Making cents of saving

  • Published
  • By Michele Schull Reinowski
  • 319th Mission Support and Services Squadron
GRAND FORKS AIR FORCE BASE, N.D. --  The "10% Solution TM" takes the math out of saving. And, it makes good financial sense. To figure out how much you have to save, simply take your gross pay each period and "drop" the last digit. If monthly gross income is $2,000 per month, save $200. If family income is $60,000 each year save $6,000 per year or $500 each month.

The Association for Financial Counseling and Planning Education® and its 800 members are announcing today the start of the "10% Solution TM" - a five-year campaign designed to increase the savings rate of Americans to 10 percent. The percent of income saved by Americans dipped into negative territory in 2005 where it remains today. Simply put, Americans spend more than they earn, financing their spending by depleting savings funds and increasing credit obligations.

What can saving do for you?

Saving relieves personal stress and improves relationships. Many studies suggest that disagreement over finances is a major reason for marital strife and divorce. And for the unmarried, financial distress is a major factor in general dissatisfaction and unhappiness. Studies show that financial stress is not necessarily due to a lack of income but instead is due to unsustainable spending, saving and investing patterns.

Saving reduces reliance on credit and can save thousands of dollars in interest. The percentage of disposable income used to pay debts is still near record highs. The American Bankers Association reported in 2005 that 43 percent of consumers carry balances each month on their credit cards. Many Americans owe $2,000 or more on their credit card debt resulting in $45 in interest each and every month at 15 percent.

Saving helps fund a comfortable retirement, yet most Americans are not putting enough away for retirement. As employers continue to decrease or eliminate pension benefits, private saving is the only remedy for this malady. Social Security benefits will not - nor were they designed to -- provide enough income for a sustainable retirement.

Saving increases confidence and the likelihood of getting out of poverty. Persons with even small amounts of savings are more likely to continue saving - even after depleting their savings to zero to meet an emergency.

Saving is habit forming. If 10 percent is too daunting, start with five percent. Or three percent. Small amounts of saving quickly add up. Begin today. Military member may want to enroll in the thrift savings plan as a means of saving, also.

Where should this saving go? Consider putting one-half into a retirement plan - 401(k) or (403(b) plan at work, or an individual retirement account or Roth IRA. Save one-third for emergencies - in a savings or money market account. These funds can help pay for unexpected household or auto repairs, medical deductibles, or other unplanned expenditures. Place the remainder in a savings account to fund future goals such as a vacation, roof repairs or college education.

AFCPE members across the nation, including Michele Schull Reinowski of the Airman & Family Readiness Center here, are dedicated to improving the financial stability and security of all Americans. Members assist consumers with financial decision making through education and one-to-one counseling. Contact your community readiness consultant in the A&FRC at 747-3241 for more information.