Not All Savers Are the Same

You want to save more, but don’t think you make enough. But is earning more money really the answer? You might be surprised to hear that how much you save doesn’t have much to do with your salary. And there’s data to back that up. A study by the Employee Benefit Research Institute and J.P. Morgan sheds light on people’s saving habits, and why some folks are successful at it while others aren’t. It defined three different levels of savers. THREE DIFFERENT LEVELS OF SAVERS What they called low savers managed to put away about 2 to 3% of their salary. The next category, middle savers, banked 5-6% of their income. And high savers were consistently saving about 9% of their salary. So, middle savers put away about 3% more than low savers, and high savers, 3% more than middle savers. Now, those are savings rates, not income rates. In fact, they have nothing to do with income. The research showed clearly that people, often with identical incomes, saved at different rates and not necessarily more than folks earning less. Simply put, there’s no link between income and saving. WHAT DOES THIS DATA MEAN? This helps explain what financial author Ron Blue describes as a consumptive lifestyle. That’s when folks who earn more spend more. Instead of banking all or part of a raise, they tend to increase their lifestyle and spending. It may also explain why savings rates actually went up during the COVID shutdowns. As people saw their income reduced or even just threatened, they cut back on spending to save more. Of course, the Bible says we should do this all the time because we never know what the future may bring. In Proverbs 6 we find, Go to the ant, O sluggard consider her ways, and be wise. Without having any chief, officer, or ruler, she prepares her bread in summer and gathers her food in harvest. The message there is that saving isn’t complicated you just can’t be lazy about it. It’s easy to let your spending creep up as you earn more money. It takes discipline to prevent that from happening. BREAK THE GRIP OF A CONSUMPTION LIFESTYLE If you’ve fallen victim to the consumptive lifestyle, try this: pledge to bank any type of future increase you receive, whether it’s a raise, a tax refund, or even a gift card. Go ahead and use the gift card on budgeted purchases but move an equivalent amount into savings. And in the meantime, how do you move from being a low saver to a middle saver? Or middle to high saver? The research showed that you can get the most bang for your buck by concentrating on three key areas. 1. Higher savers tended to focus their saving efforts on housing. That includes a mortgage or rent, taxes, utilities, and home furnishings. Look for ways to save there. 2. See how you can cut spending on food, both eating out and groceries. 3. And finally, trim the cost of transportation, which includes vehicle purchases, fuel, and maintenance. Constantly looking for ways to cut costs in those categories could move you into the next higher bracket of savers, and that 3% increase will have a huge impact over time. The research showed that retirement account balances of middle savers were twice as large as those of low savers. The researchers also posed this question to respondents: Would you rather save $150 a month, $35 a week, or $5 a day? Four times as many people chose to save $5 a day rather than $150 a month even though it’s the same amount. And that was consistent across the various income ranges. The bottom line is that psychologically, it seems easier to give up something that costs $5 a day. Keep that in mind when you’re looking for ways to cut spending. It’s helpful to write down every penny you spend for at least a month. Three would be better. As you do that, look for small, repeat purchases that you can live without. You’ll probably find that saving $5 a day is pretty easy, just don’t tell yourself that you’re actually saving $150 a month. And if you need help with this, why not download the FaithFi app? It can help you set up your budget in three different ways, depending on your management style. It will also track your spending and alert you when you go over in a category. You can download it at FaithFI.com or wherever you get your apps. Increasing your savings even by just a little will make a big difference in the long run.. On today’s program, Rob also answers listener questions: ● Is closing unused credit cards a good idea? ● How do you determine when/if it’s wise to surrender an annuity? ● Is supporting Christian political candidates and causes an appropriate way to tithe? ● Is it wise to purchase stocks from an employer at a discount? ● What is the best way to use a lump sum of money? Remember, you can call in to ask your questions most days at (800) 525-7000 or email them to [email protected]. Also, visit our website at faithfi.com where you can connect with a FaithFi Coach, join the FaithFi Community, and even download the free FaithFi app. To support this ministry financially, visit: https://www.oneplace.com/donate/1085/29