The best way to secure our future is to practice saving money now. Nobody knows what will happen next, that’s why we must always be prepared.Yes we might have money to consume today but we are not so sure of our luck.Consumer spending is dipping across the board, and pizza sales have been slumping as part of the equation. Pizza sales and diners eating out have been a bit more sluggish of late. The biggest chains, Pizza Hut and Dominos, have expanded their menus in order to bring in more sales to bolster the lagging sales of their pizza. Papa John’s, on the other hand, which stresses quality, has actually managed to keep in the black. Pizza is an American institution in dining, but due to the recession it would be unjustifiable to order $30 or more just for a normal family to eat anymore. However, the pizza sales that do work well are those on the value menus or that stress quality.
“Saving is killing the economy”??? Wow, that’s an interesting take. I suppose it’s our patriotic duty to spend/borrow ourselves back into oblivion? If our economy relies solely on borrowed money, it’s in dire need of a major readjustment — and I hope it’s getting one.
About 1968, I cut up my credit cards and paid cash for everything and only paid cash for things like my parents did because no one would give “coloreds” (non-whites, including blacks, Mexicans, Indians) and my parents had paid cash for everything and were free from debt and owed quite a bit of property. A recession came and my friends bought everything with credit cards and my husband left me and I suffered. NOW, 2009, I say, spend carefully only on what U need and a few extras. Buy only on sale and do not get in debt if U can help it. My kids are not under a lot of debt, do not get caught by smarmy loan deals like I did with my house I had almost paid for and lost. If U mess up, don’t give up. One man’s loss is another’s gain. Just keep moving. Don’t give up.
You all here are totally clueless! Taking on crushing amounts of debt is like paying taxes:
They are both the patriotic thing to do.
Get with the program, traitors.
Well… It’s pretty simple, really it is… When you spend more then you make, sooner or later your debt will come full circle. The folks buying 500/600K homes with incomes of 60-70K per year with teaser rates of 3% have noone to blame but themselves. Seriously folks, wake up and look yourself in the mirror.
I am 38 and my wife is 39. We currently make a combined salary of 200+K. Yes – a lot of money. However, we have 2004 and 2005 car. Both paid for… Live in a 300K home and have the mortgage down to less than 100K. Still mow our own grass, use coupons, eat out once a week, sell and buy used items on craigslist or ebay, etc…
Credit cards are another part to this downturn. Folks – pay them off… We use credit cards, but pay them off ever month. Don’t let yourself get behind the eight ball.
Also, don’t be afraid to stock up on food items when they go on sale at the store. We have about 2-3 months worth of food (can goods, pastas, water, juices, etc…)
Good luck
My husband and I have believed for a long time that you’re not truly free unless you are free of debt. Our nation should not have become so dependent on credit in the first place. I would rather own my possessions rather than a bank owning them. Rather than amassing large amounts of material things we don’t need, and can’t afford, we save for things like travel, and have been doing so since we married 13 years ago. The only interest we pay is on our mortgage (at a low rate, even), and it kills me every time I see how much interest versus principal we pay each year. Talk about throwing your money away–of course, it’s lining the pockets of the mortgage company, and keeping those people employed, but in my mind we might as well be burning it.
Keynes’ Paradox of Thrift is at best absurd. You cannot as a society constantly borrow more money to purchase goods. Anyone who thinks that you can has simply bought into what is generally called a Ponzi scheme or Pyramid Scheme. At some point, debts must be repaid.
We have reached that point.
There is no paradox.
Save or starve…
Something is wrong in America. We spent our way into this mess. Is there an expectation from people to continue spending now to prop the economy and magically expect to start saving when economy is ready to to turn around? People are going to start saving now if a rainy day strikes them. I can see the point: If saving deceases consumption and slows the economy. But there is no way out of this. Question is what is done by banks with people’s savings? Will they employ it in productive ventures or giving big bonuses. Frankly, there is no way around this.
Mr. Zandi should know better, as an economist, one of the largest reasons why the economy is in trouble is the low rate of savings by Americans. If Americans had a higher rate of savings they would be more likely to weather the liquidity crises and economic downturn. We would not be a debtor nation having to go cap in hand to oil producting countries, China, and the rest of the G7 to bail us out by purchasing our debt, to finance spending above our means.
I am concerned about the rising debt in this country – nobody seems to talk about that.
Isn’t this the very problem of overdrawing from what we don’t have – led us to this situation.
With the recent stimulus package it raises the total debt to about 12 or 13 Trillion. Nobody has any plans to discuss on how that is going to be repaid.
Sometimes i wonder if we gave too much power to our Congress. I think we should without their rights to approve any more burdens without a plan for repaying the debt.
We are saving for the uncertan future. My company is outsourcing IT jobs big time and there are no promotions or pay increases for us. The executives get their bonus for reaching the company financial goals anyway. I may not stay in IT field for long. We have mortgage only. Right now we have 3 months worth of expenses stashed away. Our goal is to increase this to 12 months and then start paying off mortgage debt as much as we can before the storm comes.
Save as much as you can folks. In tough times ahead, our government is not going to feed your family. The stimulus plan is a hogwash. Obama promises we will get $400 each, but the tax payers will be burdened with $4000 to pay off in future. Do not you feel we are already taxed to the hilt with all the increseing prices in food, healthcare, and gas?
What is wrong with Savings? I consider my savings as my profit (income -expense=profit). If companies can produce record profits why should i not try and emulate them. When none of the big profit producing companies are trying to spent, why should the consumer be urged to spend? Are consumers not allowed to make a profit on their hard work for which they toil for everyday?
The so called credit freeze was caused i believe in large part due to “SAVINGS” by these big companies who hoard up mountains cash and announce that there is a credit freeze. Check out big companies like Exxon, GE, Google, microsoft etc for their cash balances.
I have looked over these posts trying to find anyone who supports the idea that we should be spending.
Why is it that all the experts are working overtime to get us to spend yet all the common folk are working overtime to save?
If the common folk believe not saving is such a bad idea, why did we just select a Government who is promoting we spend more?
What am I missing? Would someone at CNNMoney please provide an explanation.
Editor’s note: In a previous gallery, we looked at this issue, which is technically called the “paradox of thrift.” Click here for that discussion.
Yes! Spend, spend spend!
There’s no way you could possibly spend as much, as foolishly, as the U.S. federal government but give it a shot. Just don’t create it out of thin air like they do. They are the only ones who are allowed to counterfeit.
Copious consumption has always fix the economy. Purchasing stuff made in China that we really don’t need with money we don’t necessarily even have sounds like a great plan.
I’m sure it’ll keep the party going now too.
Of course we are saving more than we usually do. Why? Because no one will help us if something were to happen. Who would help us? No One. Health Insurers? Nope – See Cigna CEO comment, they could care less if you were dead, but you better pay for your hospital stay. Wall Street? Nope – They will take your house and anything else you have and don’t have The government? Obama Yes (and just did help a little-see stimulus bill) Government – Nope – I think if Obama were not elected tax breaks and money will still be given to the wealthiest of Americans and Companies assuming a ‘trickle’ down effect. Well I’m tired of being trickled on. The Health Insurance Industry and Wall Street can ‘rot in hell’.
I was hoping to save my tax refunds as well as my normal savings but alas, my truck engine bit the dust(2000 Dakota). Hmm, let’s see, spend $20,000 on another truck (with debt) or spend $4,000 on an engine with no debt. To those who don’t save, here’s the lesson. GIVES YOU OPTIONS..rebuilt engine..saved $16,000…no debt!!
who would not want to save money right now. when you are so unsure of your job. i have some debt which i am paying down. i am learning to live without alot and i am getting used to it. if i do not need it i do not buy it. it is time that americans live with in their means. keep things simple.
Everyone should read the article in this week’s BusinessWeek on the slump. It’s not a problem of demand, but a problem of supply. Capacity is far too large. Capacity to produce goods was increased ridiculously to meet a horribly overstretched demand. Excess capacity has to go away.
My husband and I are 33 with no children and we live within our means. Our only debt is our mortgage and we have a 3-month emergency fund and save for major expenses like home renovation and travel.
I’ll admit that we are sitting on a large sum of money we had earmarked to renovate both of our full bathrooms at the same time. We just don’t feel comfortable spending the money when one or both of our employers may be in dire straits.
If you have what you feel is an adequate emergency fund and little debt, go ahead and spend a little, but I think the general statement of “go spend money” is irresponsible at best.
I’m 27 and my wife is 28 and we have been married for 3-1/2 years. We are both teachers, so a modest income. For the past 5 years we have both managed to max out Roth IRAs, build an emergency fund, buy a house, buy waterfront land (investment/possible retirement), and carry no credit card debt.
