The Lost Art of Saving Money
Saving money is nearly a lost art in America. According to the U.S. Census Bureau, the national household savings rate has fallen from 10.8 percent in 1984 to a negative 0.5 percent in 2005. Over the past 20 years, not only are households saving less, but we have finally reached the point where we are spending more money than we are making. It's easy to see why saving has lost its luster in our country. Conspicuous consumption, easy access to credit card debt and a government that encourages spending are the major culprits in a consumer driven drama that plays every day in the U.S. The result is too many families that are one or two missed paychecks from near financial insolvency.

Now, just because the herd is stampeding toward financial calamity, there is no reason for you and your family to follow. You can setup a safety net of saving that will help you achieve your short, medium and long term financial goals.

Why Save?
Having a clear understanding of "why" you are saving is what will drive you and your family when you are making alternative financial decisions. Sit down with your family and discuss your financial goals? Consider the following:

• Short-term goals can be achieved in less than one year and might include, establishment of an emergency fund, this year's vacation, or minor home improvements.

• Intermediate goals of one to five years might include, paying off credit card debt, saving for a house down payment or making major home improvements.

• Long-term goals of more than five years might include college funding, retirement or a vacation home purchase.

Write your financial goals down and put an estimated price on each one. Your goals will give you the motivation and staying power necessary to sustain a savings program over the long haul.

Putting your goals into action is the next step. Unfortunately, most families have never set up a formal saving plan. They will dutifully pay their bills and hope that they have something left over at the end of the month to save. You still have to pay your creditors, but meeting your financial goals will have to be your priority.

Pay Yourself First
The "Pay Yourself First" model assumes that you make your savings payments first and then live off the remainder of your income. If you don't have a savings plan or your plan is not working, start with this simple model.

For purposes of illustration, let's assume that a family has a gross income of $72,000 per year and can invest in employer 401k plans, with a company match of 50 percent of the first 3 percent saved.

• Savings Goal: Start with 10 percent of gross income is $7,200 per year.

• Savings Allocation: 401K savings plan—3 percent of gross is $2,160 per year, with company match of $1,080.

• Savings Account: 7 percent of gross is $5,040 per year.

Total Annual Savings: $8,380—13 percent of gross income.
Because the 401K savings deduction is a before-tax payment, the actual reduction in take home pay will be less than the amount deposited into the account. The savings account payment should be an automatic deduction from the pay check or an automatic withdrawal from the checking account.

Make it Happen!
There are a lot of families that are successfully saving money towards their financial goals. There are several key changes that have to take place to get started:

• Change your mindset: You have to live below your means in order to save money. Savings has to be your financial priority.

• Understand where your money is going: For the next 30 days track your family's spending. Keep cash receipts and use your check register to setup a spreadsheet or ledger. Where is your money going and how can you better prioritize your spending?

• Reduce your credit card debt: First, don't create any more credit card debt and then develop a plan to eliminate or substantially reduce it within 12 months.

There are numerous books and websites with tips on how to save money. The American Savings Education Council has an interesting website at: www.asec.org. Some might say that this seems like a lot of work and it is! But, think of the time as an investment. An investment that will help lead you and your family down the road to "Financial Success." If your financial position is not where you want it to be, you have to take control and make it happen!

(Michael G. Shinn, CFP, Registered Representative and Investment Adviser Representative of and securities offered through Financial Network Investment Corporation, member SIPC. Visit www.shinnfinancial.com for more information or to send your comments or questions, email shinnm@financialnetwork.com.)