I just ran across an interesting article in the latest issue of Reader’s Digest. It’s by Jean Chatzky and, in it, she talks why Americans are so bad at saving money. So what’s the problem?
Why are people scaling back on their savings and/or borrowing against home equity and their retirement accounts to fuel their consumeristic tendencies? We know that saving is good for us, so why don’t we do it? Chatzky offers up three main reasons.
One: Saving today is harder. As prices increase, we have less and less “disposable” income that can be directed towards savings goals. This is especially hard right now given that the runup in gas and food prices has occurred in the face of household income levels that have been holding steady for the past five or so years.
Two: Credit became too accessible. According to Chatzky, it’s been far too easy to get your hands on money to spend. For example, the rule of thumb for an “acceptable” debt load has steadily increased from 28% to 33% to 36% to as high as 50+% of your total monthly income. Why? Because housing prices were going up, and lenders still wanted your business. The problem is, the more you owe, the less you can save.
Three: Saving is, was, and always will be no fun. Choosing to save almost always means opting for delayed gratification, and delayed gratification isn’t very much fun. According to Chatzky, “Things way off in the future — like retirement — don’t jostle the pleasure center [of your brain] much at all.”
Inflation is undoubtedly a problem, but I also think that some of this needs to be laid at the feet of consumer decision making. Buying that giant house way out in the distant suburbs, and then opting for a car that gets crappy mileage certainly didn’t help the situation.
The same goes for the credit issue. Sure, there’s been lots of easy credit, but nobody forced people to use it. I know that this sounds harsh, but it’s hard to feel too sorry for someone when they willingly put themselves in a hole.
As for the third issue, I wholeheartedly agree. I’ve written recently about the parallels between personal finance and physical fitness, and this is yet another example. It’s hard to do the right thing when not doing the right thing is so much more agreeable.
It takes self discipline, but once you get over the hump and make a habit out of saving money, exercising, etc., you’ll soon find that slacking off isn’t nearly as enjoyable as it once was.