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Is Personal Responsibility Dead?

Written by Matt Jabs - 83 Comments

While attending a recent Homeowners Association meeting, my wife and I were overwhelmed by the attitude of a majority of our neighbors. With few exceptions, they wanted everything done for them and thought all they had to do was sit around and complain loudly enough to make it happen.

After about 15 minutes of complaints and finger pointing, I chimed in on a specific issue with, “What if each of us just committed to doing our part to help make things better for everyone?” The crowd fell silent for a good five seconds (which felt like an eternity in a room full of 50 people) before everyone astoundingly agreed.

I don’t think that my neighbors were incapable of thinking up such a simple solution on their own. Rather, I think this is an illustration of the depth of our cultural dependence and reliance on others for seemingly everything in life.

“The willingness to accept responsibility for one’s own life is the source from which self-respect springs.”

-Joan Didion

Let’s consider the notion of personal responsibility as a whole, with a heavy focus on financial accountability at the individual level. After all, by developing an understanding of things that are going on at a personal level, we’re sure to gain insight into what’s happening at higher levels.

The root of the problem

“No alibi will save you from accepting the responsibility.”

-Napolean Hill

Unless you’ve been lost at sea for the better part of seven years, you’re likely aware of the economic problems that have pushed us “against the financial ropes,” both individually and as a nation. As ridiculous as it sounds, these problems stem from Ricki Lake and Richard Simmons as much as they stem from Osama Bin Laden and George W. Bush.

No, we’re not in this predicament because we haven’t been “Sweatin’ to the Oldies.” Nor are we here solely due to 9/11, Republicans, Democrats, or other bureaucrats. We’re here because, on a whole, we’ve become a nation that rebels against virtue and character, and chooses instead to value the emptiness of fame and fortune.

Unfortunately, relying on fame and/or fortune for happiness is grounds for disaster — just ask anyone who has ever been rich or famous!

Who can we blame?

“Man must cease attributing his problems to his environment, and learn again to exercise his will – his personal responsibility.”

-Albert Schweitzer

In our culture, we seem to have an unquenchable need to blame someone for everything, and therein lies the problem… Personal responsibility is the polar opposite of pointing the finger of blame. Who is responsible for the fact that you have a negative net worth? The credit card companies? No. While I believe their practices to be a crime, you are the one who signed up for the offer to get a free t-shirt and a license to spend money you didn’t have!

Granted, in this day and age of rampant corporate bailouts, our leadership continues to set a terrible example of fiscal responsibility for its citizens. Their utter non-chalance when it comes to their use of presumptuous money to fund their wayward behavior. While this is glaringly obvious, I propose that we need to consider things at a more granular level.

What if our individual track records over the course of the last year were made public for all to see? How would we fare? Most of us would have a few skeletons that would quickly quiet our brash criticism toward others. The point here is simple: before we can expect others to act in a certain way, we need to be sure that we’re behaving appropriately ourselves.

Don’t like how the government is spending money they don’t have? When is the last time you made a credit card purchase with money you didn’t have? Angry with how your employer is failing to budget enough money for personal raises? How would your family budget hold up under similar scrutiny? Moreover, if you weren’t living paycheck to paycheck, you wouldn’t be so dependent on your employer, and might be more thankful that you still have a job.

Obviously, I’m painting with broad brushstrokes here. Not everyone in our society lives beyond their means, or mismanages their money. On the whole, however, these things ring true.

So what’s the answer?

“Accept responsibility for your life. Know that it is you who will get you where you want to go, no one else.”

-Les Brown

Yes, our political leaders have shown an immense amount of irresponsibility have fallen victim to fashionable corruption. This does not, however, give us the right to follow their lead, complain about their inadequacy, or wait for them to fix our situation. What it does give us is an ever-increasing need to take responsibility for our actions!

Here’s a list of suggestions to help us regain personal financial responsibility:

  • Accept that you cannot blame others for your position in life. Pointing fingers might feel like the easy way out, but it doesn’t do anyone any good. Instead, take a good look at your own financial state, accept full responsibility for it, and work out your own plan to change it for the better.
  • Don’t expect anyone to change anything for you. Don’t wait for handouts. Instead, pick yourself up, dust yourself off, and work harder than ever to fulfill your own goals.
  • Decide that your past will no longer dictate your future. Commit to putting your old financial habits behind you. Wipe the slate clean and give yourself a fresh start.
  • Consider your own actions before you attack the actions of others. Make sure you have your own financial house in order before you start tearing down others who have an obvious problem. On the contrary, if you see they need help, find out if there is anything you can do the assist!
  • Don’t file bankruptcy. This may seem impossible, and I’ll probably catch a lot of flak for writing this, but bankruptcy goes against everything I have mentioned previously. It is the ultimate cop out — the complete opposite of personal responsibility.

