Saturday 31 October 2015

The Importance of Saving Dollars

The US economy has improved recently and dollar’s strength has been confirmed by reflected by the exchange rate in relation to many of the world’s other currencies. There is talk of an increase by the Fed. in the coming months although no one is expecting too much of an increase and therefore little change for US consumers. Few things become cheaper these days, certainly now that the recession is over, but the fall in the price of oil means that gas is cheaper and utilities too. It is certainly a bonus because both take up a reasonable amount of dollars each month for most households.
A Start
The question is how to use this little windfall? The average household benefit is said to be around 700 dollars on gas alone but it appears few are making positive use of it, either by saving towards retirement or an emergency fund, or by taking positive action to reduce debt.
A recent JPMorgan Chase publication into credit and store card debt suggests that the money is being spent in restaurants and department stores rather than many using it in a way to help overall financial positions. It is worse still if a credit card is used to pay because any month end balances incur a high rate of interest and it seems many in the USA are carrying significant balances.

Credit Card Debt & Personal Loans
If the figures are to be believed those carrying credit card debt have balances of over $16,000 on their cards alone. It surely makes sense to reduce and ideally pay off those balances when this extra money is available? They should certainly look to ridding themselves of high interest debt, perhaps by getting a more competitive personal loan from just right installmentloans which is readily available from online lenders. The $700 does not come as a definitive figure, rather it is achieved by simply handing over less money each time. The way to achieve the $700 is best done by putting aside a sum each month, in the region of $60.

There is then the opportunity to save towards a retirement fund or retirement. They may opt for the S&P 500 which should provide growth of approaching 10% per annum. That figure of $700 would grow more than 10 times over in a period of 25 years. It is an illustration of how any saving can grow when compound interest applies; even $50 a month put away towards the future will grow far quicker than anyone would think. Think if the oil price remains depressed and next year there is another $700 to invest. Those who are dreaming of a comfortable retirement and put those two sums of $700 to good use will have an excellent addition to their retirement fund if they are still only in their 30s or early 40s.

Time never stands still and when it comes to reaching retirement will come one day. The sooner people start to think about saving towards the time when they are no longer working the more they will have in their retirement fund. Those who begin in just a small way in their 20s are taking advantage of the fact that compound interest produces growth. It is harder to catch up starting to save in their 30s and harder still in their 40s. Those who take no steps to get rid of expensive date will rarely be able to ensure a comfortable retirement. The Social Security System, even under is present rules will not do that. The System is under pressure with the possibility that benefits will actually reduce because fewer are contributing and more are claiming and living longer.

The only source of extra money is taxation and that is not popular, certainly with the majority in Congress but time will tell whether the mood changes. As the fund gets lower and lower it is possible that public pressure will force a change. It is impossible to rely on that of course meaning that people who do not plan their financial future will have less than a comfortable retirement. There is a good deal of wealth in the USA but also many with financial problems; there are solutions for those that want to look for them.

Do you have have any questions or suggestions? Write in comment section.
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