All Things Financial Planning Blog

There is a heartening change that we are observing today, an event that is truly national in character. At the bottom of the financial abyss, we single-handedly turned around our personal savings for the first time in 12 years.  The chart (Dept. of Commerce publications data) below expresses this turnaround emphatically. 

It is the timing of this turnaround that is so heartening. The realization that this crisis may truly be worse than any other enabled us as a nation to halt this decline. We have our emergency “nest eggs” rebuilt again. Amazing still is that this feat was achieved with a determined effort to curtail our consumption levels to ensure that our emergency funds were rebuilt. Again, a similar chart expresses this aspect better.

What next then? With our emergency nest eggs rebuilt, we must now ponder the question as to continue to increase our savings or not. For seniors, the objective would be to ensure they did not outlive their funds. For those between 45-65, in general, retirement must loom somewhere, and retirement is sweet. Similarly, for those between 25-45, thoughts would turn towards families, home purchase and children’s education. All worthwhile savings objectives. Thus the central question is whether we should increase our current consumption or postpone consumption to attain our future objectives. Only time will tell whether we continue the trend of increasing savings and moderating consumption or whether we go back to drawing down on our savings to increase current consumption.

Somnath Basu
President
AgeBander
Thousand Oaks, CA