MoneyRates.com 2011 resolution #1: Raise your savings rate
January 10, 2011
MoneyRates.com started off this year by suggesting 12 monthly resolutions to help you get your 2011 finances in good shape. In January's resolution, you can reign in the new year right and lay a good financial foundation by increasing your savings rate.
Improving your savings rate
Despite the slow economy, personal savings rates have been a little better over the past couple years. How did yours do?
According to the Bureau of Economic Analysis, the U.S. Personal Saving Rate was between 5 percent and 6 percent for most of 2009 and 2010. No matter where you're starting from financially, chances are you can improve your personal savings rate, so MoneyRates.com is kicking of its 2011 series of 12 monthly resolutions with an improvement that can make your money work for you this year.
Broadly speaking, you will likely fall in one of three categories with your savings, and here's how you can improve savings starting out in each of these situations:
- You haven't been able to get rid of your debt, much less save money. The first thing to do is get yourself on schedule towards being debt free. You can't just make incremental improvements here and there--you need a timetable for getting out of debt. Meanwhile, as long as you are keeping up with your payments, try to get in the savings habit by setting aside a little bit of money out of each paycheck. This will give you a cushion so you won't have to restart the debt cycle if an unexpected need arises.
- You are saving money, but it never seems to be enough. Try budgeting for savings first, and everything else afterwards, and see if this helps put your savings rate on target.
- Your savings are on track to meet your goals. Congratulations, but don't get complacent. If you keep trying to improve your savings position, you'll have a great emergency fund and guard against slipping backwards.
As you build savings, be sure to put those savings to good use by depositing them wisely. Use CDs for longer-term savings, and savings accounts or money market accounts for money you may need to access from time to time. In either case, shop around for the best CD rates, savings account rates, or money market rates.
After all, you spend enough time working for your money. The more savings you accumulate, the more you can put your money to work for you.