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Financial Expert's Tips For Building A Nest Egg

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Jun 26, 2009 8:19 pm US/Eastern

Financial Expert's Tips For Building A Nest Egg

(KDKA) One result of the recent difficult economic times is that Americans are saving more money than they have in years.

Economists will say the more we spend the better it is for the economy, but the more we save the better it is for our own financial health.

Back in the 1950s, saving money was as American as baseball and apple pie.

The savings rate was about 10 percent for 30 years, but by the middle of this decade that number dropped into the negatives, meaning Americans spent more than they earned.

"We were depending on increases in asset values, and our 401ks, we were depending on expectations of increasing home values," said financial planner Emil Ronchi.

But after years of living large, times have changed.

"It is hard to save, we are eating home more, going fewer places, vacationing closer to home," said one consumer.

But we are saving more. Last November, the savings rate stood at 2.8 percent, and by April it was up to 5.7 percent. That's the highest it has been since 1995.

Ronchi offered some advice on growing a nest egg.

"You get down to basic budgeting; it is not higher math, it's plusses and minuses," he said. "What do you bring in? What do you spend your money on? And then you have to prioritize."

Step one is to build an emergency fund. It should consist of money you can get your hands on quick. One rule of thumb is, it should be enough to cover your living expenses for at least six months.

Step two is to look for appropriate investments. Experts say more people are spooked by the steep declines on Wall Street and want safety, but that comes at a price, low rates of return.

"It's very disappointing, if you want safety, you are not going to get compensated for it," said Ronchi. "If you are willing to take risk, you may get compensated for it, but you may aslo get whacked upside the head, that's the nature of risk and return."

Ronchi says it is worth looking at the Treasury website to check out direct purchases of government bonds. He also says you might want to avoid a long term CD in case rates do go up.

But his bottom line is stay disciplined. If you are spending all of your money, you're not going to get anywhere.

When it comes to saving, the old rule pay yourself first is the best way to go. If you wait until the end of the month to see how much you have left over, chances are you'll be putting your savings on hold for months to come.

(© MMIX, CBS Broadcasting Inc. All Rights Reserved.)

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