Concluding thoughts

“No one will improve your lot if you do not yourself.”

-Bertolt Brecht

All of the above may sound simple and obvious to you. If it does, that’s great — I’m obviously not talking to you. In the end, I thought these ideas deserved mentioning, and that they might be just the sort of thing that some — like my neighbors in the condo association meeting — needed to hear.

Published on May 14th, 2009 - 83 Comments
Filed under: Miscellany

About the author: is a thirty-something IT manager and blogger who wants to help himself and others get out of debt. He writes about personal finance and debt-free living at Debt Free Adventure.

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83 Responses to “Is Personal Responsibility Dead?”

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  1. 1
    Garry - thisimprovedlife Says:

    Great post and well thought out.

    I can’t say for the US, but here in the UK we have become so dependent on the state that some people won’t lift a finger to help themselves and expect the government or local council to do it for them. It is just a situation we have got in to bit by bit. Our personal responsibility has diminished over the past 10 years.

    As for financial aspects, you are right on. To make things change we do need to get our house in order before we can start on anyone. But itI understand it is difficult when you are bombarded by ‘celebs’ with all the latest gadgets and super-cool lifestyle. And as a backdrop to this the government pour billions in to propping up the financial sector that have made such a mess of things in the first place.

    But I think things are changing for the better now. More and more people are starting to think like you state in your post. They are looking more at what they spend and what they can do without and are starting to control their financial lives.

    Sorry for the long comment, but you have struck a few chords there.

  2. 2
    the weakonomist Says:

    It’s funny you should mention bankruptcy, I was just reading a book last night that touched on the subject. The author says bankruptcy law exists to help businesses take risks. It was not originally intended for individuals. Now, 98% of all bankruptcies are for people, and not business. You’re right, it is the ultimate cop-out.

    Perhaps the recession will make up for this in some way, maybe a new generation of personal responsibility, but it is our human nature to dump as much as possible on others so I know we’ll get right back to here soon enough.

  3. 3
    MikeS Says:

    Well said Nickle. My wife and I have been thinking the same thing the last year or two. Everyone seems to be waiting for thier bailout.

    Before my current job, I was working on strictly commission. Then the economy turned and my pay went with it. I took on a second job to make ends meet. Eventually, I decided to leave that job and find one that paid salary. My financial situation took a beating in the process, but my wife and I have a plan to get through it. How many people who now say that cannot afford their houses, cut expenses or took on second jobs.

    I think as a society, the sooner we can get back to people helping themselves, the better.

  4. 4
    Justin Says:

    I went to a homeowners association once. Once. The meeting made me lose all faith in humanity for about a week. I watched as previously close neighbors called each other names over a tree house one built for all of their kids to play in. (The treehoue was even sided to look like the house.)

  5. 5
    Kev Says:

    Great post. I’ve been thinking a lot about this lately due to the recent legislation concerning credit card reform.

    I had a credit card mess going on a couple of years ago that I eventually dug myself out of. My initial reaction was to be pissed off at them – I wanted to blame them for the mess I was in. It was easier to blame them for “unfair practices” than it was to blame myself for stupidity. As much as I dislike what they do and the way they operate, I know that all they really did was hand me the shovel – I dug the hole all by myself.

    I don’t know how I feel about the governments involvement now… I do feel that industry needs some reform but the real reform needs to be with us – as a society. The way we have been viewing credit and personal finance management for last two decades is all wrong. The reforms will only address a symptom of the actual underlying issue. Our intelligence, rather than the government, should be what protects us from credit card abuse. There will never be enough laws, reforms, or regulations in the world that can protect someone from ignorance.

  6. 6
    David C Says:

    Fantastic post and very appropriate for the times that we live in. We do our best to instill this type of thinking in our soon to graduate high schooler. I have tried to let him learn that there are consequences for every action and they are your responsibility.

    Of course, doing this has made me look inward at some of my failings along these lines. The vast majority of the calamities that I have experienced were of my own making. I have lived and learned and hope that he will gain knowledge from my mistakes.

  7. 7
    lbd Says:

    Man oh man, this sums up everything I feel about America on a daily basis. As a whole, this country is lame and lazy. I live on the gulfcoast and especially see this at hurricane time after one hits. The consensus is that the government should be giving more money out: “How can I fix my roof with only $600?” and so on. My only question to any of these people is why does the government have to protect YOUR house? Why do you not have more insurance to cover the damage? It makes me sick to be honest, the gross amount of finger-pointing and dependence on anyone but yourself.

    I couldn’t have said it better than you have. It’s time to start looking inward and make changes.

  8. 8
    Baker @ ManVsDebt Says:

    @ MikeS – This is from regular guest author Matt Jabs, although Nickel is awesome too. ;-)

    I really connected with this message. For a long time I’ve viewed accepting personal responsibility as the first step in turning around your financial life. I know this was absolutely the case for my personal situation.

