Time to Check Up on Savings Rates

With the end of 2009 fast approaching, this is a good time to check on what kind of year it's been for your savings program. The following are four key diagnostic questions:

1. Are you on track to meet your 2009 savings goal?

People often set goals with the best of intentions, but it is equally important to hold yourself accountable for meeting those goals. If you aren't on track to meet your 2009 goal, you have to decide what you are going to do differently next year.

2. If your income is down, what do you cut first--your expenses or your savings rate?

Of course, a weak job market meant that many households took a financial hit in 2009. It's easy for savings rates to be the first thing to suffer when household income is down, because the impact is less immediate than with cutting expenses. However, if your savings program bears all the burden for your financial setbacks, you'll be cheating yourself in the long run.

3. How do you set goals for savings rates?

How do you set goals for your savings program? Do you simply have a vague aspiration to save more, or do you have a specific target? Do you set these targets in dollar terms, or do you shoot for specific savings rates as a percentage of income?

The more specific you can be about your goal, and the more that goal is tied directly to a desired result (retirement income, down payment on a house, etc.), the more meaningful this process will be.

4. How do bank rates affect your savings goals?

Low savings account rates may seem to discourage savings, but the truth is that when bank rates fall, your savings rate should actually rise. The reason is simple--the amount you save must pick up some of the slack when low bank rates result in low yields. With bank rates remaining low into the new year, you may want to push up your savings rate in 2010.

 

Source:

Montana State Universtity: http://msuextension.org/publications/FamilyFinancialManagement/MT200303HR.pdf

Showing 0 comments | Add your comment