We have a couple of small vehicle loans (one currently under 1500 and 4000) both will be paid off in the next year. I installed a wood burning fireplace when we bought our house; we save at least 1000 a year in heating costs. (we live in NE WI)
It isn’t that hard to live with in your means. We don’t have cable or satillite tv, we drive modest cars, we know where the nightly specials are so when we do eat out the bill is reasonable. We suscribe to Netflix, camp on our land, play card/board games, and take our dogs for walks for entertainment.
Bottom line – LIVE WITH IN YOUR MEANS!
I’ve got a great idea, Mr. Chris Isidore, and the “CNNMoney” guys should start and continue spending, they rest of us will save.
The beauty is for all of the people who have saved for a long time, and actually have money to spend at a time like this, is that the deals you can get right now are amazing on just about anything.
I just paid under $1,800 for a piece of sound equipment brand new from a dealer which a year ago the same dealer wouldn’t have sold to me for under $3,000 and the MSRP on it is $3,999.
so many have said it already – I will save more, a stimulus check would go straight into savings. Tax cut – straight into savings. Not a 401 k mind you just a simple account in the local credit union that is not tied to the wall street gangs.
I also agree with the business owner – I am prepared to stop producing when my job goes away. Move into a smaller house that is already paid for, let the bank own the big house I live in today. Grow my own food, live off solar electricity with my only real challenge how to pay the water bill.
I am a foreigner living in the US. Since I came here, all I saw was people have to get a bigger houses, get a 6-figured job, get a bigger car, etc. I don’t hear people say “I want to save more money.”
Why can’t they save more and cut spending? America will be a rich nation if people learn to save money.
That’s silly to say that Americans are saving too much. Perhaps the Chinese save too much, but not America. If we had been saving at a healthy rate over the past two decades, we wouldn’t be in such a rough situation now. Saving allows companies to invest in increasing their production, which leads to more work for more people. Spending can only lead to the poor house, or worse the debtor’s prison (figuratively speaking).
The reason Americans have stopped saving is because the Federal government held down federal funds rates for far too long, punishing savers and rewarding borrowers.
Well thanks goodness the people of America are smart enough to not listen to the propaganda of CNN. This country was founded on savings and investment, not on deficit spending. We will turn this situation around by focusing on the real strength of this country: freedom, liberty, creativity, and hard work. The sooner we all realize that government deficit spending and hand-outs of our own money is not the answer, the better off our future will be. Good job everyone!
I have begun saving more, not less. Savings is a fundamental tonic for my peace of mind and independence from an economy that seems terribly out of control. Spending is what got us into this mess; cutting back and savings will get us out of it. I am not buying things I do not need on top of bailing out people who bought things they did not need and could not afford. Also on another front banks are not my friend so and resources such as savings I may have will not be shared with such an inept group of people. As folks in scouting learn – Be Prepared! Savings helps in that regard.
Good luck all.
Is saving really the problem, or have we built a house of cards that relies on americans purchasing more on credit? Last year one headline read that Americans for the first time ever owed less money on credit than the month before. This was a first in american history. Converting you’re cash into precious metals is another hedging technique like oil speculators saw this last summer.
I guess my husband and I are contrarians seeing that we have been saving 32% of our income for the last 10 years, paying cash for everything except a new house in 2007 (however, we put more than half down). We have in the last 2 months begun remodeling the kitchen by replacing all the major applicances, installing new countertops and retiling the floor. So we are spending, spending, spending right now. The economists must love us!
Nice to see that John Maynard Keynes is alive and well and working as Senior Editor at CNNMoney. Could any article be any more WRONG on the source of prosperity in the economy?
Savings is the engine of productivity and wealth, not spending. If it were spending, then the rapacious spending of the past 8 years under Bush should have turned this country into the wealthiest on earth. Instead we own many times our GDP in debt to other nations. The Federal Reserve inflationary printing presses are the way government gets around our poor spending habits, and the consequences are now being seen.
Go to http://www.mises.org and get a solid education in economics. Stop reading this swill that the government propogandists in the media keep publishing. There are not good times or bad times to save. There are sound economic principles and they MUST Always be followed.
What a stupid article – saving money is NEVER a bad idea.
By the way … isn’t SPENDING instead of SAVING what got us into this mess?? And the government is the worst offender spending TRILLIONS they don’t have.
I have been cutting back drastically on consumer spending. However, I have been converting whatever amount of money I have into precious metals. In essence this is a double whammy for the economy seeing that:
A: I am NOT buying consumer goods.
B: I have little money in the bank because I have converted my cash into precious metals.
The above mentioned scenario is happening across the US. You can’t touch precious metals at the spot price anywhere. So not only are Americans NOT spending but they are converting whatever worthless fiat money they have into real money like Gold and Silver.
FYI- My favorite link on CNN Money is the commodities link where I have watched the prices of Gold and Silver soar.
Kyle
I have had enough of this CRAP! I own my own business and I have cut back to no less than 80%:
I only work a day or two now and I am taking it real EASY!
WHY?
30 % federal tax + alt min tax
15 % FICA tax
6 % state income tax
8 % in various hidden and not so hidden taxes such as FUTA,SUTA, Use taxes, tax and tax and TAX!
That’s real ‘Incentive’ to PRODUCE
So that’s it! I CUT WAY BACK
So Congress and obamama can find some other SUCKER to pay for their give away CRAP!
Taking OUR (MY) hard earned $$$$$$$ & LABORS to make good on some other persons STUPIDITY!
Hey fellow PRODUCERS take action: CUT BACK!
You want ‘CHANGE’ see how fast things CHANGE when producers STOP producing!
We are not saving more, nor are we saving less. We’ve saved more than 40 percent of our net pay for more than 15 years, and no amount of prodding by anyone will make us save less. It is financially irresponsible to spend more than you earn, and that is why individuals, as well as businesses, and governments get into these messes.
Consumer credit is simply the modern incarnation of slavery. Borrowing for consumption means you have sold your future labor to the bank at a discount. At that point you are a slave. You “sold your soul to the company store”. Why do you think the CC ads stress ‘freedom’ as in the ‘freedom card’? It’s the same kind of marketing behind the naming of the ‘Patriot Act’. Wake up!
I will not stop saving all of these stimulus they are coming up with will not help me i pay ALL OF MY BILLS ON TIME & all they want to do is help everyone that dont pay there bills.SO NO I WILL NOT STOP SAVING ALL THIS IS DOING IS MAKING ME SAVE MORE & MORE.
Let me see, we’ve had how many years of binge buying and living beyond our means, which got us into this mess. Now the gov wants us to do it some more. NOT! Since the gov is taking more from me to pay for the lazy deadheads, I’ll continue to save and stay out of debt. Someone has to. What would I buy anyway that would help? Everything is made in China now…..
We have not changed our savings pattern. We continue to save about 10% of our gross income as we have in the past.
I paid off my car (2005 Mazda 3) last year, my credit cards got paid off this month, I’ve been paying extra principal on my mortgage since I got the house, and I’m maxing out my Roth and getting 10K into my 401k every year. I also have 6-7 months of living expenses in cash. I’ve done this on an income of 60-65K/year.
It’s called living within my means, and if more people (and the government) could do it, the country would be MUCH, MUCH better off. Save away, and make your life better.
When you put money into a bank, the bank then becomes obligated to pay you interest. Normally the banks would increase their lending to make the money to pay you the interest, but banks these days are still reeling from their bad loans and however many toxic assets they have, which they may not be aware of or have written off yet. The problem now is even when people put money into banks, the banks are reluctant to lend the money out because they are afraid to be burned again with bad loans. So the money just sits there, and isn’t flowing in the economy. Businesses end up not getting loans or have to deal with decreased sales, then they are at risk of having to lay off workers, which feeds into the whole vicious cycle.
Actually the text of that article isn’t saying that all saving is bad. Ignore the headline which is designed to attract attention. The article is making the argument that what is causing the problem is the shock to the economy of a sudden shift from low saving to much higher saving. It is the rate of change of savings that the article is targeting. The analogy might be between slamming the brakes, bringing the vehicle to a screeching painful halt, versus slowing down gradually to a smooth stop.
Saving is good for the economy. Borrowing is bad for the economy. I save and average of $50K per year. I have not debt.
I’ve always tried to save as much as I could, and spent as little as necessary. Not because of the recession, but because I’m not stupid. Living within your means is smart. Leveraging up with debt is dumb. This country is full of people who are only changing their spending habits temporarily. As soon as they think the sun is shining again, it will be a debt free-for-all. It’s pathetic. Our work-to-consume culture gives me little hope that this depression will leave any lasting impression. The only thing on everyone’s mind – citizen and government alike – is how can we get more money to spend, spend, spend!! Spending brought us this mess. Re-creating the problem will never solve it.
