Everybody wants to save, but very few people manage to do it. According to recent statistics, nearly half of Americans don’t have $500 set aside for an unexpected expense. As for retirement, most people are critically behind the major benchmarks for their age group.
While there are many reasons why people don’t save — each one as unique as the next — here are five of the biggest obstacles stopping the majority of people.
1. You Don’t Earn Enough
Let’s face it — a low income puts you and your budget in a bind. Your paycheck can only stretch so far, so hitting the usual saving milestones is harder when you earn less.
If all your money goes towards the essentials, there’s a good chance you simply don’t have the money to tuck away in savings. Cutting your essentials down is possible, but it might be easier to get a new job. You can also check out these ways to earn money from home to boost your budget until you land a better paying gig.
2. You Haven’t Set an Appropriate Goal
Saving without a goal undermines your financial security. A goal gives you something to work towards. Without one, it’s easy to forget why you’re saving a portion of your paycheck, and you can convince yourself you can skip a contribution here or there.
Both emergency and retirement funds have standardized goals to ensure you have enough money squirreled away for the future. Most financial advisors agree you need at least three months of living expenses in an emergency fund and roughly $1 million for retirement.
While these figures aren’t perfect for everyone, they give you an idea of what you should be saving. You can determine if these goals are appropriate for your finances and how much you need to save each month to consider yourself on track.
2. You’ve Hit a Rough Patch
Saving is easy when everything goes according to your budget. But sometimes, you can hit an unlucky streak and encounter a lot more than what you anticipated in your spending plan.
Your car breaks down, your cat needs surgery, and you need to call out for a plumber. Each new emergency depletes your savings, and if you don’t have enough downtime between the next emergency, you might come up short of what you need.
If your emergency fund fails to cover your next emergency, you might consider taking out an installment loan. When used strategically, an installment loan can bridge your lackluster savings, advancing you enough cash to afford your next unexpected expense.
4. All Your Money Goes to Debt
Few people have just one installment loan they have to worry about. Most juggle a variety of loans at any given time — from their mortgage to car financing, student loans, and credit cards.
Add it all up, and the average American owes a whopping $94,321, according to the latest data from Experian. That translates into a debt-to-income (DTI) ratio of 150%. In other words, the average American owes 1.5 times more than they earn.
With this DTI ratio, you might not have any money to spare for savings if it all goes towards your many debts.
Lastly, the ceaseless rise in the cost of living is one of the biggest reasons why people aren’t saving. Inflation has pushed up the prices on almost everything, yet few people have seen comparable bumps in their wages. Your paycheck simply can’t stretch as far as it used to, as a result.
You wouldn’t be alone — more than half of Americans have given up on their retirement savings, while more than two-thirds of Americans are saving less for emergencies.
How Can You Save More?
In almost every case, a budget is your answer. Sit down with this document to see how you can cut costs and save more.