Many people got religion about saving money during the recent recession. This reversed a trend of steadily climbing U.S. debt burdens–or is it just a temporary pause in that trend?
The answer depends largely on whether people continue the good savings habits they acquired during the recession. You may not be able to do anything about national savings rates, but you can take some steps to make sure your own savings rate stays on track.
Keeping the savings habit going
On the surface, it may seem counterintuitive to find that savings rates actually improved during the recession. After all, incomes were down, and low bank rates created little incentive for saving. Even so, people were scared into good savings habits, and found they could get by with less.
Here are four things you can do to continue good savings habits as the economy turns from recession to expansion:
- Lock-in low interest rates. If you refinanced your home loan, make sure you locked in those lower interest rates with a fixed-rate mortgage.
- Eat in more often. Many individuals cut down on their restaurant habit during the recession. Continuing to eat at home more often will make going out seem special again–and could be good for your waistline as well.
- Reduce your credit card usage. By choice or by force, many people have cut down on the number of credit cards they have. Even once credit becomes more freely available again, keep in mind that having fewer credit cards gives you fewer ways to get into financial trouble.
- Avoid “expense creep.” Over the years, it seems bills for services like mobile phones and cable television have ballooned drastically. The recession forced people to cut back to what they really need, and you can keep pocketing those savings if you guard against letting unnecessary services or luxuries gradually creep back into your lifestyle.
If Americans were able to increase savings rates during a recession, just imagine how powerful those habits could be once incomes start rising again and there’s more to put into your high yield savings account. If you really want to build wealth rather than just fight off trouble, maintaining good savings habits in an economic expansion is the way to do it.