Yes! My wife and I have always saved –some for retirement, some for the kids’ education, some for home and auto repairs, and some for emergencies. But because my job future is cloudy, we have shifted savings into high gear. I don’t care if Congress or Wal Street thinks we should spend more. It’s easy credit and overspending that have caused pain for individuals, families, cities, counties, states, and big firms. If ALL of us encouraged our citizens to be more prudent with money, we could really change the nation. It’s never too late to save…or live within one’s means.
I am currently a student working 40 hours a week and still living pay check to pay check. Even before the economy dropped, it was hard to save, but now there isn’t even a choice. From every direction teachers are telling students how the economy is affecting future jobs. With that in mind, all you can do is save what little money you can not knowing how much you’ll have to rely on it later.
I have saved all my life and lost nothing but now I see inflation coming in a big way so I am buying things that have value which will go up in inflation. Gold is not the only thing that keeps its value. We are likely to have super inflation.
I will make no apologies for saving money! Who’s going to help ME if either my husband or I loose our jobs? Who will pay my New York City rent and tax bill? I voted for Mr. Obama but will he personally put diner on my table? I think NOT. So save I will and to hell with what anyone thinks about it.
I saw articles about the possibility of this crash coming way back in late 2006 and started paying back my 18,000 dollars worth of credit and student loan debt. I made major sacrifices and I acted responsibly. I was hoping this market correction would allow me to buy a home at an affordable rate- naturally I was WRONG.
I don’t feel sorry for people who took out multiple loans and I do hope they all loose their homes so that I can finally afford a home. I do not accept that people were hoodwinked- I’ an artist with very low math skills and even I could figure out I could not afford a home at 250,000 with my 60 thousand dollar income. At the very least I knew that I could not trust a banker or a lending company to have my best interests at heart. Realizing that I could not buy along with everyone else made me extremely sad and I gave up on my dream for a few years till I could put together a decent down payment. Now the government is falling all over itself to help these idiots and their irresponsible banks/lenders and putting the country further in debt! I tell you it’s enough to make a tough city girl cry out in frustration. Stop the madness! Homes should not have an average price of half a million dollars when the average income is 60 thousand (I’m sure it’s less) So yes you bet I save. To heck with with all these “experts” and officials- they can’t even figure out what got us out of the first depression! I wonder at this new administration trying to come up with a solution is so little time- why not do the research? Why not wait to see what happens in the next few months? We’re already in the crapper- how bad can it get? Bread lines bad? Fighting for basic like toilet paper bad? Freezing in your apartment bad? How bad? Details!!! Information!! No one is clear which makes me very skeptical. Who’s going to end up with all this government cash? The same folks who got us in the mess- those who know how to game the system. The evidence is clear- government does NOT care about me or my family- they don’t even know I exists so I have to protect myself.
The “proximal” cause of the recession is banks, bad securities, people foolishly cashing out equity, blah blah. Agreed.
The “distal” cause is the “real economy”. Since the dot.com bust, salaries have been stagnant, but inflation (real inflation, which includes healthcare, food, gas, education costs, insurance premiums–not just what the fed calculates for convenience) has been pretty aggressive. Salaries for many people have not kept paced with the fake-Feb measure of inflation much less with the real inflation that actual sucks the value out of your dollar like a vampire.
The economy has been propped up by people spending their equity. Could real estate prices rise forever? If you thought “yes” you took equity out of your home to replace your diminishing buying power, a surrogate for the American Dream, and once you walked that slipperly slope, why not a little bit more for a flat screen TV? It is best to stay away from that shiny Apple (I did), but many didn’t. It is a slippery slope indeed.
Problem is that real estate didn’t go up forever, and shame on everyone who thought it would–homeowners, banks, mortgage brokers, G.B. Bush. What goes up comes must come down—cliche but true! The “mild recovery” since the last recession just masked the underlying illness…and made everyone a lot sicker. There never was a recovery…just a seeminglessly endless pocket (equity) to make up for what was lost.
In science and technology jobs, I see thousands of jobs going overseas every month. This was BEFORE the recession. This has been happening since the dot.com bust. Got a PhD, and patents, and think you are safe? Maybe you are, but many aren’t. Most GR positions aren’t going to Indian Institute of Technology grads with PhDs. But that doesn’t mean execs won’t hesitate to replace you with one with someone vastly less qualified than you and then just say it is all about “skills”.
Sure it is about “skills”–it is “skills per dollar”. And you get what you pay for.
Yes it is about global competition: Americans need to learn how to dumpster dive, grow their own food, recycle everything, pass hand me-downs to each other, use clothes lines, turn the lights off after dark, and live in tiny homes with multiple families. Only then can we have a chance in hell of “competing” with people for whom that is a way of life. And given the higher cost of living here, the third world is way ahead of us in surviving on very little. The salary of the poorest in the U.S. would provide a nice middle class lifestyle in India. Compete with that.
I’ve quit spending altogether. I only buy necessities and don’t eat out anymore. No movies, entertainment, starbucks, etc. I’m saving all the cash I can.
I’m not going on vacation this year and won’t be buying a car for sometime. I’ll just keep the one I have running. I’ve even gone on a diet and quit drinking beer.
It’s amazing how much more money I have now. I do have a good job so this has been like getting a pay raise.
Saving as much as we can, keeping litle in the bank and all in a credit union account. I no longer trust banks and we use only the credit we can pay in full each month. No debts, house and car paid in full.
I have saved my entire life from back when I had a paper route. I have a small 41 year old house and a 10 year old cheap car. I have well over a year’s worth of expenses in checking and CDs. I feel stupid. Greed is good. The people who ripped off others and got $1mil bonuses last year and the others who bought houses and cars and HDTVs that they couldn’t afford will be let off the hook by the government.
I’m ahead of the house payments by two months. I’m paying extra into the house every month unitl I have four months in advance paid, then I will just keep that far ahead.
I’m also paying off my car this year with my bonus and tax reurn, to give me moree cash flow. Next is credit cards. by the 2010 I should have only a mortgage, one car payment and no credit card debt at all.
We are saving about $10G a year, and on about a 5 year plan to pay off all debt. Hope we can keep our jobs so we can stay on the plan.
Posted By Jon, Columbus Ohio: February 12, 2009 3:51 pm
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Why not save a little less and get the debts paid off in 3 years? Debt just weighs you down.
We have absolutely buckled down. We have no credit card debt, going to pay cash for a new car and have 6 months of my spouse’s take home in the bank.
We have increased our savings rate by eating out less than once a month versus 5 or 6 times a month in the past. We clip coupons, bring our lunches to work, bring our own beverages to work instead of stopping at a convenience store, turned the thermostat down and haven’t bought new clothes in months.
I buy make-up at Target instead of department stores and don’t get my hair cut as often.
We are putting 20-30% of our take home pay into a savings account and are maxing out both of our 401ks this year.
I carry no debt other than a mortgage and my Daughter’s school debt. I save all I can since social security is already ‘failed’ looking forward to my retirement era. I earned enough this year to owe taxes due to interest payments received. But I may not pay them; there is rumor that the Wranger Act will prevail before April 15th.
I honestly believe people could go out and spend every dime they have and it still wouldn’t be enough to stop the economy from shrinking and people losing their jobs. People were told the same crap back in 2002. “We need to spend our way out of this recession”. Look where that got us. Temporary relief and now we are in an even bigger mess than before.
People artificially stimulated the growth of the economy with money they didn’t have. Now we’ve reached a point were people don’t have the means to keep the bubble full and it’s shrinking fast. The government will try to artificially stimulate it again to blow the bubble back up some more but once the artificial stimulus source runs dry the bubble will start to shrink again and we’ll probably be even worse off than we are now.
I would rather be saving what little I can right now and be somewhat prepared if I do lose my job than pretend that spending every dime I have is going to save an economy that is way to big to sustain itself.
You can find an economist (much like a lawyer) to take any position you want. I though toio much consumer debt and spending was how we got into this mess in the first place.
Wow, was it the sleazy socialist democrats or the war-monger republicans that caused our current crisis? I believe the full share of responsibities lie on both parties. No controls and many of them became rich. Didn’t the economists for the Federal Reserve have indicators…who suppressed the information? I think all our elected leaders should work for free for the next 10 years….think of all the money we would save. They could actually say they represent the people instead of their wallets. Anyway, we the people did this to ourselves!! Personally, my wife and I did not live beyond my means, we’re avid savers and did not spend foolishly. My wife and I are still employed and have sufficient savings to last us two years. Those people that are filing bankrupcty and forclosing on houses are to blame. You were either greedy or stupid. If you didn’t plan for a rainy-day….too bad!
I am saving and spending. I just don’t spend more than I have. I have my emergency fund in place and max out retirement and still have money left over to save and I spend it on things I need. Not things I don’t need. My wife bought me a Playstation 3 for Xmas, but I took it back because I am really not into that. Turned around and bought a GPS device for $200.00 less.
