Year after year, studies show that Americans are on the struggle bus when it comes to saving for, well, anything. With 2018 on the way, nothing much has changed.
In 2017, more than half of all American adults had less than $1,000 in a savings account, according to a survey by GoBankingRates. To add insult to injury, a similar Bankrate study showed that nearly a quarter of adults had no money saved for an emergency like a layoff or a huge medical bill.
Unfortunately, our retirement savings don’t get a pass from our ineptitude. According to a report from the Economic Policy Institute (EPI), the mean retirement savings of all working-age families ages 32 to 61 was $95,776 at last count. Sounds good, but that’s an average – which can be skewed upward by families with millions saved. (If one family has $10 million saved up and nine other families have $0 saved, the mean or average savings of the group is $1 million.)
The median retirement savings, on the other hand, worked out to just $5,000, since so many families have no savings and investments at all.
10 Reasons You Might Not Be Saving Enough
But, why exactly do we eschew our savings goals? As with most economic issues, the answer is complicated. Job losses, stagnating wages, rampant student loan debt, and myriad other economic factors have undoubtedly made it harder for many people to save anything meaningful. If you’re earning less than you were five years ago but your bills have only gone up, it makes sense that you’d have less, if any, money to sock away in savings.
On the flip side, there are still many people who can afford to save money but aren’t – and for reasons that might surprise you. If you’re struggling to save and can’t seem to figure out why, consider these explanations from financial advisors who work with people just like you every day:
#1: You’re the poster child for ‘Someday Syndrome.’
Stephen Rischall is an award-winning financial advisor and public speaker who believes far too many people fail to save because they keep telling themselves there’s always tomorrow.
“All too often people fall victim to Someday Syndrome,” he says. “‘Someday I’ll start exercising regularly, someday I’ll start eating healthier, and someday I’ll start saving more.'”
Rischall says that many people, and especially those making good money, declare a goal of saving more as soon as they start earning a higher wage. But it rarely happens as we plan, he says, since the same habits that keep us from saving at a lower salary never change.
To break out of this habit, Rischall says to make savings a priority and “pay yourself first.”
Whether you can save just $10 or 10% of your income at first, your efforts will add up over time, he says. “Your future self will thank you.”
#2: You have massive credit card debt.
No matter your income, it can be difficult to justify or even afford to put money away in savings if you’re constantly bombarded with credit card debt and interest payments, says Seattle financial advisor Josh Brein.
Interest payments alone can add up to hundreds of dollars a month, and it’s hard to justify saving money at a 1% or 2% interest rate when credit cards charge an average of about 15% APR these days.
The way around this is obvious, of course, but takes a concerted effort. For saving money to make more financial sense, you need to pay off high-interest debt and avoid adding debt back into your life. You can also consider transferring high-interest balances to a 0% APR credit card to pay down debt faster.
#3: You don’t sit down to make a plan.
Financial advisor Christopher Clepp of Strategic Financial Group says he sees far too many people who have no idea how much they need to save for retirement, a down payment on a home, or to send their kids to college.
“They haven’t taken the time to sit down with a professional or do the math themselves, and they save whatever is easy for them to save, which is often not enough,” he says.
People are also hesitant to change, notes Clepp. They’re afraid of being told they aren’t doing enough, so they choose to skirt the issue.
Unfortunately, kicking the can down the road won’t help anyone reach their goals. If you want to make sure you’re able to retire one day, remodel your home, or have enough savings to help your kids with college, the best thing you can do is sit down with a professional to draft a real-life financial plan, says Clepp, or at least hash out a realistic one yourself. Without a plan, you’re almost destined to fail.
#4: You have outrageous car payments.
Long Island financial advisor Joseph Carbone says car payments are very often the death knell for a couple’s savings goals. Worse, these couples often have no idea.
“It is not uncommon for me to work with couples that have close to $1,000 in monthly car payments,” says Carbone. “The kicker is, more often than not, they are lease payments and not finance. They have to lease new cars and the monthly payments just keep going.”
Carbone says he has to have this discussion with clients all the time. “What would you be able to do with that extra $1,000 per month?” he asks them.
“From a financial standpoint, cars are one the worst investments you can make,” says Carbone. And all too often, car payments are the very reason people can’t or don’t save enough.
#5: You’re afraid.
Chris Ball of Financial Muscle Planning says he believes far too many people are afraid of messing things up. They’re afraid of investing and not understanding financial products. They fear making a mistake with their savings, and they fear breaking out of their comfort zone. Because of these fears, they often choose the “do nothing” approach to save themselves from making a mistake.
To help in this respect, Ball says he makes it clear with his clients that his mission is to provide accurate knowledge, data, and insight they can understand.
“The only way to conquer fear is to face it head on,” he says. “We don’t know what the future will bring, but we have the power to build a solid foundation that can weather any storm. By breaking the cycle of fear, we can empower more people to save and plan with confidence.”
#6: You’re complacent within the consumer cycle.
Financial planner R.J. Weiss of The Ways To Wealth says he believes Americans struggle to save because it takes too much effort. The way of the world sets you up to spend your entire paycheck, he says, so many people just go with the flow.
