Is There a Right Time to Start Saving?

Empyrion Wealth-The Right Time to Start Saving

Almost everybody has that annoying uncle: the one who interrupts your funny story by disputing your facts; who feels the need to correct other family members on almost any occasion; and who offers uninvited critiques of your wardrobe, your choice of romantic interests or your performance in the school play. Here’s one of my best-remembered (and most disliked) annoying uncle sayings: “Failing to plan is planning to fail.”

I hate to say it, but … your annoying uncle is right about that last one. As a professional financial planner, I see on a sadly regular basis the unfortunate results of a failure to plan. With my women in transition, this often comes to light with the death of a spouse or a divorce. With my family stewards, failure to plan usually looks like complete bewilderment about how to organize, manage, or finance the affairs of an aging parent. For my clients approaching retirement, the shortfall in planning usually becomes apparent when they finally get around to adding up the resources they can depend on for maintaining a desired lifestyle once the regular paychecks stop.

One thing that all the above scenarios have in common is a shortfall in savings. Women who suddenly face a life on their own, people who are responsible for the care of an older family member, and soon-to-be retired persons looking at an income shortfall are all dealing with the consequences of not appropriately factoring the need for savings into their life planning.

For both financial planning and saving, the right time to get started is always now. In fact, the most common excuses I hear for not doing either one sound very similar: “We’ll get started when the kids are out of diapers”; “We don’t have enough assets to think about that right now”; “That’s just for rich people”; “I can’t afford it right now…” And the list goes on. The fact is, however, that wherever you are in life and whatever your circumstances, you need a financial plan, and you need to be saving on a disciplined basis.

If these excuses sound familiar, it’s not surprising. According to the U.S. Bureau of Economic Analysis, the average American saves only about 6% of net disposable income — far below the 10% that should be built into the typical financial plan. As a nation, we aren’t saving nearly enough. According to the Bureau of Labor Statistics, household spending in the U.S. averaged just over $60,000 in 2017. Based on that, Americans should have an average of $30,000 in savings — enough to cover living expenses for six months. But a survey of 2,000 Americans recently reported in the Chicago Tribune found that 38% have $1,000 or less in savings. Only about 27% have $10,000 or more saved.

You don’t have to start big — but you have to start! Your financial plan can be as simple as developing a realistic household budget that includes some amount allocated to savings, every month. Ideally, you should be socking away a portion of your savings in your company’s 401(k) or your IRA. The point is, the best plan for you is the one you get started on today, and the best amount to save is the one you can commit to in a disciplined way over time. Then, when some of those revealing moments in life come along, you won’t have to worry about your annoying uncle’s comments.

Stay Diversified, Stay Your Course!