I am saving one certain things, like eating out a lot less, and doing my own ironing as opposed to dropping 40 dollars a week at the dry cleaners, etc. This adds up for maybe 400 dollars saved per month.
I have actually spent more recently then in the better days, you can get great deals on electronics and things you have always wanted/needed now. So for those of us who are lucky to keep our jobs, times are manageable.
If no one spends at all this crisis will persists. People just need to find the right balance based on their situation.
Our family is fairly well off relatively speaking. However, we are preparing for an extended recession [we call it a depression] and we have gone into minimum spend mode. Our culture has been changed from “yankee can do” to “can I borrow some $$ to amuse myself”. We save money, minimize taxes, and invest in companies. Better to own than spend.
Let us not forget that the reason behind the bail out is rising foreclosures. Some of you/us bought houses way beyond your means(what you make). And since you cant make the payments, there is someone somewhere loosing his/her job. The bankers need to fess up to the mess they helped perpetuate but SO DO YOU!!!!
The basics of our current issue.
Borrowed money was way too easy to access and cost little to nothing (interest) as a result we had 3+ years of bidding wars on houses in locations where Annual incomes did not support the prices the homes were being sold for. #1 issue a reality check on the true value of homes which case hundreds of thousands are being left to the banks – that falls on consumers not being financially prudent.
#2 Due to the percieved increases in home values many people took money out of their homes based on this increased value and purchased a 2nd home – fancy cars – boats or motor homes which created an abnormal demand and surge in value for boats – houses – cars and motor homes. This resulted in more jobs at said companies to build the goods. Now that percieved value and easy loan money is gone and all those jobs generated by that are gone.
#3 The investment firms who were not sticking to basic finance rules ie balance your risk – were issuing subprime loans as fast as they could print the forms then repackaging them into complex investments and selling them to various investors funds – banks etc. As a result the firms who did not stick to the basics (balance your risks) have tanked gone bye bye and many other firms who bought up the complex investment packages who make up our 401K companies – retirement funds etc have been left holding the bag per say.
#5 Same can be said about the housing development world. People don’t realize that the builder and the developer are usually two different people and the land developer is the one who set the price and the design format long before the builder purchased the rights to build and sell homes. Which case many – many developers who have done cookie cutter urban sprawl projects across our country walked away from planning 100% focused on max profit vs best design for the given area which also falls greatly on the greed, and lack of skill our city planners had for alowing such projects to take place.
It all comes back to one thing cheap easy money being handed out with little regard to true value and capability to pay it back.
The consumers, lenders, investment banks who did not balance their risk and the cookie cutter tract home developers all have a huge role in putting us in our current economic mess.
I’m saving 30.2% of after income tax salary. The next ten years are going to be extremely difficult. I have also planted friut trees, tilled a garden, and purchased 5 chickens. I hope everyone is as prepared as possible. good luck
Of course I’m saving. Once I paid off my credit cards it was like climbing out from under a ton of bricks, and I never want to go back to that. We bought a Sienna all cash and got a fantastic deal. We are saving for the kids college, retirement, another car…just wait, you don’t need it all now, and you don’t need to pay the interest.
Laid off after 26 years with BellSouth/AT&T. Paid off house and vacation home mortgages. Carry ZERO debt now. Partner is working and pays all the bills. We still have our savings in the event things go further South!
I can’t believe the gall of the title of this article. Had people been saving MORE when times were good, it would probably be much less punishing than it is right now.
The economy kept creeping out on the limb of consumer debt, and eventually that limb cracked. The only way out for our economy is for people TO be saving – and to imply that by doing so they’re actually hurting it is just nonsense.
Bottom line – saving is never a bad idea. Just don’t forget that when times are good again.
I have always spent less than I earn. Started when I was a kid (thanks, Mom and Dad). I am saving a lot more now than I was two years ago and have no plans to change that. I think economic turbulence will be around for a long time, and the amount of savings I thought was adequate a year ago is now double. I have cut back on restaurants, vacations, home improvements, and gifts. I am shopping more at outlet grocery stores.
America as we know it is gone! Be ready because we will no longer be the richest country. We are going to be a country of rich and poor! No more jobs, no manufacturing – just entertainment and tourism!
For those that say we shouldn’t save you must not have to worry about the price of gas, food, healthcare, education, clothes and necessities. Who can afford to save when people have to live pay check to pay check because of greed in our corporate and financial world!
If the taxpayers keep bailing out banks and the auto industry the entire country is going to go broke and be purchased by foreign countries as they laugh all the way to the bank!
Government awarding people for having too many children, illegal immigrants, and just plain laziness by giving money for welfare and healthcare is going to be the death of the nation!
Taxpayers – quit paying taxes and see what happens to the country! Then what would government do because they can’t use our earned money to bail out everyone else who is lazy and greedy!
The American economy will ultimately be stronger if the American people put their energy and efforts into paying down debt and living more within their means. The consumer economy was a terrible experiment which resulted in two career paths: flipping burgers & folding clothes or suing people for a living.
I am a 23 year old college graduate with a BA in Political Science. I have been unable to find full time employment since graduating in May. This downturn has ruined my ability to get a job. I am too educated for a company to take a chance on me cleaning floors and too inexperienced for a company to offer basic job training. I guess the college degree was worth less than the paper printed on it. However; I digress.
My hope is that the economy in the long term will be stronger when Americans no longer merely consume but begin to produce goods domestically, get paid living wages, and create jobs that aren’t merely low paying service industry jobs.
I am guilty as charged!
I have reverted to utilizing common sense as opposed to listening to the omnipotent press and media, none of whom, along with our politicians, have a freaking clue it seems. I live beneath my means and yet do not miss out on anything I really need or want. I am in the process of liquidating all of my affinity program awards, as they will soon be useless and or recalled/canceled. And finally, I have opened a savings account in concert with my checking account so that in addition to my monthly 401K and my money market contributions, I am able to stash just a little more every time my cash flow drifts to the positive.
My mid to long term view is that 1) the market is NOT going to bouce back, 2) other investments are yet to fail- and they will and 3) cash is now and will be evermore so – KING.
It’s really simple. No individual, company, cr country can continually spend more than it can repay and no entity can either obtain nor grant credit without assured collateral in the form of assets or wherewithal to repay as agreed. The USA has missed on each count for the last 30 years and it will probably be that long before we dig ourseleves out of this mess – shorter and even more unpleasant if we capitulate and go 100% socialist as we are heading. Save your money.
gee thanks democrats/congress/3 dumb republicans. An extra $13 a week for a total of $400, and $800,000,000,000 for waste. A blind mouse could manage money better then the government, yet we trust them spending our money we have not even given to them yet. Sounds familiar, have we seen this before?
I am saving more. My saving is not a reaction to the current market, i was without a job for 3-4 months and blew my savings. I am trying to save 10k or so to get my savings back in order, but i also have a massive debt (in the form of student loans and a credit card), so i will be paying that down as well.
I count myself lucky, i have a 40% salary increase to help me boost my savings and pay down my debt. This current economy does have me thinking about getting a cheaper car (or keeping what i have), instead of my plan to buy a 2010 Camaro once i hit my savings and debt ratio targets.
I’m an IT guy, now 46… I had a reality check back after Y2K (remember that after the .com bust!) I didn’t lose my job but I was on the list and my building access badge was deactivated (in error I was told). I then watched 100’s of my fellow friends/workers get the boot. So I got serious about saving and living smarter at that point. I now have a year or more in the bank with CD’s. I did eventually lose my job with that company (they went bankrupt) but a customer of ours picked me up within a week. Anyway I have always lived within my means that was the way I was raised. Yes I have a kind of expensive home but I only have 1 mortgage and I put down 20% when I bought it. I’ve always had a roommate as well to help pay the bills. One last thing that I did that was smart and I have made plenty of mistakes. While I may have moved on this one a little early on it but clearly thankful now that I did. I moved 95% of my 401K money into a cash account back in May 07′. The 5% that I didn’t move has lost on average about 50% of its value. So I’m feeling pretty good compared to what some of the other folks have done including my own family members who didn’t listen to me. Oh one last thing yeah, I pay big bucks for my share of the taxes and had never had any public assistance from anyone nor have I ever reneged on my personal/financial obligations. It’s called personal responsibility and yes I have always considered myself a member of the Democrat party.
Something occurred to me while reading all these comments.
Saving is not killing the economy. Saving is the most visible component of the healing process.
This “hunkering down” is part of that process. You don’t go try to win the Tour de France after being hit by a bus. As much as financial exec’s don’t want to admit it, they’ve been doing the economic equivalent of doping. And now the whole body is paying the price.
Now it’s time to heal. I find it heartening that so many people have posted here that they are saving as much as they possibly can. Sounds like medicine to me.
Get this: I am supposedly a “top performer” at my company: patent awards, stock options (when they still gave them to non-executives), and unlike many of my peers, regular raises.
