Money Management

Americans are on the brink of financial trouble. 

At the beginning of the COVID-19 pandemic, Americans were saving more money. This wasn’t surprising, given the fact that many common areas of spending (like travel and dining out) disappeared. The government was also providing stimulus checks, which helped people sock away more money in their savings accounts.

Unfortunately, this trend has reversed in recent months. Money in savings accounts has gone down, not just compared with the amount people were putting away in 2020, but also compared with the pre-COVID era. And that’s very bad news for individuals and families as well as for the economy as a whole.

Americans are saving less money

According to the Federal Reserve Bank of St. Louis, the personal savings rate for Americans fell in the third quarter of 2022. During this time, Americans had a personal savings rate of just 3.3%. This refers to savings as a percentage of personal income after accounting for taxes and other expenses.

This 3.3% rate is the lowest personal savings rate since the Great Recession. It’s down from 3.4% the prior quarter. And it is the eighth-lowest personal savings rate recorded since 1947. It also represents a dramatic decline both from the earlier days of the pandemic and prior to it. In fact, this savings rate is 88% lower than during 2020 when Americans were saving more than ever, and it’s 61% below pre-pandemic savings rates.

Americans are not just saving less now, but they are also spending their savings. In the second quarter of 2020, Americans collectively had personal savings of $629 billion. This is only a small fraction of the $4.85 trillion people had saved during the second quarter of 2020 when the government was sending out stimulus money. But it’s also far less than the $1.98 trillion in collective savings in the second quarter of 2021 and the $1.41 trillion in the second quarter of 2019 prior to the COVID-19 pandemic.

Why is this such troubling news?

The huge decline in the savings rate and personal savings most Americans have suggests that people are struggling financially.

This may lead to spending cuts that slow down economic growth and tip the economy into a recession. It could also mean that people who have too little saved don’t have the cash they need to cover unexpected expenses and find themselves in debt when surprise costs creep up. That’s even more likely to happen if people continue to spend down their savings.

The underlying reasons for the decline in savings also show that the economy isn’t healthy for consumers right now. While some people are draining their savings because they are spending more to enjoy post-lockdown life, many others were forced to reduce their account balance to cover essentials because their wages were not keeping up with record-high inflation.

While there is hope that inflation could be cooling, these low savings rates leave many people with no financial cushion in case an impending recession does arrive. If you’ve seen your account balance fall, it may be worth trying to cut back on spending or increase your income (perhaps by taking on a side job temporarily) so you can build your account back up in case you need the cash to see you through an economic downturn.

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Could trying this technique slash your grocery budget? 

Groceries are a budget-buster for many people, especially as food prices have been steadily climbing due to inflation. But you don’t have to just accept that your groceries are going to lead to big credit card bills. There are ways you can reduce what you spend to feed yourself and your family.

In fact, finance expert Dave Ramsey has some advice on a simple way to save on grocery store purchases — and his tip is one that just about everyone should listen to.

Here’s how Ramsey says to save on groceries

Ramsey has a simple suggestion for reducing your food bills.

“If you’re wondering how to save money on groceries, this is one of the easiest ways,” he said. “Make a meal plan and grocery list before you leave the house. When you get to the store, stick to the list. Don’t give yourself any room for budget-breaking surprises.”

Ramsey also advised that if you bring your kids with you when you go to the grocery store, you enlist their help in both planning the meals and locating the items you’ve put on your grocery list.

“It’s a lot easier to stay on budget when you’re shopping with a plan and working as a team…and when you get used to saying no to candy,” he said.

Here’s why this approach can be a great one

Ramsey is absolutely correct that making a meal plan is a really good way to reduce your grocery costs. And there are a whole bunch of reasons for that.

One of the biggest benefits is that you can avoid impulse buys, as Ramsey explained. You will know exactly what foods you need to buy to make the recipes you have chosen for the week. Since you’ll have a plan for what to eat and what ingredients are required for it, there will be no reason to go off your list and buy items that unnecessarily add to your grocery expenses.

You can also avoid wasting food since you’ll have a plan. If you don’t know exactly what you’re going to make before you go to the store, you may end up buying veggies or produce or some other items and never getting around to eating it before it goes bad. But if you have a plan to cook and eat it on a specific day, this is far less likely to happen.

Finally, you can make your meal plan based on what is on sale at the grocery store for the week, which can help you to save even more money. For example, if ground beef is on special based on the grocery store flyers, you can schedule a few ground beef meals during that week so you can take advantage of the sale and keep your dinner costs down.

The good news is, making a meal plan is something everyone can do. You just need to think about what you’re going to eat for each of your meals over the course of the week and then use that schedule to make your shopping list. This process will make all the difference in dropping your grocery costs more than you can imagine.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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The free ride you may have been enjoying won’t last forever. 

Many people consider Netflix their favorite streaming service. And many people who use Netflix also don’t pay for it. That’s because Netflix has allowed users to share their accounts with others for years.

But USA Today recently reported that practice will soon come to an end. And in the coming months, Netflix fans might have to pay more for their service — either to add additional users to their accounts or get accounts of their own.

No more password sharing

Password sharing clearly costs Netflix a lot of money. Up until now, the streaming service has looked the other way on account sharing, but now, it intends to crack down. And in the coming months, it plans to roll out a paid sharing model that’s apt to cost existing subscribers more money.

Netflix actually introduced a shared account option in Latin America, where subscribers could add a sub-account for $3 a month. That’s not a bad deal, and if Netflix adopts a similar model here in the U.S., it could allow many users to continue sharing their passwords with family members and friends with minimal financial pain.

But we don’t know how expensive the password sharing option will end up being. And subscribers who wish to go this route could see their bills soar.

Plus, we don’t know how restrictive Netflix’s password sharing model will be. So those who have been using Netflix accounts that belong to friends and family members may need to prepare to pay for their own accounts. That could be problematic at a time when so many people are grappling with inflation and raiding their savings accounts just to cover their basic bills.

Should you start paying for Netflix?

If you’ve been accessing Netflix through somebody else’s account, that option may soon be off the table. So is it worth adding a Netflix charge to your ongoing credit card tab?

Well, it depends on what your finances look like and how much use you think you’ll get out of the service. If you find that you use Netflix frequently, then a subscription could be worth it. And you have different options in that regard.

A basic Netflix account costs $6.99 a month, but you’ll be subject to ads that interrupt your content. If you don’t want to deal with that, you’ll need to prepare to pay $9.99 for a basic ad-free plan (which comes with less superior video quality), $15.49 a month for a standard plan, or $19.99 for a premium plan with better video quality.

The good thing about Netflix is that you don’t have to sign a contract. You can cancel your service at any time.

Granted, it may be worth sitting back and waiting to hear how Netflix’s shared account model will work before rushing to get an account of your own. We may find that Netflix makes it easy and affordable to continue sharing accounts. But it’s also a good idea to start taking a look at your budget and seeing how Netflix might fit in — just in case the rules for shared accounts end up being too limiting.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Maurie Backman has positions in Netflix. The Motley Fool has positions in and recommends Netflix. The Motley Fool has a disclosure policy.

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