Boost Bottom Line with Utah Saves

Boost Bottom Line with Utah Saves
1,000 who signed up have saved an average of $140 per month

January 22,2006
Deseret Morning News 
By Jenifer K. Nii

Mark Haymond doesn't have a heart-wrenching tale of bankruptcy, financial ruin and woe. But he has emerged as one of the poster-people for a program that may help Utahns who do.
Through Utah Saves, an initiative launched in November to help Utahns save money, Haymond — a 54-year-old father of four and employee of The Church of Jesus Christ of Latter-day Saints — has saved more than $15,000, which he plans to put toward the purchase of a new home.
Haymond was one of the early recruits to Utah Saves, signing on in February 2005 when it was introduced as a pilot program to employees of The United Way of Salt Lake City. He is a long-time fan of personal financial management and acknowledges that his savings over the past 11 months isn't the norm.
Indeed.
The norm, as it is emerging, may spin its own tale of financial woe. The U.S. Commerce Department reported that the nation's personal savings rate for November — the most recent data available — was a negative 0.2 percent. That was the seventh month in 2005 alone that savings rates were in the red. In 1981, America's average personal savings rate was 12.5 percent, according to the Commerce Department.
At the same time, traditional employer-funded benefits plans are being squeezed, putting pressure on workers to fund their own retirement. And personal debt, particularly in the form of credit card debt, is ballooning. As of September 2005, the Federal Reserve reported that Americans held more than $801 billion in (non-mortgage) revolving credit account debt.
Combine those factors with — perhaps most prominently in Utah's case — the bankruptcy rate, and voila: — woe.
"The personal savings rate is negative right now and has been since summer," said Sophie Beckmann, spokeswoman for A.G. Edwards & Sons Inc. "That's a concern, particularly in light of the fact that Social Security is in question and that pension benefits are decreasing. The number of benefit plans have been cut by a third in the last 20 years, and those have been major sources of retirement income that may not be there by the time we get to that point."
In response to those concerns, A.G. Edwards in December released its first "Nest Egg Index," which ranked states, cities and metropolitan areas on their personal savings and investing behavior. Utah ranked 13th in the index. Salt Lake City was 57th out of 318 metro areas.
The A.G. Edwards index found Utah at or above average in most of the 12 categories it used to formulate its rankings, Beckmann said. The state was close to the national average in investing propensity, above the national average in savings propensity and "well above average" in 401(k), pension and other retirement plan participation. Utah was below average in mortgage amounts and personal debt. Bankruptcy rates were not among the factors considered in the rankings.
"So basically, what that's telling us is that — in spite of personal debt levels — people are saving in Utah," Beckmann said. But, she added, "It also tells us that everything we're looking at is relative."
Jerilyn Stowe, Utah Saves initiative manager, said data aren't immediately available showing just how much the average Utahn saves. However, she said, the United Way — a partner in the initiative — found in its October 2004 needs assessment that "insufficient income" topped the list of concerns among Utahns polled. That struck a chord and sparked what eventually became Utah Saves and, Stowe hopes, will mark the point at which Utah begins to think differently about money management.
Nearly 400 people enrolled in the Utah Saves program in its pilot phase, and since its official launch in November 2005, an additional 600 have joined. Those thousand people have saved an average of $140 per month and together have saved about $450,000, Stowe said.
The program, supported by a coalition of public- and private-sector partners (including a five-year grant totaling $1.7 million from Intermountain Healthcare), offers free access to educational materials about saving, a session with a "wealth coach" and other support materials and programs.
"Basically, it's a program for everyone, but particularly everyone who's having a hard time paying their bills, who are living paycheck to paycheck," Stowe said. "It's especially for those people on the edge, where any catastrophe — an injury at work, or the loss of a job — could send them into bankruptcy. It's for those people who have to rely on credit cards to fill in every month, to pay for their basic necessities and needs."
And if the bankruptcy rates are any indicator, Stowe said, that population is increasing.
"We do see a correlation (between declining personal savings and the rise in personal bankruptcy)," she said. "If people have more in savings, they'll rely less on other avenues to pay off debt. But we've seen an increase in the bankruptcy rates every year for the past 10 years."
The Bankruptcy Abuse Prevention and Consumer Protection Act, enacted in October 2005, spurred a flurry of bankruptcy filings in Utah: there were 21,784 filings in 2005, a 6 percent increase over 2004's filings and the third-highest number in a single year for the state, according to the U.S. Bankruptcy Court for the District of Utah.
In October alone, 5,680 Utahns filed for bankruptcy, a four-fold increase over the typical number of filers in a one-month period. Following the enactment of the new laws, bankruptcy filings in Utah and around the country decreased. In November and December, there were, combined, 340 filings. And as of mid-January 2006, there were 111 filings, according to William C. Stillgebauer, bankruptcy court clerk.
"It's starting to pick up again, though not with a vengeance," Stillgebauer said. "But to have 111 filings in the first 17 days of January shows that it is starting to climb up again, slowly."
Thoughts about the reasons why are as varied as the number of bankruptcies themselves.
"Our society today is such a 'buy now, pay later' society," said Preston Cochrane, executive director of the AAA Fair Credit Foundation, a Utah Saves partner. "Over 50 percent of the retail conducted, either online or traditional shopping, people use their credit cards. Plastic payments are becoming the new payment method, and paper (cash payments) is becoming a thing of the past. But when you use your credit card, studies have shown that you tend to spend more, because it's painless."
Haymond attributes part of the problem to a lack of financial management education in secondary school and at the university level, and part to social and economic forces.
"We have so many forces out there trying to get us to spend money," he said. "But I really do think we get ahead by saving. We can become financially independent by saving. I don't think we'll ever become financially independent by spending."
However, responsible financial management, like starting (and staying with) an exercise program, is hard. It takes discipline and determination, Beckmann said.
"Getting started is the hardest part. It means sitting down and identifying your goals, and then devising a plan to meet those goals," she said. "For a lot of people, that's a daunting task. Which is why getting the help of a financial adviser might be beneficial. They can help people find out where they want to go and help them find a way to get there."
Utah Saves, by providing many of its services at no cost to enrollees, may help fill that role for people of more limited means, Stowe said. For others, it is another regular reminder of the importance of taking care of one's own financial destiny.
"For those individuals who aren't used to putting money in a savings account, it can be difficult to maintain that commitment," she said. "Our goal is to help people, to support them and let them know they can do it."
Everyone can save, Haymond insists. And increasingly, Beckmann adds, they must.
"The most important principle, in my opinion, is deciding that you will," Haymond said. "Most people don't make it past that first step, and so a year from now they're not saving, and five years from now they're still not, and 10 years . . .
"Get started now," he said. "It's not even the amount that matters most. Maybe it's $5 a month. But from $5, maybe you'll be able to increase it over time. And it does add up."