    More and more, though, I realize that this goes for much more than just finance. Personal responsibility is really the first step in turning around ANYTHING we want to do in our lives.

    In my opinion, first admitting that there is a problem and that we’ve fallen short is key. But then you also have to realize that you have all the tools & access to information you need to be the solution. Altogether, both these parts reflect taking personal responsibility to me.

    Thanks for another great contribution to FCN, Matt.

    Nickel you should be a talent scout! Whatever you both are doing it’s working. I’m loving the site these last view weeks even more than usual! Keep up the great work.

  9. 9
    Whatever Says:

    This is a load of crap.

  10. 10
    stu Says:

    The root-of-the-problem is the American public {government} school system… which directly indoctrinates 90%+ of the population against personal responsibility — and for reliance on the “Nanny-State” & government “Officials/Authorities” … for every human problem from cradle-to-grave.

    “Give me four years to teach the children and the seed I have sown will never be uprooted”

    — Vladimir Ilyich Lenin

    School truancy laws directly violate every state constitution & the federal constitution. Abolish those illegal rules… and the you will remove the indoctrination shackles on our children.

  11. 11
    Jeff@StretchyDollar Says:

    @ Commenter #9 – You can’t even take responsibility for your insightful comment? This is a great post – I agree completely.

  12. 12
    Christina Says:

    This is a great post, very helpful for my current situation. This post touches on so many issues that are affecting so many people right now. Keep up the good work!

  13. 13
    Robert Says:

    If you speak to government officials off the record they will openly admit that dependence on the government is carefully cultivated from a very young age as was mentioned above. A dependent populace is more likely to obey the agenda set forth for it, and require less resources to control. Case in point, we are being openly deceived and lied to about the economic state of the country. Assertions and commentary from Washington cannot be reconciled with the numbers. The present hope of our leaders is that the propaganda will be self-fulfilling. Unfortunately, with time it will create a resentful and uncontrollable citizenry when the public realizes it has been duped. Personal responsibility is a dying concept in america because government intentionally tries to kill it wherever it takes hold. It will be interesting to see how the government handles the fallout from it’s most recent prevarications. It’s not going to be pretty.

  14. 14
    MikeS Says:

    Sorry Matt. :-) Gave the wrong person credit. I realized after I responded.

    I would disagree that public schools corrupt the young into being dependent upon the government.

    I went to public school my entire life and would prefer the government not to be involved in my life if at all possible.

    I believe personal responsibility starts at the home, with the family. If a childs parents are waiting for their handouts and not taking steps to change their circumstances. Why would we expect anything different from the child.

  15. 15
    David Says:

    Well, I’m all with you on the personal responsibility aspect of this post. However, I must disagree on “being mad at the government spending money it doesn’t have.” If we take the approach of reducing spending and cutting government costs, many public services will fail, along with the ever-growing lower-class (due to numerous job losses from the failing economy). The government isn’t “lieing” to us as one commenter suggests: unemployment is sharply rising, and the stock market is in a consistent down trend. We ARE in a recession, possibly entering a depression. If anything, the government should be spending MORE money to create MORE jobs and help MORE people who have lost theirs get by. If the government has to pay people to dig a hole and fill it back up, that’s what they should do. It would put money in the pockets of more people, which helps them find food and shelter, along with being able to boost the economy through spending. But yeah, on a personal level, I agree with personal responsibility. But I think in cases like my wife’s father, who has been working in the auto industry for 25 years selling cars, and now continues to work 60 hours a week making no money (its commission based) trying to make ends meet, it doesn’t help him any to say he should be more responsible and screw him over by eliminating government spending that would help him. Just my two cents.

  16. 16
    Derek Says:

    This is a great post. My wife talks about this all the time when watching the news. It seems like everyone is looking for a handout and don’t want to put any work in to reap the rewards of hard work.

    I think personality responsibility and lack of it in recent years is much to blame in the problems we are currently facing.

  17. 17
    Corporate Barbarian Says:

    I think people still cling to the notion that life is fair, and that everything will just work itself out. If it doesn’t, they want to blame someone, or attribute it to bad luck. I believe that you make your own luck by acting responsibly and being prepared. A timely post for those who keep expecting someone to wave a magic wand to fix this mess.

  18. 18
    Bible Money Matters Says:

    Great post, I couldn’t agree more. I went to one of those homeowner’s association meetings as well, and it’s amazing how fast they can get out of control, people saying they want this, that and the other thing. Like you said, no one wants to take responsibility for themselves and their actions.

    I think government IS doing a lot of wasteful spending. Another commenter mentioned that they thought we should spend more until more jobs are created. The problem is that the spending the government is doing ISN’T creating anything but government jobs, and a majority of the money is being wasted and isn’t really being accounted for. Billions of dollars! The wasteful spending is happening by both republicans and democrats, and it’s disgusting.

