According to the consumer research firm Yankelovich, if you live in an American city today, you see at least 5,000 advertising messages every day. Forget television, radio and billboards. In the digital era, we now see ads at the gym, on displays at the grocery store — even in your doctor’s waiting room.
No wonder most of us find it impossible to keep a personal budget and over 50 percent are living paycheck-to-paycheck, just a single unforeseen expense away from financial disaster. Exposed to an unrelenting barrage of slick salesmanship, most of us are no more able to cut spending than are the politicians we send to Washington – and our personal economies are just as vulnerable as the one they’ve created.
When it comes to money, we are a country that has forgotten how to say “no.”
That’s why “America Saves Week,” from February 25 to March 2, provides a chance for each of us to look at our own spending and begin the hard work of developing good savings habits.
It’s a time for each of us to take stock of our finances so we can get rid of high-interest debt, build an emergency fund and begin saving for the future.
For at least 56 percent of us, the first step will be to develop a budget.
Thanks to a wide array of online financial tools, you won’t even have to do the math. Most of these programs and smartphone applications can be easily synchronized with your bank accounts, so if you use your debit card instead of cash, you won’t even have to enter your costs individually. You merely categorize them according to the nature of the expense (utilities, entertainment, dining out, and so on).
Once you know where your money is going, you will finally be in a position to prepare a realistic budget that lets you set aside some money each month toward your financial goals.
What should those goals consist of?
You should begin by paying down your high-interest debt. With interest rates that can run as high as 30 percent or more, a credit card is a hand grenade in your wallet. Few people realize that making only minimum payments on a high-interest credit card means paying each month for that hamburger you ate years ago — and that you will likely never fully pay it off.
Next, you need an emergency fund. In today’s economy, nobody can afford to be living paycheck-to-paycheck.
How much is enough? For the 40 percent of us who admit we live beyond our means#, an emergency fund in any amount will be a welcomed improvement. As a general rule, an amount equal to no more than three months’ income will be a generous cushion against bad luck.
After that, it’s time to begin thinking about saving for the future, whether it’s a college fund for the kids, a tax-deductible Individual Retirement Account or (if you’re lucky enough to work for an employer who offers one) a 401(k) plan, where the boss actually matches your savings, dollar-for-dollar up to a certain percentage.
Still, the biggest question you’ll face is the same one that’s perplexing Congress and the President these days: where to cut spending?
In our house, we made a collective decision to cut the cable.
When we first subscribed to our local cable service back in 2003, the fee was around $65 a month. In 2012, with no change in our level of service, our monthly bill had ballooned to $161 — $1,932 a year.
Even though we were making the equivalent of a monthly car payment for dozens of channels none of us ever watched, each member of the family had our own favorites. We all realized just how big a sacrifice we would be making. The kids were horrified to be giving up Animal Planet and Disney; my wife would miss the Food Network and HGTV. For me, no more ESPN or CNBC.
While I hated giving up the bowl games and University of North Dakota hockey, the thought that we were paying nearly $2,000 a year for Honey Boo-Boo made the sacrifice worthwhile.
As it turned out, the sky didn’t fall on any of us — not even me and my beloved SportsCenter. The result was an increase in the amount and quality of our family time, a lot more reading and a host of new, constructive activities throughout the house.
Like ours, your own journey toward financial freedom will begin with baby steps. Talk to your family and make the decisions together. Don’t try to do too much at once: to do so would be like starting a vegetarian diet on Thanksgiving.
Even small savings will yield big improvements over time, and as you see your debt go down and your savings expand, you’ll be encouraged to take bigger steps as time goes on.