by Rick Kahler
Are you a spender or a saver?
According to Scarborough, a market research firm, only 9% of adults in the U.S. label themselves as spenders. This is the percentage who "mostly agree" with the statement, "I am a spender rather than a saver." On the opposite side, 29% "mostly disagree" with the statement and are considered savers. Presumably, the 62% in between consider themselves to have well-balanced financial habits that include both spending and saving.
Given these numbers, it would seem that most of the adults in this country ought to have healthy savings accounts. Unfortunately, that's not the case.
According to a report released in March 2013 by the Employee Benefit Research Institute, 57% of U.S. workers have less than $25,000 in total household investments and savings, not including the value of their homes. The Social Security Administration's current figures show 34% of American workers have no savings set aside specifically for retirement.
Something doesn't quite add up. Either a lot of Americans aren't willing to admit that they are spenders, a lot of Americans are so poor that they can't afford to save, or a lot of Americans are delusional.
Or maybe a lot of us just have different definitions of "saving." Here are a few money habits that might encourage people to think of themselves as savers, but that don't necessarily add up to being successful savers:
- Buying things on sale. Waiting for discounts on items you need and want is a wise and standard practice for frugal shoppers. But you aren't a saver if you buy bargains that you don't need, might not even really want, or can't afford. Maybe that $150 pair of shoes is half price. Yet if they will just sit in your closet, you haven't saved $75. You've spent $75.
- Having money in the bank. Yes, putting money into a savings account is the first place to start saving and a great habit to teach your kids. But once you have accumulated an emergency fund, keeping your money in the bank isn't a good savings habit. Over time, savings accounts and CDs don't pay enough to keep pace with inflation. Money in the bank may be safe, but it isn't really an investment because it isn't growing. Mutual funds that include a well-diversified range of investments are far better places for your long-term retirement
- Not spending anything. There are times when choosing not to spend money now will only cost you more money later. Failing to maintain your car or do home repairs are two common non-spending habits that may seem like saving but actually turn into spending.
- Saving for someone else. The time-tested advice to "pay yourself first" usually means taking money off the top for savings before you spend anything. Yet this has another application, as well. Make saving and investing for your own retirement your first priority. It needs to come ahead of saving for your kids' college educations, weddings, or first homes. This may seem selfish or greedy, but in fact it's the opposite. When you provide for your own financial well-being in retirement, your kids won't end up having to help pay your bills.
When we're asked to label ourselves, it's normal to tend to choose answers that fit the way we would like to think of ourselves. I'm sure most of us would prefer to think of ourselves as savers rather than spenders. But if we really want to become successful savers, we can't settle for the money habits we wish we had. We need to look at the money habits we actually practice.
Rick Kahler, Certified Financial Planner®, MS, ChFC, CCIM, founded Kahler Financial Group, and became South Dakota’s first fee-only financial planner in 1983. In 2009, Wealth Manager named Kahler Financial Group as the largest financial planning firm in a seven-state area. A pioneer in the evolution of integrating financial psychology with traditional financial planning profession, Rick is co-founder and co-facilitator of the five-day intensive Healing Money Issues Workshop offered by Onsite Workshops of Nashville, Tennessee. He is one of only a handful of planners nationwide who partner with professional coaches and financial therapists to deliver financial coaching and therapy to his clients. Visit KahlerFinancial.com today!