    If only we had a personal responsibility flu that could spread across the country ;)

  19. 19
    Ethan Says:

    “Government is the great fiction through which everybody endeavors to live at the expense of everybody else.” – Frederic Bastiat

  20. 20
    Wise Money Matters Says:

    That was one of the best articles I have read on this site. Absolutely spot on!

    Here’s another quote.

    “Those without a vision have no future. Those without a future will return to their past” -Edwin Louis Cole

    We spend so much time complaining about what HAS happened that we ignore what needs to be done to make the future better. I’m afraid if we don’t learn from our mistakes, we will simply set ourselves up to fail in the future. This is why I’m an opponent of any bailout measures. It patches the symptom but doesn’t solve the problem. We need to suffer the consequences of our own actions if we are going to learn from them.

  21. 21
    Matt SF Says:

    Great Post! This is the kind of stuff that should be included in the fine print of a credit card application. Bravo!

  22. 22
    Matt Jabs Says:

    Wow, guess I’m not on an island for thinking this after all…

    First let me thank everyone for their thought provoking comments, writing truly is more enjoyable when you have intelligent response.

    @Garry: So it is not only a national problem, but an international problem. That makes sense, considering governments around the world are starting to meld together more & more (I don’t think this anti-autonomous move is good for us the citizens).

    @The Weakonomist: Hopefully we will see a new movement toward personal responsibility! Like you inferred though, the pendulum will swing back…case in point the spending booms of the 1950’s & 60’s after the depression.

    @Kev & Christina: I’m glad this post helped you. I went through the same thing!

    @lbd: I bet the “gimmie mentality” is rampant down there after a hurricane. Makes me think of FEMA (uh…gag…) Sorry, I just threw up in my mouth a little

    @Baker: Thanks for your very encouraging words! And thank you for reiterating the importance of applying this principle to all areas of our lives.

    @Stu & Robert: I agree, that is why I will home school my children. I’m sure that could start a debate in itself & is a great topic for another post. ;-)

    @Jeff: Thanks for calling out the guy who could not even take personal responsibility for his own comment! ;-) This made laugh out loud! It illustrated my point perfectly!

    @David: I am diametrically opposed to giving the gov’t more control and allowing them to spend more of our money, for any reason, and believe they have no business meddling in financial affairs at all. That said, I respect David’s opinion & will agree to disagree and will line up with Robert, Ethan, & BibleMoneyMatters on this one.

    @Corporate Barbarian: I appreciate your call to arms!

    @Wise Money Matters: Thank you for you encouragement. Your point about suffering the consequences of our own actions is key, and something I failed to specifically touch on in the article, so thanks again. PS…don’t jump to hasty conclusions about this article, while I appreciate the compliment, make sure you check out Nickel’s archives…there is so much awesome material that I could never have written.

  23. 23
    David Says:

    There’s other benefits in dumping the victim/nanny-state mentality.

    In addition to helping my finances, finally “manning up” 3-4 years ago and cleaning up the fiscal wreckage turned around my perspective on a number of things, chiefly related to career and community involvement. Much of that stems from approaching financial independence (close, and I was laid off in Feb so that income stream is gone) and realizing that, even though I’m not working and am now collecting unemployment, I don’t really *have* to get another job any time soon and have explored a number of alternatives to another soul-crushing corporate job, e.g. Peace Corps, teaching, etc. I don’t need much money anymore, so to hell with the rat race. I’m done. Even on UI I’m still able to save and when that runs out, it won’t matter anymore. I’ll be teaching English in Ecuador or something else useful to others besides bosses and shareholders by then.

  24. 24
    Greg Says:

    This was one of the best written articles I have read in a long time. Very well done. I subscribe to the Wall Street Journals weekly wrap up email and they have similar articles sometimes. It is refreshing to know there are people out there with the same point of view. Thanks for putting it on paper Nickel

  25. 25
    The Getz Says:

    While I honestly do not believe we will ever turn around from the downward spiral we’re on, I am glad to know there are still many people out there who realize the absolute necessity of personal responsibility, hard work, and integrity. The problem is though, there are so many people who have let themselves be dumbed down and follow the “sheeple” mentality, that they now outnumber us. I’ll be the first to admit that the $900.00 dollars of credit card debt that I have(slowly getting it as well as all other consumer debt paid off though) is entirely my fault. I just couldn’t wait to buy the laptop, the mountain bike, and the gasoline[ironically because I never had any money left after paying all the credit card bills ;) ] I wrote two bounced checks because I never balanced my check book, if I even bothered to write the transactions down. However, after a bit of a scolding from my boss(non-work related conversation), I realized that I wanted better for myself, but I expected better of myself. I’ve watched my debt go down, my net worth go up(still in the negative, but going up), and my credit score has gone up. It all boils down to the fact, that even if someone else will do everything for me, what am I going to do when they can’t? Because that will inevitably be the case, and I pity #9 when it happens.