But I am on a sinking ship. It is not a matter of IF I will get laid off, it is a matter of WHEN. Most U.S. workers in my company will lose their jobs in the next couple of years, recession or no recession. I am well educated, well respected, highly skilled in more than one area, considered creative and innovative—but my job will be shed. (A friend with over 50 patents to his name got laid off last week). I just want to survive long enough to get past this recession so that I can a job someplace else later.
It doesn’t matter that almost no one in India or China does what I can do; shoot first, hire a “Global Resource” later for pennies. The chasm-size gap between what I do and who they hired to replace me won’t be noticed for months until after I am gone and it will be too late for me and my family. Maybe they will hire me back as a lower paying contractor; maybe not.
The middleclass of which I am a member is being eroded. This is the true cause of the recession; the equity in housing just masked it.
Even with my regular raises (many of my peers get nothing), I am finding it hard to stay ahead. Costs go up–food, health care, cable bills, everything!!!!!; but my salary increases so punily by comparison. And I am among the blessed.
Indeed I am saving. But I’ve always been a disciplined saver, never buying anything on credit I couldn’t pay back within a month. I have never taken a penny out of my home for equity; always max out my 401(k). I save for what I want, then buy it. Now really, I can’t buy now; I need to be prepared for what is coming; I am extremely worried.
For me, this recession is just bad timing as I see the spector of “free trade” threatening to send my job to some nice chap in India, nevermind that he isn’t even qualified to do what I do. In the U.S., we have no protections for jobs, my overseas friends. And decisions are often made very high up; I see meat being cut away just as often as fat. And there is blood everywhere.
My wife and I have always done the right things financially and educationally but it doesn’t matter. I am already “overeducated”, so more “training” is a big fat joke. Bush Jr’s community college mantra always made me ill. Obviously, I got the wrong kind of doctorate—science and engineering in this country are BAD career moves. Next time I’ll try medicine. Oh crap, No Re dos!
Instead, I will save, and keep my head low. Saving is not hurting the economy; our “global” companies are…and as long as the execs get their pound of flesh, isn’t that all that really matters?
Saving might be a little rough on the economy now, but our economy will be so much stronger in the long run, if we don’t push for people to spend. We got into this mess because people were spending more than they had. The market is just correcting itself, and will be stronger in the long run. I am saving a lot more now than I was, in savings, 401K, stock purchases and money market funds. I am trying to create a nest egg, or safety net. No one can see the future, but it is my job to be prepaired.
The fatcats offshore jobs, stall wages over a period of decades to line their own pockets, and generally destroy the middle class, and then gripe that no one is spending. Well, DUH. The first reaction to the downturn was for companies to slash jobs. Bad idea, and now it’s turned into an unemployment tsunami as everyone follows suit like the lemmings they truly are. Hey corporate America:
PEOPLE OUT OF WORK CAN’T SPEND MONEY
I was taught to save early on and my parents stressed in heavily when I got out of college. Paid off my school debt in 2 years by living at home. My only debt is my mortgage on the house. I save 5% of my gross income in a 401K, and about 10% of my net income in stocks, Roth IRA, and CDs. I have a 6 month rainy day fund. My job is fairly secure so except for cutting out my bad habit of eating lunch out, I’m pretty much doing what I’ve always done. I will take one vacation, maybe two. I will do one or 2 home improvement projects. I did take my tax return and replaced my 7 year old television, but that will probably be my big purchase for the year. Since I’ve lived well within my means all these years, the recession isn’t hurting me too much except that my home value has dropped a lot and I’ve lost a lot of money in investments, but I have 18 years till retirement to recover.
What I fear is the future when the government has to raise fees, raise taxes and cut benefits and services to pay for all this spending. I fear higher prices and higher health care costs in the future that far exceed the growth in my income. All my savings will be for naught and I won’t have a retirement.
It infuriates me to see your headline… “Why Saving is killing the economy”
It should be.. “Why Saving is SAVING the economy”
We live well below our means… and we’re happy with that.
I’m glad that individuals are finally saving their money, and doing something that’s right for them, long term.
We are saving about $10G a year, and on about a 5 year plan to pay off all debt. Hope we can keep our jobs so we can stay on the plan.
no one trust Wall Street anymore as well as banks or politicians…wait till mass amounts of people stop paying their credit cards, no one could stop it
My wife and I have usually been pretty good at saving. We usually “pay ourselves” first before paying all the bills. $1k goes to mutual fund, $1k to 401(k), $2k to cash savings. Then our bills and if anything is leftover then we’ll go out to dinner, movies etc…Regardless, all major purchases are paid in full from savings. If we need to cut the monthly savings from $2k to $1k then we will. Despite what these economists think…save save and save!!! Everybody needs a minimum 6 months worth of bills saved…
spending got us in the problems our economy has today. had we been savers to begin with, we would have the credit issues we have today. all the bad debt. most of the people who are losing their homes pulled tons of money out of those homes’ equity when prices where high and lived high on the hog. my neighbor is one of them!!!
I am a saver. Between my wife and I, we save 30% or more of our income. We have several different short term and long term investments and a couple of different savings plans. It just makes me sick to see these people (and companies) spend way more than they can afford and expect someone else to bail them out like it is not their fault. Don’t make me pay for the stupidity and irresponsibility of others.
Here is the thing. Regardless of what you do with “your” money it’s not really yours to begin with now is it? Where do you get your “money” from? Your job. Wheres does it get it’s money from? Customers buying a service or product. Where did those customers get their money from? You see where I am going with this? Now, most businesses actually operate in the red and use borrowed money, from the banks for operating expenses. One of those operating expenses is payroll. So, in essence, it is a circle. Banks lend bnusinesses money for you to earn and then either spend or put it in the bank. The bank always ends up with the money in the end anyway. Whether you save it or you spend it. It just goes to a bank anyway. Money is a farce. All it is is just another system of control for those who are the “haves” against the “have nots”. There needs to be another Tea Party in this country. The “middle class” needs to revolt.
Now I eat out less and pay attention to sales at the supermarket. I try to drive less to save gas and extend the life of my car and save on maintenance costs. When I do drive, I try to carpool so they can save a few bucks. I am more aware of using electricity, water, gas around the house and I stop myself from splurging on the latest fashion when last year’s fashion is doable. Obama said that we need to be more responsible by living within our means and I think that is the right course for every American.
Yes I am saving and always have been. I have a son who will be graduating from high school in 4 months and will start college in the fall. I cannot rely on the government anymore to fix things (they just do not seem to have a real plan other than just throw more money at the problem and it will somehow go away (but they are great at public speaking engagements)). So I have to protect my family and save for a rainy day even though it is pooring. Also a better topic to talk about is why oil prices are going down to the lowest point in years but the price of gas is going up, why isn’t someone in government or industry attacking that issue to help the little guy?
Yes I am saving all I can. The government scared me to save all I can because of bank failures, home price collapse, and soon the US will default on paying back the stimulus package. Giving away free money will be like throwing a couple of buckets on a raging forest fire. Yes one will feel good they did it but they will still run like the wind when the fire rages on around them. How can they give all that free money out that they don’t have? It is a shame the government does not care about people that live within their means and save money in US banks. What happened to American values?
We are trying to save at least $5000 per month together with my wife. Strategy: my wife took a job on east coast as an RN, the south is not good for nurses esp if you are minority, anyway she has 2jobs and i have one fulltime. I work full time in science/research/engineering field. we are both 33yrs. We should be debt free (credit card) debt in 4months ($25,000). We borrowed to invest overseas. We have got 2 boys staying with lovely relatives abroad, we thank God for that. We are leaving way below our means, and hopefully move out of the country in about 3years. By end of this year my wife will stay home with the kids. We are renting, refused to buy into the housing scam. So we will be fine, and our prayers to those who are out of work. Oh one more thing, we have always had one family car even though we could afford a second, we cut our cable 3 yrs ago. We don’t buy junk, haven’t at all only necessities.
What an outrageous statement? Such a statement reveals a serious lack of understanding or bad intentions. In either case “Shame on You!”
Of course I’m saving. I’m one of the uncounted unemplyment statistics, a consultant whose customers have no money. So I’m still living off of work done last year and every cent we can gets saved. When my work picks up we’ll consider spending.
It feels like I have been saving my whole life. When I got an allowance from my folks, I saved practically every cent for a year so that come Christmas time I had enough to buy a 1909 SVDB Lincoln Head penny, the first ever minted (only 20,000 in existence). I payed nearly all of the $600 it cost myself. And I was only 12 years old at the time. Now I’m saving for a better HD camcorder so I can do more free lance videography work and one day land my dream job as an independent film maker. I guess its a matter of patience more than anything. So few people in this country are willing to wait, save, or truly earn anything anymore.
I got a kick out of Marco from Europe noting that Americans each want “two boots”.