Weiss uses the home-buying process as an example. When you go to buy a home, most lenders use the 28/36 rule to determine how much you can afford. The rule says that your housing payment shouldn’t exceed 28% of your monthly gross income, and total debt payments shouldn’t exceed 36%.
That’s the maximum a bank will lend you – but many buyers just look at what the bank says they can afford and go from there, instead of deciding what they can realistically afford without sacrificing other financial goals like savings. “From the consumer’s perspective, it actually takes effort to spend below the amount you qualify for,” says Weiss.
The car buying process, another major expense, is similar as well. “Many Americans choose a car based on qualifying for the monthly payments,” says Weiss. To break out of this cycle, you need to learn to think for yourself and not just accept what your bank or lender says.
#7: You don’t have an emergency fund.
Financial planner and founder or ReisUP Tara Falcone says one of the biggest reasons Americans don’t save enough is because they fail to establish an emergency fund at the start of their financial lives.
With an established emergency fund, it’s a lot easier for people to overcome a job loss, pay cut, or medical emergency. Without a fully-established emergency fund, on the other hand, adults are more likely to constantly fall behind financially as they struggle to keep up with surprise bills and life’s ups and downs.
“Young adults especially need to understand that living frugally out of the gate in order to establish an emergency fund is crucial to their long-term financial health,” says Falcone. “Having cash on hand to pay for unexpected issues like car or house repairs, large medical bills, or temporary unemployment will prevent them from going into unnecessary debt and allow them to save more money in the long run.”
#8: You have a ‘subscription addiction.’
Financial advisor Tony Liddle of Prosper Wealth Management says that the rise of the monthly subscription model, which he calls “The Subscription Addiction,” is making it harder for Americans to save.
These days, you can subscribe to almost anything: from television services to grocery delivery, Amazon Subscribe n’ Save, Fab Fit Fun boxes, monthly shaving kits, clothing or coffee crates, or beer or wine of the month clubs. And let’s not forget all the Blue Aprons of the world, which promise you easy-to-cook meal plans with pre-portioned ingredients included that inexplicably cost almost as much as dining out.
While nothing is inherently wrong with subscriptions, Liddle says you do need to keep track. “The key is to be diligent on where your money is going and look for recurring costs that you aren’t familiar with,” he says. “In doing a review of my own finances, I found I was paying for two separate services to monitor my credit. Both were charging me $29.95 per month, and on top of it I wasn’t even using the services.”
Liddle suggests you take inventory of your own subscriptions to see whether you’re paying for services you don’t need. Do you really need cable, Hulu, and Netflix, for example? Is your Blue Apron subscription actually helping you save and be more efficient, or is it making dinner preparation too expensive and complex? If you can cut out some subscriptions you don’t need and funnel that cash into savings, you’ll be a lot better off.
#9: You haven’t automated your savings.
While there are plenty of formulas and strategies that can help you reach your savings goals, one of the best options is automating your finances. By setting up automatic investments or bank transfers, you can ensure you meet your savings goals first and force yourself to live on what’s left.
San Diego Financial Advisor Taylor Schulte says one of the biggest mistakes people make is never taking the time to automate their important financial tasks. Schulte says many people believe they need to stick to a monthly budget to get ahead financially, but you don’t even have to budget if you automate your finances.
“Set up a process to automatically pull money out of your checking account and put that money into a savings or investment account regularly,” says Schulte. “With just a one-time setup, you’ve committed your future self to consistently save money.”
By automating everything, Schulte says you can just “set it and forget it.”
If you don’t bother, on the other hand, it’s likely your savings goals will fall to the wayside. There are too many ways to spend money, after all, and it’s far too easy for life to “get in the way” as you try to save.
#10: You’ve accepted debt as part of your lifestyle.
While many of us see debt as some sort of necessary evil you have to access from time to time, far too many people see debt as part of life. They fall victim to the “shiny object syndrome” and decide that debt is the best way to afford the life they want, says Ryan Inman, a fee-only financial planner for physicians.
Many times, people graduate college or enter the workforce and immediately pile on debt that makes it significantly harder to save, says Jordan Nietzel, CFA, director of investment operations at Blooom.com.
“They get a new car, new furniture, new clothes, and that’s on top of the student loan debt they already had,” says Nietzel. “They’re putting themselves at a disadvantage to start.”
Nietzel says that debt makes buying items we can’t really afford far too easy. “We buy things we can’t afford because somebody else offers to pay for them now,” he says. We avoid the emotional pain of money leaving the bank account today by agreeing to pay for it later. And we always do pay – in far more ways than one.
Nietzel says that the biggest factor that helps people save is their ability to live within their means. While living on less than you earn often means going without the things you want, it will also help you avoid debt. And you’ll have a lot more money to save if you’re not drowning in monthly payments and interest charges every month.
Holly Johnson is an award-winning personal finance writer and the author of Zero Down Your Debt. Johnson shares her obsession with frugality, budgeting, and travel at ClubThrifty.com.