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Financial checkup may be as important as health checkup

Published: Sunday, Sept. 30 2012 4:43 p.m. MDT

Economists on the national level and money managers on the personal level are calling for a return to budget discipline.

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SALT LAKE CITY — When Cathy and Darnell Jackson began their married life together 36 years ago, they were living paycheck to paycheck. But over the years they have been able to develop a system of fiscal discipline that would be the envy of almost any finance guru. She is an executive assistant, while he works in apartment maintenance.

“(We changed) over to our current budgeting method of putting money in savings accounts in categories, she explained. “Car maintenance, house repair, short term savings, emergency fund savings, holidays, travel, escrow, rental (property) repairs, savings for a new car, etc.”

She uses automatic savings through payroll deduction with an investment company to fund the various accounts.

“This really helps us be able stay calm with our finances,” she said. “We have been able to live below our means and are feeling better about retirement.”

Remarkably, the Jacksons have become the exception, not the rule in America.

During the past three decades the personal savings rate among Americans has dropped more than 50 percent. According to data from U.S. Department of Commerce Bureau of Economic Analysis, the personal savings rate in January 1970 was 9.4 percent of disposable income. The highest level of savings came in 1982, when the rate climbed to nearly 11 percent before beginning its continuous decline in 1984. The lowest savings rate was reported in 2005 at just 1.6 percent of disposable income.

It has economists on the national level and money managers on the personal level calling for a return to budget discipline.

Examples of hope

Tom Merrill has also been able to devise strategies to manage his family’s finances. Merrill is a health economist for a small research firm in downtown Salt Lake, while his wife is pursuing a Master's degree. 

He said their monthly budget fits into two main categories: fixed expenses which are set up with automatic withdrawals from their checking account and variable expenses that are taken care of by a second checking account that has a predetermined budget for each category (e.g. groceries, gas, household, etc.).

He said those categories are “somewhat fluid and flexible to allow for variability.”

“We have an emergency fund and several other savings accounts that get a set amount every month on the first that we basically never see unless we are using those accounts,” he said. “We aren’t perfect, but our savings and debt repayment has really taken off in the last year and we are constantly re-tweaking the budget to fit our ever-evolving family’s needs.”

Maintaining the well-being of your finances is just as important as keeping your body healthy. But as often happens with one’s physical health, staying in shape financially can be challenging.

Heading into the final few months of the year is a good time to get a financial checkup and take a close look at the state of your financial health.

Save more, worry less

According to www.statisticbrain.com, the average American family has about $3,800 in a savings account, with about $35,000 saved toward individual retirement. Conversely, 25 percent of American families have no savings at all and 40 percent are not saving for retirement.

While most people know the importance of saving and managing money, not everyone is disciplined and organized enough to do so effectively. The average American household income is about $43,000, and approximately 38 percent have no funds set aside in case of emergency.

Earlier this month, Fidelity Investments issued new savings guidelines suggesting that workers save at least eight times their final salary in order to meet basic income needs in retirement.

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