Someone please make fun of my cultural ignorance and explain what that means. I’m sure I am misunderstanding.
The other interpretations that are coming to mind – that Europeans walk around with one shoe, or that they only have one foot – are just too funny.
Jim in Bloomington MN:
Banks are lending and I work for a one here in MN that gets bad press from the Media (Biased news). My banks is lending at the same pace since 2006, it’s just the people with bad credit keep complaining banks are not lending. The ones who got us into this mess are crying again. If you have good credit and not upside down on your mortgage balance compared to your home’s value, you can lending. The media does a great job of saying we are not lending..BS!. I see it first hand and we are lending! If you have high debt to income ratio, why would be lend, if we see a future risk of default in the near future.
I’m saving more. I’m eating out less, going to bars less, putting off buying new things for the house, driving less, i cut cable, i cut netflix and don’t plan on starting these things anytime soon.
I think it will be funny to read these comments in 1, 2 or 5 years from now. By then the economy will be back (Hopefully) and these idiots that over spent will be out there doing it again. Its just like hybrids were all the rage when gas was $4.50 a gallon, now people are buying trucks already. We Americans are way to short sighted and have horrible memories.
I’ve been saving for years. There comes a point in your life that you don’t need to drive a shinny new car or have all the latest gagets. I find it more rewarding knowing I have no debt and money in the bank.
We are saving but just for a down payment.
I have a six figure salary and my wife a decent one.
We have no kids, travel overseas at least 4/5 times a year, eat out every week, buy clothes and live in a cool neighborhood downtown manhattan. Still manage to put 5% (+ER Match) in 401k and saved over $30k in 2008.
Savings is good, but it has to be aimed. ie: saving for a down payment, kids education , 6/12 months of living expenses, etc.
You can’t just save for the sake of saving, just doesn’t make any sense. People should enjoy their lives.
Having said that, I never had credit card debt and never will, because spending is ok, within our means though.
Yes I am spending less than previous years. I have not used a credit card since last summer. I have also increased my savings in my ING account, this keeps it out of sight, no debit card. I go to the groceries twice per month instead of whenever the urge hits me, I cut coupons and look in the circular before I go to the supermarket. Last year I only lost 0.91% in my 457K account, but because I have doubts about the stock market I have decreased my contribution and am saving that amount.
Real savings is what fuels capital investment, not credit creation and money created out of thin air. Our problems are a byproduct of fractional reserve banking and excess credit creation.
Yes I have been saving more, but I’ve always saved and held a tight reign on consumption. But more are doing it now because the future we’re going to have to live with…stimulus and bailouts forcing the US into bankruptcy, seems pretty much in the works now.
blaming consumers for not spending is ridiculous, we haven’t saved in this country for years and to suggest that saving now is in some way responsible for our economic condition ignores the fact that for several decades now we’ve had a phony economy built upon a faulty and buckling foundation.
Unless we allow the market to fix itself we’ll never have true properity again, we’ll founder for a decade without making any progress.
Save people…save!!!!
I JUST LOVE THE GOVERMENT… LETS JUST KEEP ENCOURAGING THE POPULACE TO SPEND LIKE DRUNK SAILORS. THIS IS THE REASON WE ARE IN THE BIND WERE IN. UNMITIGATED BORROWING AND SPENDING. IF WE WANT THE WORLD TO BUY INTO OUR CRISIS WE HAVE TO START SHOWING SOME FINANCIAL DISCIPLINE NOT JUST BUYING MORE JUNK TO PROP UP THE ECONOMY. YOU ARE NOT GOING TO SHOP YOUR WAY OUT OF THIS ONE. TIME FOR WASHINGTON TO GET A CLUE!!!
Yes, I’m a saver. But I’m troubled. Riddle me this: IF the banks should have plenty to lend for all the savings going on. So… what ARE they doing with the money I have on account with them? And will it exist when I need it?
We are great savers, but we always have been. We have at least 12 months’ of living expenses in the bank, plus other investments for college and retirement. We have NO debt. But we have always lived like this, so there’s no change. I’m upset about all the folks who spent like there was no tomorrow and got us into this mess. Also I’m upset about how the government spends. If more people lived like we have, this would not be a problem.
With all our jobs going to other countries, I am willing to travel to these countries to take the jobs there! American jobs in foreign countries being staffed by American workers..sounds like a new concept to me. Buying American products will not save U.S jobs. We need to give these companies greater tax incentives to stay here. We also need our students/children to start majoring more in math, sciences and foreign languages (other than Spanish)! We borrow all our money from foreign countries (Stimulus packages)..what happens when these country’s appetite for our high debts comes to a hault?
I typically save 15% – 20% of my pretax income each month, and have done so for some years. Fortunately, I was taught as a child to pay myself first.
Once I pay my retirement account, mortgage, car and living expenses I enjoy what’s left over as I please.
Freedom from money worries (not completely achievable in this economy) is wonderful, and easy to achieve if you want it.
Our economy has been relying too much on consumer spending (consumption) rather than production, for too long now. That’s one reason Wal-Mart is the nation’s largest private sector employer. A healthy economy means you make things here and sell them to people in other countries.
In order to “save money” and “be competitive”, we’ve been shipping jobs out of the country for years, and importing low-wage workers where the jobs can’t be shipped out. It was only a matter of time before there weren’t enough customers with enough actual money (as opposed to credit) to support spending for anything other than necessities sold at the lowest cost in barebones retail outlets.
If we really can’t manufacture anything here at a competitive cost, then we should have let the population of this country dwindle down accordingly. There would be fewer jobs, but fewer people and fewer demands for social services, healthcare, transportation and other taxpayer-funded services. Instead, we’ve been adding to our population like crazy — mostly with unskilled “laborers” — and bragging about how we have such a young workforce compared to the other developed countries. Looks like they got it right and we got it dead wrong.
Saving more? Yep. I live within my means, got a smaller house than I want, drive a cheaper car than I want, wear older clothes than I’d like, have a TV that is (gasp) 3 years old though I want a bigger one. Will I buy anything bigger, better, newer? No chance. I’m 36, have a decent income, get taxed heavily and don’t see why I have to bail out companies that made bad decisions. Banks made bad gambles. Let them fail. US auto makers have antiquated business models. Let them innovate or fail. Obama will not make me spend more. The only thing I’m buying in this economy is equities. Here’s hoping they perform again some day. For now…I say let troubled banks fail so I can stop hearing about tossing a TARP over things to keep them alive.
Maybe we are moving from being a nation of debtors to a nation of savers. That sounds encouraging. It’s called taking responsibility and living within your means. Maybe the banks will stop flushing money down the toilet with high-risk loans.
My wife and I bank a salary. We use CD’s and savings accounts and haven’t seen our savings/retirement impacted one bit.
When people were out buying boats, cars and homes we were paying off our car loans and student loans.
This nonsense that the economy is suffering because of our savings is bunk! This is the Keynesian “Paradox of Thrift” arguement. We’ve been in a heightened state of consumption for the past decade. Nobody was complaining when average savings rates of individuals dropped from 10-12% to negative! in 2005!
The banks, government and investors all banked on the fact that individuals would continue to push themselves into massive debt. This has ended, the consumer can’t do it anymore. This is human action at it’s finest. Keep saving people! That real growth! Capital savings and debt reduction is the best thing people can do right now.
My rule: have 6-12 months of bills saved up at any one time. That is security at it’s best.
I am saving. Something that I don’t understand though is if everyone is saving why don’t banks have funds to lend? The more deposits that they have the more that they are able to lend out. That is the core reason they pay an interest rate.
Yes I am saving more, trying to brace my family for what crap is coming down the road 3 years from now. Also seriously thinking about getting out of the dollar and into a foreign currency before the green back is worthless.
I must say that its funny to read your comments. The thing is that you have done it yourself!!! Americans can do only 1 thing and that is consume, consume, consume! Americans are living in a dream. They need a huge house, 4 cars, 2 boots, designer cloths, eat out 4 times a week etc. etc. etc. Your economy depends for 70/75% on consumer spending. That’s sick. America is running on empty and you don’t even know it. I wish you people good luck and truly hope that you can change your life style.
Yes I try to save as I always have done but it hurts to see the government spending trillions like it’s chump change. I wish our government would save a bit more. It’s like those of us who try to do what’s right get taken advantage of.
I’m slashing expenses & savings like crazy, not over concern for my job, but the impending tax wallop down the road. Can we please find a way to stick this problem on the real people that caused it, the idiots who over paid for houses.
Its a joke. The only thing a sane person would do is to save everything you can. The days of easy living are over and its time to return to traditional values and to God. Its going to be a rough decade, but if we learned from our parent’s Depression stories, we should be OK. Going out and buying on credit is the equivalent of economic suicide. Don’t fall into the trap to buy now because prices are cheap (compared to what?). Price of houses and everything will continue to fall for the foreseeable future.