  26. 26
    IndependentOperator Says:

    Sorry, but I think you missed the boat.

    You list how we shouldn’t point our fingers at others, because everyone is being irresponsible with their finances. But you don’t ask why? There has to be a reason. It’s not just random.

    What could possibly coordinate everyone in our economy to save less, spend more, and take on debt? How about the entity responsible for setting interest rates? Low interest rates punish savers, especially if the rates are below inflation (the rate of which this entity also controls, by the way). Low interest rates also make it cheaper to take on debt. And a situation that discourages savings and encourages debt means the money has to go somewhere… spending.

  27. 27
    Matt Jabs Says:


    Correct me if I’m wrong, but it sounds as if you are asking who we can blame for our lack of personal responsibility?

    As eluded to in the post & comments, if the gov’t, or any other outside entity attempts and/or succeeds to lead us astray, regardless…it still does not trump the fact that we just need to accept responsibility for our own decisions, no matter what our circumstances. Which is the core message of this article.

    I hope this addresses your concern.

  28. 28
    IndependentOperator Says:

    @Matt Jabs,

    Yes, you are wrong in your interpretation of my comment. The point of the article is that individuals are being irresponsible by racking up debt. Is that really so? What should individuals do… save money in a savings account? That would be pretty irrational if interest rates are lower than inflation. You would be richer after 1 year by transferring that $100 into a stable asset than putting it in a savings account at 1% when inflation is 5%.

    What is personal responsibility if not acting rationally in one’s best interest? If the government manipulates interests rates and inflation rates such that it is not in one’s best interest to save, and therefore no one saves, are we really going to pin the blame on individuals?

    The problem is not some fault in our own ability to take responsibility for our actions. The fault is in monetary policy. This is not a deflection of blame; it is rational assessment of responsibility. Allow interest rates to return to market valuation of capital. Stop inflating the money supply and allow the market to return to the slow, gradual price deflation that is supposed to happen in a growth economy. Then see whether people start saving more and spending less.

    You can’t create punishments for saving and then criticize people who stop saving. That’s ludicrous.

  29. 29
    Matt Jabs Says:


    I apologize for any misunderstanding. The points you raise concerning anti-consumer interest rates & faulty monetary policy are excellent, and spot-on. It is uber apparent that our “leaders” clearly do not have our best interest at heart, which has undoubtedly played a major role in the financial position of the citizenry!

    That said, the points made in the article still stand as well and are also accurate, just presented from a distinctive perspective.

  30. 30
    Betsy Says:

    I loved how you changed the energy of the room to one where people 1) were no longer disagreeing 2) were thinking about what they COULD do.

    Just one sentence! :)


  31. 31
    Michael Harr @ Wealth...Uncomplicated Says:

    What a great post and conversation! Nice1, Matt.

    @David – Digging holes and refilling them does nothing but grow economic problems. It’s kind of like taking a cash advance from one credit card to pay for another. The bigger problem is still there and it’s made just a little worse with the additional costs involved–whether to the credit card company or to the guy digging holes–the real problem doesn’t go away.

    @IO – your point about a lack of motivation for saving versus spending is pretty far out there. Anyone wishing to invest above inflation can log on to TreasuryDirect.gov and pickup some I Bonds or TIPS. Besides, rational…errr…normal people don’t make a decision to buy concert tickets, purses, or whatever based on whether or not returns on savings are higher than inflation, they make purchases based on whether or not they (a) want it and (b) are able to afford it either (1) now with cash or (2) with payments to creditors.

    Also, monetary policy is a powerful force, but you’re giving it far more credit than it deserves.

  32. 32
    IndependentOperator Says:

    @Michael Harr,

    My point may be ‘out there’ in the unending fount of wisdom that springs from the depths of the personal finance blogosphere, but it seems to be pretty on target in the relatively irrelevant world of economics. For instance, Hayek was awarded the Nobel Prize for his work showing that market interest rates coordinate rates of investment with the market’s willingness to spend in the short- and long-term in a free economy.

    Now, you seem like a smart guy, which leads me to believe that you intentionally left any mention of ‘opportunity cost’ out of your list of things individuals base purchases on. The suggestion that individuals buy things when they want them and can afford them is simply wrong and would lead to an incredibly inefficient economy. The truth, which you surely will dismiss as subtly different, is that individuals act in a way that maximizes what they get for their money. In other words, if they want tickets for $12, they will only buy those tickets if they want them more than anything else they could buy for $12.

