30,000 Foot View #2

Don't Take It Personal, Finance

Relatively early in the COVID-19 epidemic, I came across some Bureau of Economic Analysis data from March. Of particular interest was this personal savings data.

The personal savings rate had quickly jumped up in the face of the COVID-19 crisis. At the time I saw these data, I was doing some writing about personal finance. Again, a lot like 30,000 #1, this was a way from me to think through the topic. Sharing it with others was secondary.

In the above data, which again was early in the pandemic, it was obvious something interesting was happening. Then, a couple of weeks ago, FRED dropped a updated personal savings rate data and it blew my mind.

The above shows a nearly 5x increase in the personal savings rate due to the uncertainty created via the pandemic. Uncertainty increased, so people pulled back spending to compensate.

As far as the US economy goes; this could be a huge problem going forward. That may be a subject for a subsequent piece, though. For now, seeing the FRED data which shows savings as a percentage really got me thinking. You’re invited to do the same.

ARE YOU SAVING MORE THAN 30% OF YOUR NET INCOME?

That’s an actual question. It’s not rhetorical. Except this challenge—in fact, use this simple Excel-based tool to explore your finances. The goal of the tool is to; (1) better illuminate exactly where each of your hard earned dollars is going, while (2) informing you how much you are saving.

For this exercise, savings encompasses a 401(K), Health Savings Account (HSA), Flexible Spending Account (FSA), Employee Stock Purchase Program (ESPP), other personal savings (e.g., a savings account at a bank or under your mattress, and any other investments (such as a individual retirement account or individual investment account with a brokerage).

Note, all you should need is a recent pay stub. Use the “buckets” as designated in the Excel. Instead of adding rows/columns, if something does not fit, use the “other” category to capture it. This will allow you to most easily see an accurate total savings rate.