Spending Vs. Saving
- Our nation is currently experiencing a negative savings rate
- Only one-third of American families are saving enough to be able to maintain their standard of living in retirement
- More people are afraid of financial problems than are afraid of death
- More than half of all employees are living paycheck to paycheck
- One in four American workers is seriously distressed or dissatisfied with some aspect of their financial situation
Consumer spending makes up two-thirds of the national economy. How are we consumers doing it? Credit card debt, home equity lines of credit, cash out refinancing mortgages – but now interest rates are on the rise – along with basic expenses like gas and food (which isn’t included or is at least discounted in inflation measures). The growing consumer mania, that buy now, pay later mindset, encourages us to set aside caution and care and continue to spend more than we earn.
As consumers our choice is simple, unless we take the opportunity for thoughtful consideration we will never move from a spending mindset to a saving lifestyle. Reflecting on one question may reveal for us how lopsided our financial approach has become: Do we measure our financial success by what we can borrow or by what we save?
Financial complexity
Granted, in the last decade personal financial management has become increasingly complex. From taxes, investments, to credit and debt, there is more and more information for the average consumer to not only know but master, to ensure the most appropriate and effective financial management decisions are made by the individual. Adding to that complexity is the subtle (and sometimes not so subtle) pressure to continue to focus time and effort on borrowing instead of saving. We spend more time on understanding our credit reports, correcting errors to improve our credit score to gain the best loan rates than we do on researching the best offered rates for savings vehicles, or finding an appropriate diversified balance in what little investing we do or our 401(k) plans.
Questioning self-control
Many experts question will power of households in relation to saving. More than half of those that do participate in an employer sponsored 401(k) plan reach retirement with the same allocation as when they became eligible to participate, regardless of stated intentions to increase overall savings or a 401(k) allocation. With that in mind, some recommend committing now to adding a portion of future raises to their 401(k) deposits. (Let’s face it, for most of us if we don’t see it in our take home pay, we don’t really miss it).
Never too late or early to start saving.
The biggest belief hurdle that must be made for most non-savers is that it is too late for them. Poppycock! It is never too late (or too early) to start saving. Right now will always be the perfect time.
