Are Americans Saving Enough?

Ways to help improve your odds for success, its Now or Never! Or you will be assured of a life of lower living standards and very grim retirement prospects! 

Spend or save? That question will confound consumers for the next several years as they try in vain to rebuild their savings, lower their debt and in effect limp toward retirement. It is well documented that for the past decade Americans have been on a spending orgy, for about 40 years since World War II, Americans typically saved between 6% and 10% of their after tax income. The savings rate began to deteriorate in 1985 and for the past 5 years it has been as low as -1%.  After the frightful events in 2008 with  Americans typically losing up to 50% of their investment values, they have started hoarding cash and the savings rate crept up to about 4%.

While we were saving less we were also borrowing more and when the Real Estate bubble burst in 2007 the Atms in our homes were shut down and Americans really went to their credit cards in earnest! In 1960 the typical US household had debt that equaled about 55% of their after tax disposable income. For years that rose gradually as credit card borrowing, low down payment mortgages and all types of other easy credit for everything from automobiles, furniture, vacations became common.  Then, all hell broke loose after 2000, peaking at 130% of income in early 2008. Even though it has been reduced slightly since then the fact is the typical family still owes more to lenders than it earns in a year.

How bad off is your family?  Here are some figures from the Federal Reserve and the economists at Bank of America to help compare your own debt, savings and net worth to the national averages:

• The average debt-to-income ratio, or DTI, is 125 percent today. Economists roughly consider a 100 percent DTI ratio to be “normal” or healthy. So if you owed a combined $125,000 on your mortgage, car loans and other obligations and earned $100,000 in take-home pay, you’d want to pay down your debt by $25,000, or 20 percent, to be in the safe zone.

• The average ratio of household net worth to disposable income, or the wealth-to-income ratio, is 487 percent today. That’s lower than the average since 1993, which has been about 550 percent. The lost wealth is mainly because of declines in the value of homes and stocks, which is where many people have parked their money. Your net worth is a fairly simple equation: your mortgage balance and other debts and liabilities subtracted from your home equity, investments and other assets. So you can increase your net worth in two basic ways: Either increasing your assets or lowering your debts.

• The savings rate this year is about 4 percent. One mainstream assumption is that as the savings rate goes up, about 80 percent of new savings will be used to pay down debt, while about 20 percent will be invested in securities or other assets that pay interest.

Consumers become rational. Given the painful transformation of the U.S. economy, Americans ought to be saving like crazy and buying nothing they don’t need. Some are, but it’s not clear yet if Americans as a whole will save more over the long term or go back to spending nearly everything they have. The savings rate has crept up to about 4 percent, but that’s still lower than the long-term average and far lower than you might expect after a collapse like the one we’ve endured. If savings continue to go up–a prudent move for most households–consumer spending will come down, leaving a hole in the growth of our gross domestic product, with little else to fill it. So hopes for a vigorous rebound rest on spendthrift consumers being as materialistic as ever. Now there’s a strong foundation for success.

Well we find ourselves in quite a bind, These problems call for NEW SOLUTIONS,  

That’s why I am Creating the DEBT FREE NATION TOUR.

I have assembled a group of financial experts to tour the Nation and give consumers some hope in a hopeless world.  We will offer common sense solutions to Mortgage Acceleration, Debt Elimination, Credit Repair and  Wealth Accumulation.  More information and dates will be available soon.