by the idea that these challenges are, in fact, reasons to save … automatically.

As I roll through the top five challenges on the list, see if you agree:

1. Unexpected expenses. The best way to cope with unexpected expenses is to have some cash set aside in a savings account. What happens when you don't also happens to be the second challenge keeping respondents from saving ...
2. Too much debt. There are plenty of reasons outside of your control that you may end up with debt, but if your expenses -- unexpected or not -- too often outpace your income, you have the power to reverse the trend. And while you're overhauling -- cutting back and out as necessary -- carve out some space for saving. This can be a difficult task, but if the survey was right, you can start with...
3. Buying things you don't need. Cutting back on unnecessary purchases goes a long way toward turning things around for non- or under-savers. The "needs vs. wants" discussion is one we should be having with our kids, and not in a "do-as-I-say, not-as-I-do" way. I'm not saying ignore the stuff you want and the stuff you want to do; I'm only saying you should save for it as part of your saving plan as opposed to allowing those wants to become a roadblock to saving.
4. Not making enough money. What's enough? In my experience, we all seem to be able to spend whatever money happens to be coming in our front door. And that's true, whether someone is making $30,000 or $300,000. One way to combat this challenge is to put a plan into place to leverage periodic spikes in income -- tax return, inheritance, etc. -- as well as income increases (pay raise, promotion, etc.) and turn those into savings opportunities. And remember, there are two sides to your budget. Working both -- income coming in and money going out -- is a surefire way to make headway.
5. Too many bills. For these folks, a top-to-bottom assessment of where their money goes is probably a good idea. What changes can you make to provide the wiggle room to start to save?

No matter your goals, whether you're making changes to what you spend, what you eat, how much you exercise, or what you save, you'll always have hurdles to clear. But if you can stay focused and committed, financial freedom waits at the finish line.