Cash and carry
Spendthrift Nation: Americans have stopped saving for a rainy day:
Instead, they are living paycheck to paycheck, depending on credit cards to get them through emergencies, and hoping that the rising value of their homes will give them a retirement nest egg.
This personal economic chasm is showing up in the national savings rate, which has been declining for years. Tuesday, the Commerce Department reported that the personal savings rate fell to zero in June, the lowest since a one-month buying binge in the aftermath of the 9/11 attacks. The United States is on track to record a savings rate for the year below 1 percent, which would be the lowest since the depths of the Great Depression, when the rate turned negative.
[snip]
"[A] large proportion" of Americans are not saving and have never saved, [Dallas] Salisbury acknowledges. "That's largely a function of income.... They're just barely managing to survive as it is, and they don't have enough income to save."
A recent Consumer Federation survey found the lack of savings was especially troublesome to women. More than 70 percent said they worried about their finances in the last year, and two-thirds said that unexpected expenses - things like the furnace breaking or the car needing to be fixed - were the cause of that worry.
That's because they had little or no money set aside. More than 40 percent of all women had less than $500 in the bank. For those 25 to 34 years old, the percentage without a rainy day fund jumped to 55 percent.
As far as I know, the definition of personal savings is pretty simple: income minus expenditure (let's leave the bubblicious real estate market aside for now). So if it's at the lowest level since the Great Depression, surely there is some sort of dysfunction in the American economy? This is especially alarming, since if people aren't saving, and pensions are less stable than ever, and our President keeps pushing that daft Social Security "reform", then what sorts of desperation and fear will we see when Generations X, Y, and Z attempt to retire? Or will retirement itself become a quaint forgotten notion, something achievable by only the very wealthiest among us? Let's fight for better wages and benefits today (and therefore better savings habits) and maybe our heirs can avoid a landscape of forty nonagenarian greeters cueing the electric eye and bumrushing us at every Walmart sliding door.
posted by Mark D. @ 10:46 PM |
| 
6 Comments:
"So if it's at the lowest level since the Great Depression, surely there is some sort of dysfunction in the American economy?"
Nope, what there is, is three things.
1. Widespread alternatives to convetional savings including real estate, stocks, bonds, mutual funds etc. Wealth is up for everyone, not just the few.
2. People aren't saving for retirement, they are investing for it. Add 401K balances to your definition of savings and suddenly its at an all time high. (Don't forget to present value your future Social Security Benefits!)
3. Fight for better wages and benefits?
Here's a novel approach. Why don't you make yourself more valuable so you can earn more. Work harder, do more, develop new skills, invest in training for yourself. Instead of, you know, whining about it.
-Censored
.
Lorika - what can I say. If you bought a house counting on a cost of living adjustment for you to be able to afford it, you made a bad decision.
I'm not making fun of you (right now anyway.) I don't know enough about your financial situation to offer advice but having to pay PMI should be your first clue you are spending too much. There are exceptions and PMI exists for a good reason etc, but typically you don't want to be one of those exceptions.
Its interesting to note that Veterans also get VA mortgages which have lower rates and no PMI. Maybe a hitch serving your fellow citizens is something you should look into.
About the wage freeze, if your skills are such that you can't get a better job, one that gives you increases despite 5% unemployment etc, be glad for what you have.
If you want to keep your job despite the stagnent pay then don't complain about it.
What strikes me as funny is that the two things you identify as costing you more, insurance and taxes have nothing to do with your job at all. You really ought to be fighting for torte reform and an end to frivolous lawsuits to reduce your insurance costs, and lower taxes to reduce your total tax liability.
But aside from the obvious, you're missing the irony of the situation - you are complaining about scraping by but you are a homeowner with an investment account. (The contents of that 401K qualify you as a stock and bond holder - just like most Americans.) And they have real value, but like most Americans (take you for instance) you're not burning thru that value - in fact once could say that you're saving it.
The question is really moot though. Savings was (in the olden days) ready capital. If the transmission went, if the plant shut down, if, if, if... it was what you had to work with, to get you through. The question now shouldn't be, "how much cash do you have in seat cushions?" it should be how much cash can you put your hands on if you need it. (That rainy day referenced.) What is the ready capital you have to get you thru some crisis.
The answer is that with your 3 credit cards, you can get your hands on more good and services than your Mom or Grandma or her mother or their significant others combined would have been able to at your age. Your margin of error, that comfort level is actually higher.
I am hurt by your words though. You've accused me of not caring about the average American and that is just wrong. I do care, alot.
I love America enough to have fought for her, have you?
I don't question your motives. I think you really just haven't thought this stuff through and you're too young, uninformend, inexperienced or indoctrinated to realize you're wrong, but I don't think you don't care.
I think its funny that you can look at rising taxes and insurance rates and arrive at the conclusion that those aren't the things that are wrong.
-Censored
Let me get this straight, Censored. Your financial advice to someone who is living paycheck-to-paycheck is:
1) Get shipped off to Iraq.
2) Fight for giving insurance companies more profit.
3) Eschew savings and go further into debt.
That's pretty poor advice I'm afraid. You really are living on your own planet, aren't you?
Certainly working citizens need tax breaks more than, say, hugely profitable oil companies and insurance companies.
The tide is rising high for corporations and the wealthy, while the savings of ordinary Americans goes down the drain. That's what you voted for.
-The Gatekeeper
Gatekeeper,
Try again. I'm advocating not paying PMI (the I stands for insurance.) Service is a way to do that, having adaquate income for what you're buying is another.
Something tells me that her higher insurance expense was health insurance, not property. But on the off chance you are correct, then with margins soaring in that business if you were hit with an increase it would be indicative of a different problem. Like crime rising in your neighborhood. That would support the idea that the purchase was a bad one.
You're kind of half assed right on your third point - I do advocate eschewing savings, where savings is viewed conventionally (mattress, savings account or social security.)
There are so many better opportuniites available to everyone, it comes to the point where you're just dumb if you ignore them all.
Going further into debt? On the contrary, I wrote that it appeared she couldn't afford the house she had and by extension needed to get out from under it.
In terms of rainy day funds, you don't need conventional savings if you can leverage your credit. The key here, is that you shouldn't see rainy days too often. A larger than expected phone bill for example shouldn't send you shuffling to your "savings."
Finally, calling for tax relief for people who don't pay taxes is stupid. Its not a tax break, its redistribution of wealth. Say what you mean commie-pinko.
-Censored
This comment has been removed by a blog administrator.
Okay, so your against rising taxes (per your earlier comment) but tax breaks = commie pinko? You can't have it both ways.
I can see where this thread is headed, so I'm closing it.
<< Home