Despite historic job losses, economic uncertainty, and unprecedented stock market volatility during the Covid-19 pandemic, American "supersavers" are still confident about their personal finances, according to a recent survey.
Supersavers are people who saved more than 90% of the annual employee contribution limit in their 401(k) during 2019 ($17,100) or contributed more than 15% of their salary. Making that achievement even more impressive: Nearly half of supersavers earn less than $100,000 a year.
The survey, from retirement account provider Principal Financial Group, looked at people between the ages of 20 and 54 who have a retirement plan with the company. Principal found that 97% of the more than 1,700 supersavers surveyed this June feel comfortable managing their finances through this uncertainty, and many are committing even further to their long-term financial goals.
"Supersavers are prepared and feel more secure because they have a cushion of extra 'just in case' money and they've made small spending sacrifices over the years to prepare for the potential of an uncertain economic climate, just like the one we're experiencing right now," says Marguerita Cheng, a certified financial planner and CEO of Blue Ocean Wealth in Gaithersburg, Maryland. She is also a member of the CNBC Advisors Council.
"It's very much like compounding interest," says Cheng. Supersavers "use spending behaviors, or habits, to accumulate and grow their wealth for the future."
Here are the three supersaver habits you can adopt to increase your sense of financial security during these unpredictable times.
Supersavers "don't buy things just because there's a zero interest offer," says Mark La Spisa, a certified financial planner and president of Vermillion Financial Advisors in South Barrington, Illinois.
Car loans are an example of a line of credit many supersavers avoid. To reach their lofty savings goals, nearly half of all the supersavers Principal surveyed drive older vehicles, meaning there's no monthly auto loan payment in their budget.
La Spisa recently spoke with one supersaver client who echoed that sentiment, telling him he is going to "drive his car into the ground" before buying a new one.
Video by Stephen Parkhurst and Euralis Weekes
While cheap financing offers may seem enticing, it's important to consider all the other costs associated with buying a car. The average monthly payment is $569 for a new car and $397 for a used car, according to Experian.
Every month you don't have an auto payment is a month where you can bank hundreds or even thousands of dollars for other goals. Consider: If you can put off buying a new car for five more years, that adds up to as much as $34,140 that could be invested for other goals.
Typically, the single biggest expense Americans contend with on a monthly basis is housing, and supersavers find ways to cut their housing costs. Namely, Principal found that the supersavers they surveyed either own 'modest' homes or have opted to rent to save money.
To reduce your housing expenses, you have plenty of options to consider. There are big moves such as relocating to a more affordable neighborhood, city, or state, and smaller ones like finding a roommate or negotiating the rent with your landlord.
Video by David Fang
If you own a home, you might also consider refinancing. Mortgage rates recently hit record lows, which has made refinancing a mortgage more enticing. Many of Cheng's supersaver clients have refinanced their mortgages to take advantage of the low-rate environment.
While it can save you thousands of dollars, it's important to factor in the costs and affordability of refinancing, because sometimes, getting that lower rate can actually be more expensive than sticking with what you have.
"Supersavers try to plan out their larger purchases," says Cheng. When they travel, for example: "Instead of going on an impulsive getaway, they're researching their trips and shopping around for a better deal in advance."
Besides saving on travel, Cheng also says her supersaver clients will monitor big ticket items for price drops and they'll shop around to save, even if it's only a small sum of money. "With big-ticket items, they'll wait a while before pressing buy if they're shopping online. They'll do their research and make sure they're getting the best price out there."
But they're not depriving themselves, Cheng explains: Supersavers are just spending more mindfully. "They still enjoy life today, but they're conscious about the big purchases they take on. They plan for them, whether that's a car or home improvements."
It's also important to remember that everyone's savings journey is different, Cheng says. "People who can't save or don't save — it's important that we recognize they're not bad people. There are situations that can prevent people from saving, and family circumstances."
What differentiates supersavers is their ability to see the big picture, Cheng explains. "Supersavers don't get as discouraged. If it takes them a while to save up a cash reserve, that's OK. It's progress, not perfection."
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