We just found out our tax refund will be $5000+ this year. Instead of taking a once in a lifetime trip visiting relatives in Egypt we will put all of it into savings. The trip will have to wait until 2010 because the job outlook is too uncertain to spend $4500 for 3 tickets to the Middle East.
I’ve always been a good saver, but even more so now. It used to be that if I had a few hundred bucks left at the end of the month even after all my retirement savings goals were met, it meant we got to buy stuff and go places.
Today? A few hundred extra dollars at the end of the month instead means another week or two of scraping by if I get laid off.
I’m the type of person the government desperately wants to see spending. But until I feel my job is secure or until my wife finds a job as “insurance” for our finances… forget it. I’ll continue to be part of the problem.
The U.S. economy is dealing with a terrified consumer not unlike the consumers of the Great Depression. The current recession has scared the consumer to a point that even if all the jobs were returned tomorrow savings and paying off debt would continue and even accelerate. Create a new job and the consumer will pay off debt, increase savings, and begin to live within their means. No massive spending this time around. They are scared just like the Great Depression generation.
To further leverage my point, look to the gas pricing and previous stimulus bill. Did the consumer spending habits return? Rhetorical question but points out that the new consumer priorities appear to be moving quickly towards debt reduction and then savings.
The current recession is producing what I call “Fearful Children/Grandchildren of the Great Depression” with long memories and a new emphasis, debt reduction and savings. The U.S. economy needs to adjust to this new direction quickly and embrace savings.
I am more confident that this time a real change in the consumer has happened and any change back to spending wildly may take more then one generation if ever.
The reasons stated above I am also not very confident that any stimulus or other programs to get consumers to spend will have little or no affect on the economy. The economy will need to reinvent itself to the new reality.
this year I’m putting in just 10% of my biweekly oaycheck pretax dollars into my 401K and saving 10% post tax dollars. The Fed doesn’t know what it’s doing – it punishes savers with low interest while give poorly run banks billions of our dollars. Living within one’s means, managing one’s debt correctly ($35,000 for a car? that’s why I live in NYC so I don’t need a car- talk about saving money and not sitting in traffic), prudent spending and saving. The average American knows we’re getting the crumbs – and we’re not interested in playing. Don’t spend – save.
$10+ trillion and growing national debt. Hardly a good example to set for the public. Wouldn’t that be like me having $500,000 on a credit card? Insane. Yes, I am saving every penny and buying nothing non-essential. Zero balance on only two credit cards. Zero on home equity line. Got a 2 year “see ya” factor.
I’ve continued to save approx. 50% of my income same as always. The difference is that now I put a larger amount into cash savings due to increased fear of job loss.
Let it be known that we will collapse the economy on top of ourselves before giving into the New World Order and serfdom. The Middle Class is the New Revolutionary Class! Buy Nothing!
If you want people to start spending, all you have to do is get corporate America to redirect some of what they spend on bonuses and dividende back to payrolls. Real median wages in the US have been in decline for a decade, and it was always a matter of time before that folly caught up with us.
Historically, well-run companies have generated 6-8% annualized ROI. The 12%+ annual profit levels they’ve been skimming to appease stockholder greed is one of the major causes of the decline in wages, disposable income, standard of living, and employment.
It may seem counter-intuitive to say that we should pay people more to save the economy, but Henry Ford understood it, and so can you, if you try.
I have been saving the maximum allowable amount in my 401k for 3 years now (currently $16,500 per year). With my company match, that comes out to 29% of my salary (100% stock mutual funds).
With the stock prices down, I’m scooping up lots of shares at about half price.
When the market recovers in few years and stock prices rise again, I will reap the benefit of buying all these shares on sale.
The longer we are in recession, the cheaper stocks will be. As long as I keep my job, the recession will allow me to fund my retirement much more effectively than if we had not gone into recession.
Many people focus on their 401k balance rather the number of shares they are accumulating. The value of your retirement account is only relevant if you are close to retirement age.
The number of shares you are buying with each contribution is far more important as it relates to accumulating wealth.
The recession has provided a good lesson, however. I’m not going to show up at retirement’s door with too much allocated in stocks.
About 10 years before I plan to retire, I will re-allocate into a more conservative bond / stock mix.
My plan is still to show up in retirement with about 2 million dollars saved. The choices I make now, by saving 29% of my income will directly relate to financial freedom down the road.
My wife of 33 years and I have been savers since we tied the knot. Nothing changes in this economy for us, despite my pending forced retirement. We’ve always lived well within our means, raised three kids (now grown), paid off all our debt including the mortgage. And our reward for our self-control, self-denial, and responsible lifestyle? We get to pay to bail out those who have been irresponsible, self-indulgent, and have lived way beyond their means. What a deal!
I think it’s funny how they place the pressure on taxpayers to spend money they do not have (or are at risk of losing)to sustain the economy, to bear the burden of paying for Wall Street and banks, and to accept massive layoffs, all the while wall street CEO’s received these massive bonuses and “awards” (from taxpayer money) and they are not expected to return a dime. I’m going to keep on saving my money. Let the government do its job for once in its life.
Am I saving? You’ve got to be kidding! Everything from my cable bill to my graduate school tuition is going up at breakneck speed. I’ll be lucky to graduate without a student loan hanging over my head at age 55. You want me to spend, reduce my credit card debt and I’ll be happy to!!
People, you need to get with the A team on this! It is exactly this nonsensical economic advice that Obama is getting from his so-called experts! Everyone knows that we will start to come out of this recession only after folks finally have enough savings to be safe from jobs loss. Save your money however you choose. Pay down your debt. But beware of the coming price increases…. they’re coming. You need to be prepared. Too much money is being thrown around willy-nilly… let the banks fail, take the hard economic hit, and we’ll get back on track faster.
I feel our financial system has caused this problem by lending money to anyone – whether they could pay it off or not. I listen to the radio stating we are in a recession because we aren’t spending; we are actually in a recession because we were too busy spending money that wasn’t ours. What made people think that wouldn’t catch up with them? Let’s change how our economy works, save and spend on only items we can afford and the our financial system will adjust to that. And, yes, my husband and I are saving and only buying items that we absolutely need with only an occassional splurge ($50 or less).
Save what. I had three dollars in quarters left when I got paid today. On 400.00 a week what is there to save. No buying clothes, shoes, I don’t even buy the newspaper. I pay car insurance, rent, utilities, food and then I sit for a week with no money at all.
Saving is just a far off dream.
I have not changed my spending habits, yet I’ve always been responsible and repaid my entire school loan not much more than half a year after graduation. I’ve been working for the past 10 years now and have always believed in saving money and living within or even less than one’s means (putting money into high yield saving accounts, high yield CD’s, traditional IRA). I believe in repaying one’s entire due balance (to credit cards) in time so as not to give credit cards opportunity to make a penny on the interest. Maintaining one’s good credit is important.
I used to be able to save $150 every pay day (twice a month) but with the current cost of everything, I can’t save. I try but end up taking the money out of savings. The price of electricity, heating oil, food, gas, everything is just so high. I make a good salary and even got a nice promotion but it’s still only allowing me to just make my bills with nothing left.
I’ve been saving heavily for the past 13 years – ever since I got my first job. All American should because at any time our jobs could be outsourced. If companies and our government want me to spend they will have to scrap those anti-American-job trade agreements. So save and if you do buy something, buy something that you know for sure is American-made.
I have an excellent job in the aerospace industry. I am still worried about job security. I am saving every dime I can and avoiding any outside epenses wherever possible.
I will not change that behavior for at least the next 12 months. NO MATTER what anyone says about the economy, I will not change until I see evidence in my home town of a turn around. Only then will I accept a recovery is in progress.
Rick IN San Diego
I work for the federal govt, so my job is safe. I always try to “Buy American” but it’s almost impossible nowadays. I did buy a Chevy pickup last month and a couple of Polaris ATVs for Christmas – figured these big ticket purchases will help the USA’s manufacturing sector.
I was going to buy some new stainless appliances and granite counter tops but won’t since the house has lost significant value.
I will no longer buy things like concert tickets that are overpriced.
Our house is paid off, no car payments, kids are out of college and we have about 400K saved for retirement. I have a six figure income for this year with a stable job future. But I’m still saving as much as possible. No confidence in the federal or state government. At least I can see and respond to tax dollars spent at the local level.
The bankers and employers have made this an ‘every man for himself’ environment. That has put everbody on notice that nothing you have is safe. What are people supposed to do other than save and try to prepare for the worse? No one, make that NO ONE, is watching out for the working man and family. Big financial institutions get all the help. Big business sends all the jobs overseas. Healthcare is the reason we take low paying jobs and stay in them. Energy companies are keeping the price of gas and thereby goods artificially inflated. Between the financial institutions and big business the working family does not have a chance. You bet I save. Every penny I can put away.
