It pays to get to know why Americans generally cannot save more money. Most of us want to increase our savings to reach financial goals. However, there are just some obstacles that are hard to overcome. While it is easy to motivate ourselves, there are things happening around us that are beyond our control. It is important for us to get to know the factors that make saving difficult for us. Even if these are beyond our control, that does not mean we are completely powerless against it. Once you know the main reason why it is hard to save, you can do something to overcome it. After all, knowing the problem is the first step to solving it.
While it is true that there are a lot of issues that make saving harder, that does not mean people are not trying. In fact, the average balance of Americans with a savings account is currently $33,766.49. You have to realize that there are people who are successful at saving. That means it is not impossible to save more money regardless of your current financial situation.
Top 5 reasons why consumers find it hard to save more
Before you go all out on your effort to improve your savings, you need to get to know the top reasons why Americans have a hard time saving. CNBC published an article that identified the reasons why Americans are struggling to save. These reasons include high-cost of living, low salary, debt, non-essential spending, and lack of budgeting efforts. Apparently, every state in the country has its own reason why their local residents are having a difficult time saving. Let us discuss them one by one so you can pinpoint what exactly hinders you from reaching your saving potential.
High-cost of living
This is hands down, the most popular reason for consumers to fail at saving. 37 states have declared that the high-cost of living is the reason why they are currently struggling to save more money. Some of the states revealed that the high cost of living is usually driven by the expensive cost of homeownership. These states include Colorado, the District of Columbia, New Jersey, New York, and Virginia. Hawaii also blames homeownership for the high-cost of living – which they say is equal to their lack of budgeting efforts in hindering them from saving more.
There are also states that say their high-cost of living is mainly caused by the expensive utility, transportation, groceries, and other miscellaneous expenses that they spend on each month. These states include Florida, Illinois, Kansas, Minnesota, Montana, Nevada, New Hampshire, Pennsylvania, South Carolina, and Wyoming.
Some of the states that blame the high-cost of living also say that it is aggravated by the low wages they receive. States like Georgia, Iowa, and Vermont have a hard time saving more because of these reasons.
Surprisingly, there are states like Mississippi, Oklahoma, and Utah that blame the high-cost of living too. However, statistics reveal that they are some of the cheapest states to live in or buy a home. It is not clear why they still blame the high living costs.
The other states that blame the high-cost of living for their limited savings include Arizona, California, Connecticut, Delaware, Idaho, Indiana, Maine, Maryland, Massachusetts, Michigan, North Dakota, Ohio, Oregon, West Virginia, and Wisconsin.
It is not impossible to save money even if you have a low income. But despite that, there are ten states in the US where residents blame their low monthly salary for their inability to save more money. The national average income is $55,322. Of the ten states, 7 have an income that is lower than the average. These states include Kentucky ($44,811), New Mexico ($45,674), Tennessee ($46,574), Iowa ($47,298), Missouri ($49,593), North Carolina ($48,256), and Nebraska ($54,384). Missouri also blames the lack of budgeting efforts as another reason why they cannot save more. Nebraska and North Carolina, although having a lower than the average cost of living, still have a hard time saving more. Iowa, on the other hand, also blames the high-cost of living for their inability to save money.
There are three other states that also blame their low salary for not being able to save more money – Vermont ($56,104), Rhode Island ($58,387), and Washington ($62,848). But if you look at the numbers, it appears they have a higher than the average income. They do have a higher than the average cost of living – that is probably why they think that they are not earning enough.
The third most popular reason that Americans have for not saving enough money is their debt. While the country has trillions of dollars worth of consumer debt, it is surprising that only three states blame it for their inability to save more money.
A quarter of the residents in Louisiana mentioned that their debt includes housing, credit cards or student loans. With a lower than the average income of $45,652, it is hard for them to pay off their debts – much less save.
On the other hand, 22% of those in Texas mention that their credit issues make it harder to save. This is true even if they have a lower cost of living compared to the rest of the country.
