How to Improve Skills, Make More Money, and Save

Saving money is critically important- but not everyone does it.

 

You can think of savings as stored up income – the fruits of your labor that you don’t spend today, but use for some purpose in the future. People save to be prepared for an emergency, such as a car repair. You may save for a down payment on a house, to plan for retirement, or to fund a new business.

 

It’s a classic case of forgoing immediate gratification, so that you can enjoy something better down the road.

 

What’s Happening Now

 

The state of consumer savings isn’t great.

 

While some Americans are doing well, the vast majority of people are struggling to save at all, and some are in debt. According to CNBC, the average American household has about $178,000 in savings.

 

But that’s the average.

 

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If you look at median household savings, a very different picture emerges. According to the data, the median household has only around $11,800 in savings – about enough money to see people through about two or three months of expenses (on a tight budget).

 

At the other end of the spectrum, the rich are doing very well indeed. People in the top ten percent of incomes have an average of $960,000 in savings. And those in the top one percent have more than $2.5 million – a colossal figure.

 

Granted, a lot of that wealth is transitory, and depends on fluctuations of the stock market, but there’s no denying that the picture is stark: there’s a big difference between the wealth of the wealthiest Americans, and those in the bottom 60 percent.

 

Cash loans have become a feature of the modern financial landscape for many households. People need these services to supplement their incomes, but the question is why? What’s driving such impressive levels of wealth inequalities across different groups?

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The Economy: Key Factors

 

One of the problems, and the reason some people can’t get ahead, is the service economy.

 

Unlike manufacturing jobs in the past, which paid competitive wages, service-sector wages tend to lag, because of the paper-thin margins in the industry. It was hard for an entrepreneur to set up a new factory: they needed a lot of capital, and so when they eventually did, they tended to make good profits.

Today, an entrepreneur who sets up a restaurant business may struggle, because competition is fierce.

 

The Impact of Automation

 

Then there’s the problem of automation.

 

In the past, workers wages went up the higher the level of automation. Machines augmented human labor, allowing each person to get more done with their time. The spinning loom, for instance, helped weavers create more items per hour, boosting their wages as they became more productive.

 

We now have machines that don’t require any direct human input at all. One company, for instance, has developed a tool which manufacturers t-shirts without the need for human hands.

 

Removing people from the picture entirely usually means that people have to go into new occupations. Although there are new jobs available, they often require a new skill set. It’s why there’s a surplus of data scientist and machine learning positions available, but nobody to fill them. People just can’t keep up with the learning demands of the modern economy.

 

Your Solution

 

These factors create a two-part solution to improve your finances. First, make sure that you continually develop skills to find work that pays a reasonable wage. Again, you must grow your skills over time, to maintain your value as an employee.

 

Second, you need a plan to save money on a consistent basis.

 

Action Steps To Consider

• Create a budget, even if that budget is simply on notebook paper.
• Separate your expenses between fixed and variable, and take a hard look at your variable spending.
• Take steps to cut your variable expenses each month and put the amount you save into a separate savings account.

 

Ken Boyd

Author: Cost Accounting for Dummies, Accounting All-In-One for Dummies, The CPA Exam for Dummies and 1,001 Accounting Questions for Dummies

Co-Founder: accountinged.com

(email) ken@stltest.net

(website and blog) https://www.accountingaccidentally.com/

(you tube channel) kenboydstl