5 saving strategies for a slow economy
July 10, 2012
Technically, the U.S. economy is moving forward. But it's definitely stuck in low gear.
The Bureau of Economic Analysis recently confirmed that for the first quarter of this year, the economy grew at an annual rate of just 1.9 percent after inflation. That's a step back from the 3.0 percent growth rate achieved in the fourth quarter of last year. The economy is not in a recession, but it is limping along very weakly.
A weak economy is causing hardships for many Americans now, but it could hurt even more in the future. A sustained period of low salary increases, poor stock market returns and low savings account rates has made it very difficult to keep retirement savings on track.
But there are still ways to keep your savings on track if you're determined enough. A slow economy means that you simply have to make more of an effort at saving money.
Here are five savings strategies for today's sluggish economy:
1. Research first, shop second
Never spend more than $50 on an item without doing a little research first. You'll shop more efficiently and make better decisions if you do some Internet research before leaving the house. Your research should have three objectives: determine the right type of product for your needs, figure out which brands and models have good functionality and reliability, and find out who has the best price for that product.
2. Use the right bargaining strategy
For more expensive items -- say, anything over $100 -- you should try to bargain for price. But to succeed, you'll need the right strategy for the place you're shopping. When purchasing services or buying from a small, independent store, start by asking if they'll sell the item for 20 percent below list. When dealing with a large chain store, the people on the floor probably don't have that kind of latitude, so take the approach of asking about any specials, coupons or upcoming sales that might help you get your item more cheaply.
3. Build a case for your next pay raise
In a tight economy with high unemployment, employers tend to give raises somewhat grudgingly. Throughout the year, you should document ways that you add value to the company by cutting costs or adding to revenue. Where possible, use quantifiable facts rather than just broad, qualitative statements. Gather this evidence at review time so you can demonstrate why it is worth the company's while to give you a higher raise.
4. And then bank that raise
When you do get that pay raise, devote as much as possible toward your savings rather than automatically raising your living expenses to match your income. The only way Americans are going to catch up on funding their retirements is by increasing their savings rates, and doing so in the wake of a pay raise is one of the least painful ways to achieve this.
5. Don't get cheated on bank rates
Did you give up on bank rates when savings account rates dropped below 1 percent? If so, you may be settling for much less than you have coming to you. All rates may be low, but why accept 0.10 percent when rates close to 1 percent are still available? That's about 10 times more interest.
While these strategies are geared toward picking up the slack in a slow economy, if you acquire these habits now, they will help you get even farther ahead when the economy finally strengthens.