Arkansas is the last state to blame debt. This is actually surprising because they have the least amount of debt compared to the other states – most of which are student loans. But still, 28% say that their debt is keeping them from reaching their saving potential.
Paying for non-essentials
Just like the previous one, there are three states that blame non-essentials for their lack of savings. In Alabama, residents admitted to eating out at cheap restaurants. The small expenses, while they are cheap, usually add up. This is why 24% of this state said paying for non-essentials caused them to skip of saving more. In South Dakota, 36% mentioned the same dilemma – despite the fact that the state has a lower than the average cost of living index. Alaska blamed both non-essential costs and their lack of budgeting efforts in their inability to save more money.
Lack of budgeting efforts
Finally, the lack of budgeting efforts is also blamed by three states – which have already been discussed in the other reasons previously mentioned. For instance, Missouri blamed both their lack of budget and low salary for their saving issues. Hawaii has troubles with the high-cost of living and lack of budget too. Alaska blames the absence of a budget and paying too much for non-essentials. It seems like these states have aggravated their inability to save because of their lack of budgeting habits.
Tips to help you save more money
Now that we know the 5 different reasons why Americans cannot save more money, it should be easier to figure out what you can do in order to give your savings a boost.
High-cost of living
If you come from a state that is burdened with a high cost of living, it may seem like you are powerless over your situation. While you have no control over the prices of the basic commodities, you do have full control over your lifestyle. If you really want to increase your savings, you need to either lower your expenses or start earning more.
To lower your expenses, you might have to live a frugal lifestyle. This does not mean restricting yourself. It is more of identifying what is important to you and focusing your funds on that. When it comes to earning more, you can ask for a raise or you can get a side gig. Of course, you have the option to combine both efforts. Lowering your expenses will help you develop the right habits that will make you a smart spender.
Speaking of side gigs, this is the solution for those who are struggling with a low salary. According to reports, 28% of Millennials have opted to get a side gig to increase their monthly cash flow. 6 out of 10 are working on a side job at least once a week and 25% of them earn $500 or more from it each month. Of course, you have to be wise with what you do with the extra money that you earn. The increase in income should not lead to an upgrade in your lifestyle. It should be sent towards your savings – or an alternative. The alternative is something that will indirectly help you save – like paying off your high-interest debts.
In case you come from a state that blames debt for their lack of savings, the obvious solution is to stop accumulating more and start paying off your current balance. Fortunately, there are so many options for you to get out of debt. You just have to analyze your specific financial situation so you can choose the plan that you can afford to pay off. For instance, if you can meet all the minimum payment requirements, you can choose to simply go for credit counseling, debt management or debt consolidation. But if you need to lower your monthly payments, you can opt for debt settlement. All of these are effective in their own right. You just have to make sure you can commit to it.
Paying for non-essentials
When it comes to paying for non-essentials, you need to alter your spending behavior. There are many signs that indicate a need to improve your spending habits. One of them is the presence of debt. This is an indication that you are paying more than what you are capable of paying in cash.
It helps if you create a spending plan. This plan will help keep your expenses in check. You start by analyzing your income and listing the expenses that are important to you. It is possible for you to use this plan to transition into a frugal lifestyle. Or you can simply use it to help you control your spending. That way, you can ensure that you will have the extra money that you can put towards your savings.
Lack of budgeting efforts
For those who cannot save because they do not budget, this can easily be solved by creating and using a budget plan. This is actually a solution to most of your financial problems. Whether it is to pay off debt, reach a financial goal, or a saving goal, you will always need a budget. Sometimes, you do not realize that you have more than enough finances. It is just that it does not go to where it should. You need to take control of your finances and the best way to do that is to have a budget plan.
Use these solutions to help you save more money. It will take some time to get used to it but if you stick to the solution, you will soon find yourself developing the right habits that will make your financial future secure.