    You need only take my example to the extreme to remove the subtlety which apparently makes you disagree with me. Consider a scenario where you make 25% interest on your money. You could buy a bike today for $100 or a better bike later for $125. Some will buy the bike today, because they value the bike immediately, while others don’t care whether they have the bike right now (perhaps they have a decent bike already and are just looking to upgrade) and will wait for the $125.

    People do this all the time. Indeed, this is the whole point of saving: forgoing current pleasures in order to save up to buy something later that will be better. Are you more likely to save if it will take you 1 year to meet your goal than you are if it will take you 10 years to meet the same goal? Then, clearly the rate at which you can meet your savings goals influences your personal valuation of the time value of money. Therefore, interest rates very much DO influence the decision of whether to spend now or spend later.

    Is it a conscious decision? Not for most people, because they are not trained in economics. But economics did not make this up; economics only modeled how the market works. And while most of us cannot explain with specifics why we want to save instead of spend and what the parameters of that decision might be, the decision is nevertheless there and nevertheless made.

    Manipulations to the time value of money, deflating it or inflating it from where the market would assign it, has very drastic effects on individual spending/investment decisions. I beg to differ with you when you say I am giving it too much credit; if anything, I do not fully appreciate the ramifications of doing this, and I’d bet the farm our policymakers don’t either.

  33. 33
    DDFD at DivorcedDadFrugalDad Says:

    Excellent post!

    I am so sick of the “blame game”! Please stop whining and just do something to help yourself!

    BTW, What I love is when even criminals claim to be the real “victim” . . .

  34. 34
    Nickel Says:

    IO: You make an excellent point. I can certainly see that low interest rates would increase the temptation to forgo saving. After all, low rates simultaneously reduce both the rewards associated with saving and the costs with associated borrowing.

    That being said… Not everyone made the decision to go on a spending binge over the past several years. Were we irrational for not recognizing this ‘opportunity’ to spend instead of save? No, I don’t think so. The interest rate environment didn’t make saving a bad (or irrational, as you put it) option, it simply made it ‘less good’.

    I don’t have the numbers in front of me (and would love to be proven wrong with hard data), but I’d be willing to be that the spread between savings account interest rates and the inflation rate hasn’t been much different over the past several years vs. periods when we were a nation of savers.

  35. 35
    IndependentOperator Says:


    Perhaps I overstated it with my words. I certainly did not mean to imply that everyone chose not to save. The point is that individual transactions are heavily influenced by interest rates, and the results are that people save less.

    Here’s the data for personal savings rate as percentage of disposable income: http://research.stlouisfed.org.....SAVERT.txt

    Here is the data for Fed’s various measures, of which I’ll allow you to choose: http://www.federalreserve.gov/.....5/data.htm

    You need only look at the Fed’s own words. One of the primary reasons they adjust interest rates it to affect spending. Greenspan and Bernanke both call this “putting the foot on the pedal” of the economy. We had a great boom because we WERE a nation of savers (at least in the 10-11% range), but we eventually burnt through our savings, mostly in the 90s.

    If interest rates were higher, I would save more. If debt cost more, I would take on less and choose to pay down existing debt.

  36. 36
    Nickel Says:

    Oh, I definitely agree that low interest rates have ben a major enticement. That being said, some people chose to borrow and spend like mad, whereas others didn’t. In the end, it’s still up to the consumer to choose. I think that Matt’s main point here is that you need to man up and make the right decisions regardless of prevailing interest rates, etc.

  37. 37
    Michael Harr @ Wealth...Uncomplicated Says:

    @IO – Obviously consumers make what they believe is the best decision (perceived optimal economic decision) when it comes to purchases, but you’re forgetting that most consumers are not particularly well versed in personal finance or economics. This has been documented by the many financial literacy studies that ask consumers relatively simple questions about personal finance and economics. In addition, retirement preparedness research also reveals that consumers have made a long series of poor decisions leading to nearly two-thirds of baby boomers not being ready for their golden years with approximately the same number planning to work much longer to make ends meet.

    While the availability of money at very low rates is a major influence in purchase decisions, I am a firm believer that myopia has far more to do with our current economic situation than simple low interest rates or low spreads between savings vehicles and inflation. It is the failure to consider long-term opportunity costs coupled with a short-term penchant for spending on perceived needs that has really put us in a mess. Fundamentally, economics does a very good job of explaining the macro, but one must also consider consumer psychology and resulting behavioral patterns before the picture can become more complete.

    I reject the notion that money supply is the only–or even the most important–consideration when it comes to explaining consumer behavior. While it is an enabler, consumer psychology is much more important.

    Consider the generation that endured the Great Depression. They were avid savers, shunned the stock market, and were incredibly skeptic of banks as a result of the psychological toll that was levied during this difficult period. Personal responsibility was at an exceptionally high rate because government safety nets were few and far between. As the next generation came up, times were better. They were better because banks weren’t failing, the market was still the market, but people weren’t wiped out the way they were in ‘29 or through the ’30s. Finally we get to the next generation that really didn’t see anything close to a tough time compared to the Depression generation.

