It's easy enough to find evidence that Americans aren't saving adequately, and while these sorts of reports certainly sound the alarm, they don't do much to help us form better money habits. For some of us, the savings mountain seems so high that we may as well not bother climbing it. On the other end of the reaction spectrum, there's a certain sense of safety in numbers. We're all milling around at the bottom of this peak together, so it must not be that serious.
The good news is, the savings story is actually taking a turn for the better, though there is still much work to be done. More Americans are making gains in key savings metrics. For example, "70 percent reported at least some progress in meeting savings needs. 66 percent reported saving at least some of their income. And 63 percent reported "sufficient emergency savings to pay for unexpected expenses like car repairs or a doctor visit." So how can the rest of us follow that group's progress toward the summit? Here's who to watch and what to do.
Savers to Emulate
You might guess that you should look to the wealthier set for inspiration on all things financial, but the truth is they're not the ideal savers. A 2015 survey showed that only 17 percent of the highest earners in the survey (households making $75,000 or more) elected to put away at least 15 percent of their salaries for a rainy day.
Middle-income Americans are actually the ones we should watch here. Without a higher income to fall back on for expenses, including household emergencies, long-term health care, children's education or their own retirement, this group is more apt to save. In that same survey, 25 percent of those earning $50,000 to $75,000 reported setting aside 15 percent of their income.
How to Follow Their Lead
What can we learn from the best savers? For starters, they understand that they have to do the saving themselves. With fewer pensions and continuing doomsday reports about the longevity of the Social Security system, these middle-income Americans are making the most of the money they earn. You can do the same by making SMART goals of your own.
If you're not familiar with the SMART methodology, the letters stand for Specific, Measureable, Attainable, Realistic or Relevant, and Timely. Here's how it relates to financial goals.
Specific. Data shows that those with a "savings plan with specific goals" are more likely to make progress toward fulfilling their savings or investing needs. Without a specific number, all you see is a fuzzy, ominous cloud in the distance labeled something like "Get it together." Then your mind follows one of the two tracks mentioned at the beginning of this article:
• There's no way; I may as well not try.
• It's not that bad; it will work itself out.
Neither of those schools of thought will sustain you in retirement. Name your goals. Set specific amounts. And then, make sure they're ...
Measurable. Quantifying a financial goal is much easier than some other types of goals, which puts you ahead here. The key is to keep tabs after you've decided on specific amounts. There are plenty of free and paid apps available to use as your dashboard while your work toward your objectives.
Attainable. The higher the better, right? Not if it's so high you end up abandoning the climb. Unattainable goals are frustrating and meaningless, and it's this sort of thinking that causes many people to have a negative relationship with their finances. Set a goal you can realistically reach. Challenge yourself, sure, but focus on what you can make happen in the real world. Then, do everything possible to set yourself up for the pursuit of your goal.
Relevant. Your savings and investing goals should mean something special to you. They should be highly relevant to your unique personality and philosophies. Will you sleep better knowing your family has an emergency fund? Does owning a home feel like a major life accomplishment?
Whether it's saving for education or investing for a retirement where you can spoil the grandkids, explore what's most important to you and structure your goals around that.
Timely. Time is a huge factor when it comes to saving, and can be much more so with investing. Plus, saving and investing are behaviors we do incrementally, so we need to examine longer outlooks to get a better idea of how it might all accumulate. Take advantage of free online investment tools and calculators to count backward from your goals and set a larger savings strategy.
Whether you're nearing retirement or starting your first job, there's no better time to start saving.
TD Ameritrade, Inc., member FINRA/SIPC. Stock investing is subject to risks, including risk of loss. Commentary provided for educational purposes only. Past performance of a security, strategy or index is no guarantee of future results or investment success.