Save Yourself

Sometimes, folks have to be “persuaded” to do the right thing by… shall we say, “extreme circumstances.”  Such as, for example, a very extreme recession.

Now that so many folks have lost their jobs, and with more job cuts coming every week, those folks who do have jobs are doing something they’ve done very little of for over a decade.  Something that is financially responsible and prudent for themselves.  I’m talking about saving.

Saving is something that has not been an American tradition for over a decade. As recently as 1993, the personal savings rate was about 8%.  But by 1995, it had dropped to about 4.5 %.  Check out this graph of the personal savings rate since 1959.

For the last four years, the savings rate has been below 2%…pathetic!  In the first quarter of 2007, the household savings rate in the Euro area was 14.4% and in the EU 27 it was 10.9 %.  (Here is my source.)

Perhaps the housing bubble encouraged home equity loans so folks could spend, spend, spend against the ever rising value of their homes. I’m really not concerned about the why; only that saving has become almost extinct in this country.

I’ve always been a saver.  My friend Fakename says I’m the most frugal person she knows.  I can’t argue with that because I am the most frugal person I know.  I’ve always lived below my means in order to save.  Living below my means doesn’t mean living a spartan life.  It means owning a 25-inch non-HD TV instead of a big screen HD LCD one, for example.

I’ve never understood why folks don’t save. From my very first job, my financial philosophy has been: always pay yourself first.  That’s what you’re doing when you save – paying yourself.  And I can’t think of anyone who deserves my money more than me!

A lot of folks say they can’t save.  They don’t earn enough to save.  Their expenses are too high to save.  I don’t accept that.  Most everyone can save something.  But not if you wait until the end of the month to save what’s left of your income.  That approach is an excuse for not saving.

The only way, and also the easiest way, to save is to just put an amount – any amount – of your income into a savings account immediately after you receive a paycheck.  Then, find a way to make do with what’s left until your next paycheck.  You may have to forgo a movie, a lunch or dinner out, or whatever.  But even just $10 a week will be $520 after a year.  Plus interest.

Interestingly, the co-workers who tell me they can’t save even $10 a week because they are in the lower paid jobs are often letting money slip away when they could be saving it.  During all my 30 working years, I’ve brought my lunch to work unless the office was going out to celebrate something.  I figure that’s easily saving me $20 a week, after the cost of preparing lunch is factored in. That’s about a $1,000 a year just by bringing lunch.

Yet, I see lower paid staff regularly ordering lunch delivery while I’m satisfied with my  homemade lunch, often a sandwich, fruit and a can of soda from a twelve pack.  It’s the little “luxuries” like these that will add up to a respectable amount over a year.  So when these same folks wonder how I can “afford” to travel four weeks a year, I get just a little aggravated.

So many folks are trying to live a lifestyle beyond their means.  A co-worker who’s one of those lower paid folks buys a new SUV every 3 years because she likes new vehicles.  In November 2006, I bought only my second new car in my life (and I’m 57) after owning a Camry (my first new car) for 21 years and putting less than 125,000 miles on it by renting a car for long trips.  Since that co-worker’s husband is losing his job at the end of the month, I suspect she’ll hang onto that SUV a bit longer….

I’ve seen a number of stories, such as this one, about folks who were making $100,000 and up, lost their job and then ended up in strange situations because they had little or no savings to see them through.   I have no sympathy for folks with six-digit incomes who spent, spent, spent and failed to save.

My friend Nick said in a comment that what the rich fear most is being poor.  While I certainly don’t consider myself wealthy, my family never had financial concerns.  Perhaps because of that upbringing I like the idea of never worrying about money.  And since I was not financially deprived as a child, I’m not too concerned with spending moneyt now.  Whereas I suspect that folks who did not have a lot when they were young are much more eager to enjoy as an adult what they “missed” as a child even if that means having almost no savings.

But the recession is changing spending patterns, which is historically true of recessions. Look at the graph again and see how savings rises in the blue colored recession years.

Normally, economists would applaud increased savings.  Savings are a source of capital for the economy.  Interestingly, economists are saying that in a recession a high savings rate is not good.  Because in a recession, folks need to be spending to stimulate the economy.  And at a macro level they are correct.

But I don’t live at the macro level and neither do most folks.  We live at the micro level: our life; our business.  I’m going to do what’s best for me.  And at that micro level, saving always makes sense.  If that means someone’s going to lose their job because I’m saving and not spending, I’m OK with that.  It’s not my job to keep someone else employed.

Even in the best of times, financial survival is the prime directive.  Save yourself.

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14 responses to “Save Yourself

  1. We need to ban money and go back to collectivism. Money is the root of all evil. Look at Mad(e)off. I don’t feel sorry for any of those suckers who got took. Making money without working for it means that somewhere, somebody else is being screwed. Damn the man!

  2. All valid good points my friend. We have lost the path to savings over the years. However, as I like to mix it up lets see what may be part of the issues here not touched

    5o years ago B/W TV’s were coming into play. No Internet, no cell phones, not a lot of pay phones around either really, no i-pods just 8 track, no x-box and the like. I can go on and on.

    With the tec revolution over the past 15 years kids are exposed to all these cool things that we did not have. I had a stick to play with and my mind and I was outside in the sun and fresh air.

    Yes things cost more and yes there are more things to buy. Advertisers and corporations send out messages like the 3 million dollar commercials for one 30 sec spot during the super bowl and so on. Or the lavish Hollywood parties after a awards program. Or the out of control spending by local, state and our big spender.