    It is this latest generation that has fallen victim to our economic problems as a direct result of not knowing that things can unravel at what some feel are unprecedented rates. The fact is that these times are not unprecedented and we aren’t feeling the full amount of pain that we would have prior to having a more enlightened monetary and fiscal policy. Is our government handling things as well as they possibly could? Certainly not, but I for one am thankful that TARP passed last year because we were literally weeks away from a complete collapse of our financial system. Fortunately for the citizens of Iceland, they were small enough to be rescued in the end. The United States is not in that kind of position and if we would have failed last year, I don’t know that we’d be having much of a conversation today.

    My point is that consumers have made trillions of bad purchase decisions. While they may have made good decisions when weighing the costs of one purchase compared to another, they have not made good decisions when weighing purchases versus savings, present value versus future value, etc. How else could you explain failure to contribute to employer sponsored retirement plans offering a match? For most of the plans offer a 50% or 100% match on contributions and surely this is a better deal than a depreciating flat screen television, an extra night’s stay on vacation, or even furniture for a new and bigger home.

    Seriously, economics is great, but it is inept in explaining consumer behavior at the personal finance level without adding information from other disciplines such as behavioral psychology, history, etc.

    You’re giving economics far more credit than it deserves. It’s an important part of personal finance, but it is still a part and not the whole.

  38. 38
    IndependentOperator Says:


    All very well and good, and our understanding of behavioral economics and individuals’ tendency to spend is only more reason that further encouraging the behavior with monetary policy is irresponsible.

    If you’d like debate on the Great Depression or your interesting theory on why individuals don’t contribute to 401k, I would be more than happy to give my thoughts over email.

  39. 39
    Kevin M Says:

    @IO – using your logic, why would you buy a $100 bike today that will end up costing $125 (give or take) including your credit card interest, when you could save up little by little and get that $100 bike for $100?

    Low interest rates may induce SOME additional consumption, but I don’t believe it causes the level we are currently seeing.

    All in all, this was a damn good post and unfortunately rings too true in today’s “gotta have it” society.

  40. 40
    IndependentOperator Says:


    The answer is simple and is explained by econ 101 topics (not “my logic”)… http://en.wikipedia.org/wiki/Time_value_of_money

  41. 41
    Kevin M Says:

    @IO – I fully understand the time value of money. I’m asking why someone would rationally pay $125 for a $100 object (by using a credit card). The (low) interest rates you speak of in your argument do not exist for the consumer debt people have run up to no end. I have not heard of a single person say, “Hey, my credit card rate is down to 15%, I’m going to buy that new flat screen TV today!”.

    My point is, sometimes the financial aspects go out the window and can only be explained by the fact that humans are involved.

  42. 42
    IndependentOperator Says:


    It doesn’t sound like you “”fully understand the time value of money”. Your argument is essentially saying that I am just as likely to buy a TV on my 0% introductory interest credit card as I am my 25% interest credit card.

    I have to quibble with the basic premise of your point, though. Even if Fed’s target rate does not affect credit card interest rates (which I strongly disagree with), that doesn’t mean that individuals are not more likely to put items on their credit card when the Fed’s target rate drops.

    I am not disagreeing that there are psychological aspects to spending.To disagree with my point saying that human behavior influences spending completely misses the point I am making. This post and many people here are saying that people need to “man up” and save anyway, even though they watch their savings get eaten away by inflation (even a mild 3% inflation rate ends up in a 56% decrease in spending power over 15 years!) is just plain odd. Rational people, including myself, will either attempt to find ways to invest with an expected rate of return above inflation (and that necessarily means more risk) or be more likely to spend.

    I’m not sure how you can quibble with the statements “if you punish savers, savers will save less” and “if you lessen the punishment on debt, people will take on more debt”. Your value judgment of whether individuals “should” do these things are irrelevant. They are necessary collective consequences to the actions. If you increased punishments for savings and savings rates did NOT drop, people would rightfully make the argument that consumers were not acting rationally. Similarly, if you decreased the price of debt, and debt rates did not increase, people would rightfully make the argument that consumers were not acting rationally.

    So, both available options are irrational?

  43. 43
    Mikel Grenier (Toledo) Says:

    WOW! Someone finally said something, other than me!

    I guess the whole root of the problem really is “live and let live.” I say this because people are too into “let them be them,” while not opposing the values behind what other’s do. This is for everything from disrespect, to not doing what your employer made to be your duties. It’s not just in the neighborhood associations.

    I have opposed that kind of thinking, but been called a “hater,” “psycho,” “too ugly to live,” “racist,” etc. I have been there. So i think it needs to be said by more people, other than me.

