Saving: Emotional Dividends in Down Economy

This is a guest post from Scott Spiker with First Command Financial Services.

Recent survey results from the First Command Financial Behaviors Index leave no doubt that the economic downturn has many Americans feeling stressed about their finances and wondering where to turn for help. But there is a silver lining amidst all of this turmoil: consumers have rediscovered how to save and that’s one of the single most important things you can do to regain control of your finances and reduce financial stress.

You might be thinking “I can’t afford to save right now.” Maybe you are focused on paying down debt or you’re already cutting back to make ends meet. The good news is financial optimism isn’t dependent on how much you save. Rather, it’s the practice of saving that creates an emotional lift. Even in a time of great economic turmoil and uncertainty, the March Index reveals that saving as little as $5 a month can reduce feelings of stress.

The savings-to-debt ratio is perhaps the most significant contributor to feelings of financial optimism, for as one’s savings-to-debt ratio increases – meaning more savings, less debt – feelings of financial security increase, and feelings of being financially stretched decrease. Having a plan and being diligent in your approach to savings and paying down debt provides a sense of control in an economy that has seemed out of control. In addition, watching the numbers on your savings account go up – even in small increments – provides a sense of accomplishment.

In recent years, many Americans have abandoned the habits of regular savings and investment and replaced them with excessive consumer spending and ominously expanding credit card balances. But, the current financial shake-up has been a wake-up call. As the economy and our sense of security spiraled out of control so did the level of emotion tied to our financial decisions.

If you feel emotionally stressed about the current economy or your personal financial situation, start by taking a few small steps to increase your savings. You can save a lot by making small changes, such as planning menus around grocery store sales, taking advantage of your local library for movies and books, and cutting back spending on services you can do yourself. Are you actually reading the magazines you’re getting? If not, cancel your subscriptions. Make cutting costs a game. Keep a monthly total of what you’ve saved and start tucking it away.

To ensure that you are spending less money than you make you have to take the time to track your spending. Look at your bank statements for the past three months. Or save receipts for a month and calculate where your money is actually going. You may be surprised at the results. Once you know where your money is going, create a plan for where you would like it to go. Outlining your goals increases your chances of achieving them.

Most importantly, make the shift to cutting back on non-essentials and focusing on savings as permanent changes for a more frugal and responsible way of life. The economy will experience highs and lows, but practicing responsible spending and savings habits will put you in the best position to minimize the impact on your personal finances and keep you on track toward your personal financial goals.

About J. Scott Spiker

J. Scott Spiker joined First Command Financial Services in September 2007, becoming the first Chief Executive Officer recruited from outside the company. A seasoned executive with more than 25 years of experience in the investment and financial services industries, Mr. Spiker has held top leadership positions in a number of major corporations.

About First Command

First Command Financial Services and its subsidiaries, including First Command Bank and First Command Financial Planning, assist American families in their efforts to build wealth, reduce debt and pursue their lifetime financial goals and dreams—focusing on consumer behavior as the first and most powerful determinant of results. Through personalized financial plans that emphasize accumulating wealth while reducing risk, First Command Financial Advisors have established lasting relationships with hundreds of thousands of client families since 1958.

First Command Financial Services, Inc. is the parent company of First Command Financial Planning, Inc. (Member SIPC, FINRA) and First Command Bank (Member FDIC). Financial planning services and investment products, including securities products are offered by First Command Financial Planning, Inc. Insurance products and services are offered by First Command Financial Services, Inc. Banking products and services are offered by First Command Bank. Securities products are not FDIC insured, have no bank guarantee and may lose value. In certain states, First Command Financial Services, Inc. is a separately registered domestic corporation and does business in California as “First Command Insurance Services.” A financial plan, by itself, cannot assure that retirement or other financial goals will be met.

image source: leff via Flickr