    It is big business. Corporation rule the world. It is in there best interest to have you buy things. So how do they do that simple.

    Now 50 years ago you could buy a frig lets say that would last for 20 years or better. Washing machine 25 years were not unheard of. Now just after warranty or within 5 -7 years most major appliances need to be replaced. We now have multiple choices for TV’s but just 10 years ago really you had one style. More of everything.

    Why because the cost of fixing these items has gotten so expensive that it is almost cheaper to buy new and get the warranty. Thus starting over and keeping the economy going for the corporations.

    So if things were built to last like they were 30-50 years ago people would have more money to save in the bank. But just as you put something away something comes along that takes the savings from your account.

    Like losing your job and having to hunt for 10 months for a new one. Or health insurance going from 80 bucks a month 15 years ago for Blue Cross to over 500 bucks a month, if you not employed by the government. But your salary does not go up equal to the cost of goods.

    So yes people make more than they use to but everything cost much more than on average bring spare income down.

    I worked for the state for 11 years. I figured that after I left them (since some years there was no pay raise of 3% ) I had lost about 11% over all salary verses cost of living. So I was working the same hours but really making less money based on the cost of living.

    So I agree you should save. But it becomes harder and harder to do this. And when you do someone could steal it look at the news almost daily. Stocks fall, company get bailed out for bad management or they just close. Or they dip into the corporate 401k just to cover other areas.

    Again I could go on and on but the bottom line is yes you should try to save but this is not Kansas anymore like the movie said. This is not the 50’s, 60’5 or even part of the 70’s or lat 80’s and mid 90’s anymore. The good time are DEAD.

    Our society needs to fall into a deep depression, not recession, like they had not to long ago to make people really change. People are not really changing. They are just cutting back and will go back to the same pattern unless this stay around for another 4-6 years. It takes that long for people really to make lasting changes. A year or two that is to short a time to really change the pattern.

    Wow get me started and I will go forever. Someone else’s turn now. Good post. Enjoyed the read.

  3. Hey! Don’t be making fun of my new 32″ HD LCD TV! Which does not qualify as big-screen. I’m actually having trouble adjusting to it because of the size. You have to sit far enough away from it for the picture to be clear. If I had a big-screen I’d have to sit in Canada to watch it.
    With technology, if you wait long enough, as I always do, the unthinkable eventually becomes affordable. Especially if you buy something that is close to already being obsolete. (Because I bought the store brand, on sale, almost-obsolete model, my TV was $432, not the thousands you think of.)
    You are, of course, absolutely right though, except for the part about savings accruing interest. What interest?
    I must say, though, that libertine’s comments definitely hit home for me. So I need to go take two aspirin because I must be sick!

  4. > I had a stick to play with

    I think you had a little more than that… 😉

  5. > Don’t be making fun of my new 32″ HD LCD TV!

    It wasn’t you I had in mind, FN… lol!

    > With technology, if you wait long enough, as I always do, the unthinkable eventually becomes affordable.

    That’s how I buy…I’m a bottom feeder….lol!

    > What interest?

    I meant once you had enough for a CD. You’re not going to get much for a normal savings account. And the CD rates aren’t that great these days either but something’s better than nothing.

    So… you and Libertine agree on something! 😉

  6. > go back to collectivism

    Not this anarchist! 😉

  7. Fake, does your remote have an “aspect” button on it? you can adjust the picture size to suit you.

  8. I know, right? You know, it isn’t easy being a liberal. Conservatives act like we are just a bunch of thieves: all we want to do is take their money.

  9. You know, ee, I think it might, but I’m afraid to look. How do you say “aspect” in Ukrainian?

  10. Woman please! I have to double check everything I do in English.

  11. All good points you mention here, Spencercourt…
    We don’t have much $$ in savings, but I am probably as frugal as you..or more! Always have been. We live on 20K a year, max, we have not ‘frills’ except my computer! We don’t do gifts, vacations, eat-out…every pennie earned (and I mean PENNY!) has a designated destination. Small mtg, no vehicle pymts, no credit cards…
    I don’t worry about surviving these hard times..we can and have lived without electricity, running water…we can again! We raise and put up most of our own food too.
    Everyone must take responsibility for themselves…THAT is part of this huge problem going on now!!

  12. You make so many valid points and I agree. One of the easiest ways to save money is to bypass that specialty coffee each day (at nearly $5 a cup) and bring a lunch from home. It’s healthier too.

  13. Well Barb…

    I guess I can no longer say that I’m the most frugal person I know. *You* are…!

    I pay all my credit cards off each month. Main reason I have them, besides convenience of not carrying cash, is the “rewards.” I get cash back on two and a free airline ticket each year on another. I do pay annual fee for the airline one but the free ticket still puts me ahead.

    Now that I’ve approved your first comment, future comments will publish without review.

    Thanks for stopping by!

  14. Terri,

    I should have mentioned that coffee point but I forgot, so I’m glad you brought it up. That is worse to me than buying lunch! For $5-6 you can buy a pound of quality coffee online and drink many many cups that will taste as good as, if not better than, Starbucks.

    I’d think there’s a lot of coffee drinking in Minnesota, especially this time of year. If you’re a coffee fan, my favorite coffee source is coffeebeandirect.com. Lots of variety and low prices.

    Get with a few friends and place a 25 pound order and you’ll get free shipping.

    I did a serious post on coffee brewing on Aug. 10, 2008 and a humor one just a few weeks ago titled “My Wife Caught Me with Porn!”

    We’re having another hard freeze tonight… unbelievable. Better be the last one this year!

    May spring come soon for you!

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