    This country had gone into a wimpy state of the passive “I’m not doing that!” Back when I was a child, VALUES SHOWED RESPECT FOR SELF AND OTHERS. Where did this go? Did we really lose ourselves enough to lose our own respect and self-pride?

    I know that people are dying because of this apathy towards work, respect and others. The few people who do recognise this, are considered “haters” by default, because they do not agree with the attitudes of one’s own pride being a hallmark of what a person is….REGARDLESS OF COLOR (which tends to get stuck in the hater mix, even though it’s nothing to do with the topic).

    Wake up America! If you don’t get some self respect and pride, you are going to kill yourself and others.

    My personal quote, that I find very true… “Live and let live only goes so far.” I point this out to you, because you cannot live and let live as someone drives home from the bar drunk, and kills someone, or themselves. Now how do you live and let live on that? Where was the respect and responsibility?

    Mikel Grenier
    Toledo, Ohio

  44. 44
    Gary Anderson Says:

    I am sorry Matt, but the present financial crisis was a PLANNED SCAM. It was planned at Basel 2. The toxic loans arose out of the Basel 2 scam that allowed shadow banking. Matt, you need to realize that the government of the United States look the other way on purpose. The rating agencies rated these crap mortgages AAA on purpose. The investment banks overleveraged on purpose. They all should be prosecuted and all should go to jail, yet they won’t because they are stronger than the government of the United States. They raid our treasury, they borrow at 1/2 percent and loan shark their credit cards to us. They have scammed us Matt. We need to walk away from all the crap loans and we need to step on these big banks while they are vulnerable. This is a protest, not a financial advice rant. But I guarantee you that if we don’t take down these banks now they will control every dollar you ever make in the future. They have the power to do away with cash if they want. Let alone gold, did you know that 90 percent of the currency of the United States is not backed by a piece of paper but rather exists on balance sheets only? We need to take money out of the big banks, quit paying loans, and change our phone numbers. Whatever you can do is good.

  45. 45
    Matt Jabs Says:

    @Gary #44: I don’t disagree with your info about the gov’t & banks pulling one over on us. But…we can never right a wrong with a wrong.

    Even though they have done what they have done, I still need to do what is right for myself. That way, when I pillow my head at night, I can rest easy knowing that despite being attacked from all sides, I did the right thing.

    Decisions like this allow me to stay off all the anxiety & anti-depression medications so rampant in our society today.

    Others may not agree, but this is the right decision for me.

    Thanks for your comment.

  46. 46
    Matt Jabs Says:

    @Gary #44: Let me elaborate further.

    By “righting a wrong with a wrong” I meant that we should not shrug our personal responsibility and walk away from our commitments, regardless of what others have done. We committed to our loans and we need to fulfill our committments.

    That said, I am all for against protesting against a gov’t and a banking system of corruption.

    What I am trying to do is to sell my home to get out of my mortgage, and paying all my other debts off, never to enter into debt again.

  47. 47
    Simplelivin' Says:

    “The point here is simple: before we can expect others to act in a certain way, we need to be sure that we’re behaving appropriately ourselves.” Love it!!!!

    I just stumbled across your blog from J. Money and I love it. Very well written and thought out. I totally agree with what you have to say, and to sum it up we are lazy. We live in a country where we don’t have to assume responsibility for our actions (ex. spilling hot coffee), it is always someone else’s problem.

  48. 48
    Matt Jabs Says:

    @Simplelivin #47 – Glad you found & enjoyed the article.

    Be careful, don’t spill your coffee! ;-)

  49. 49
    Gary Anderson Says:

    Hey Matt, trying to sell your home? Where do you live? Who would want to buy a home if you knew it was likely that home prices will decline by another 20 percent or even more if the economy tanks? Maybe you can find a sucker Matt.

    Actually, I am not accusing you of anything wrong in selling your house. But do you get my point that the bank scam has destroyed trust and confidence in the value of housing? You can extend that problem of valuation to the dollar, to the rate of interest being charged and to the value of all commodities.

    Commodities generally go up with inflationary expectations. However, commodities purchased with credit are not subject to that expectation, especially when the interest rates for future buyers could go through the roof, further diminishing the value of the house you are trying to sell.

    That brings up another point, the person who buys your house with a low interest rate could end up being in trouble if he needs to sell. Interest rates are being kept artificially low.

    So, I am saying that trust in the value of things has been undermined by the banks and the Bush administration. This destroys the fabric of society. Hope you can sell your house!

  50. 50
    Kyle Says:

    While there’s a grain of truth in the OP and the commentary, there’s also a lot of old-fogeyism, an intellectual cousin to “kids these days” and “get off my lawn!”

    Personal responsibility will always be balanced against societal rights and duties. If you are looking for excuses to feel superior, there will always be people out there to give you good reason, but the vast majority of human beings are doing just fine and feeling quite responsible.

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