Saving is NOT killing the economy – the economy has been wounded by overindebtness, and all what the current crisis is doing is revealing the wound. There is too much debt out there, and some creditors have to take losses. The political game in Washington now is which creditors have to take them, or if the losses can be burdened onto the taxpayers.
Ditto as Laura in Philly.
Trying to save more? – no, not right now, but that’s coming again. We still maintain enough for all company plan matches, IRA funding …
Trying to spend less? – no, not really that either as we’ve always tried to manage a balanced budget – Congress take note.
We stay within our means while not wanting for anything major. Repair where it makes sense. Do the work ourselves whenever possible. No revolving credit card or store debt, no car payment by driving ‘93 and ‘96 (non-truck, non-SUV) vehicles well rated by Consumer Reports purchased used (according to budget). Auctions, yard sales, discount retail shopping, and coupons stretch dollars (as does simply waiting a little longer).
Long term mortgage debt reduction is what we’re all about. With reasonable asset management and a little economic correction, completely debt free in three years.
Every one of my friends who were also laid off back during the dot.com disaster are savers now and have been since. They also own or live in a rental they can afford on very minimal income be it savings – unemployment or a spouses income etc. I also know that many of them all share the same thought that at some point in their life they will be in a position to either be laid off or quit their high pressure job move or remain in their current location and do a much lower paying/demanding job so they can enjoy their life. 7 yrs ago non of them would have told you this or been even remotely close to any idea like this with their $600 a month leased BMW’s and $2500 a month fancy loft rental.
I think that maybe the rest of the US is just finally catching up with what the Dot.com folks learned back in 2000.
It is hard to save in US due to the high tax rates. Tax is only going to be higher in the future which will lower saving’s rate.
Please stop writing stupid articles that misinform people.
Saving money does 2 important things:
(1) Improve capital ratios at banks so they are less likely to fail when their loan portfolio plummets.
(2) Protect individuals against economic shocks (like loss of their job) and reduces the probability of foreclosure on their home.
These are the 2 main things we need to stabilize our economy. Our government is too stupid to figure it out, so individuals have to be disciplined enough to do it for them.
My wife and I have only cut back on dining out. However, we have increased donations to needy organizations. We both have delayed retiring at least another year, perhaps two years.
Grandma taught us to spend half and save half. Spending puts my neighbors to work. Saving is essential for the inevitable rainy day.
Grandma was wise. The Government (starting with the Pres) is stupid. And it appears from this blog that us common folk know and the Government does not.
But what really worries me is why do some believe the nonsense the Government deals out – starting with last year’s Bail Out!
Hmmm, silly me. The Government are looking out for their own – starting with the Fed.
Of course we are saving more! We are scared of losing our jobs, homes and retirements. We were taught to save and buy what we could afford. Spending ourselves into foreclosures and bankruptsy is what got the economy in this mess.
This article is ridiculous. The reason we are in this mess is too much spending. If we had more savings we could be drawing on it now making it only a recession – not the depression it will become. Our bloated retail sector needs to contract and we need to get back to hard work, production, and savings. More painful in the short term but, much better for the long run.
I have been spending more money at current recession. I purchased a new truck, went on 2 vacations, had home improvement, and donated $2000 to charities with in last 6 months. I consider I am very lucky since my job currently is secured. Also, I have 12 month expenses in a saving account. I believe spend is the only way to break the current downturn cycle and restore confidence in short term. US saving rate has gone up 400% with in last 6 month. If we stop spending, then more of people will unemployed. Eventually, I will be the one on the cutting block.
Lets think about this critically! If everyone in the economy is saving on average, 3-3.5% of their income, and we’re supposed to have enough saved to cover 6 months of expenses (per the economists), how many YEARS will it take for us all to get there (since the average person has been living beyond their means for years)?
I agree with everyone else. This is a good start but it is only a start. Everyone should learn to save more and live within their means and I do not feel sorry for businesses that fail because their business model is based upon gross overspending of irresponsible consumers.
I am saving NOT spending. A stimuli package will change my saving behavior until I’m feeling safer about the economy. A better program for people like me is to help me speed my debt down payments drastically so that I will one day start spending again == let me take my 401 K money out, offer lower interest fixed loans, etc… that will get me to feel ok about spending some day………
Throwing me money to spend will not change my mindset… and I m not alone in this..
Trying, but just about everytime we get a little saved something breaks or needs repaired. But we do contribute the maximum to our retirements funds.
It is hard.
We’ve made paying off debt a priorty and doing well with that. We are also trying to save a little.
I am a saver and have always been. I
always ask myself…”Do I need this
item or do I just want it?” I buy on
needs only and then I shop best price.
I am still working at 69 years and will
retire soon….all is paid for. My house is modest and I drive an older car in good shape.I am a happy person
and support my church .
I think whomever thinks that ‘saving is killing the economy’ is really uneducated.
Greed has ruined this economy… government greed and corporate greed, and even consumer greed to some extent!
Buying stuff on CREDIT is not good business. I think it is very sad that one has to buy a TV or a washer and dryer on credit because they cannot afford it at the specific time they need it. While both items tend to fall under ‘luxury items’, still they are both a necessity in today’s day in age.
Regardless, saving money is NOT killing the economy. It is not helping either, but it is going to take a lot more than people spending all their money to save this economy. And let’s not forget that a huge percentage of these savers and spenders are mostly living paycheck to paycheck! So of course you better save!
This is unreal now we are going to be picked on for saving?? America is going to become just a memory. We’ve had a next to 0% savings rate its vital that its closer to 12-15%. If you have money and your choice is a new shiny item or savings..People PLEASE save it. Deflation is a serious reality and while the Government is worried about it we should be embracing the chance to buy that same shiny item at a distressed price in the future. We have too much debt now its high time that it got reduced.
Remember America the Government ( or lack of) is going to pass the stimulus and the bailout, eventually we will have to pay for it. Nancy Pelosi wants to steal, yes steal, money from people who try to save we can not allow this to happen.
As for our new President,I did not vote for the man, where is the change? Its the same old.. No changes, no freshness, no new ideas .. Severely lacking in judgement as proven by his tax cheating appointees. That said, McCain would have not been any better no one man is going to solve this. Trouble is we are going to apply a quick fix which in the long wrong is going to be worse than the problems.
I’m of retirement age and still working and on SS. I have no choice. My wife and I are debt free and proud of this accomplishment. We are putting everything possible into savings, as we did with the recent stimulus tax refund check last year.
I was laid off from a permanent position due to outsourcing overseas, and my contract position is being phased out in mid-year for the same reason. Give Big Business stimulus loans & grants and require jobs to remain here, as a requirement.
Will the argument that American savers are unpatriotic be used by the gov’t to seize bank deposits? At the very least, I would not be surprised if the savers are blamed for huge tax increases levied on non-elite Americans. Again, it’s the corrupt offsetting of punitive costs to the have-nots that permit the media to indulge in this insulting propaganda.
We have always lived within our means. We only have a mortgage payment. Our cars, remodels, etc. are always paid with cash. We have our 8 month safety net in savings. We max out our 401k/IRA’s each year and put money aside for our kids education.
However, with the money left over, I never cared how we spent it. Since we were putting aside the important things first, the rest was free to “squander”. That being said, I am fearful that the leadership in Washington does not have a clue what to do to fix the mess the irresponsible people in the country created.
Thus, we cut about $350 in spending a month on unneccessary expenses.(On-star and XM radio on both vehicles, X-box live, premium channels on cable, dry-cleaning, newspaper, about 5 on-line news subscriptions, landline, etc). We still enjoy dining out but now we eat out by dining lower on the food chain.
This $350 is going to the principal on our mortgage so it should be paid off by the time I am 44 (6 years from now).
Hopefully the economy will not take my job but we are at least in a position to weather a long storm.
The population of people that are both in big trouble and play a large role in the current economy issues are probably the same population that are not reading news like this reading posts, posting and debating about the things they should be doing and thinking about.
I’m saving more aggressively too. Cash is king right now. And probably will be for a few more months. Once real estate finally completes it’s long-overdue correction there’ll be cheap properties to make profit on and I’ll need cash for downpayments. As a side benefit, good sized savings also provide much needed security in this job environment.
To be honest, our saving habits haven’t changed. My husband and I have always been diligent in saving, and trying to live within our means. We use his paycheck for all of the bills, mortgage, etc. and my paycheck goes directly to our savings/retirement accounts. If one of us loses our job, we are already in the habit of just spending one paycheck. We are lucky enough to both have jobs rights now and since we don’t have any kids, we only have our own bills at the moment. We feel really lucky to be in this position.
I can not believe that I would read such a misleading title on CNN.
In reality, savings are killing the consumer economy, but not the productive economy.
Credit comes from Savings, period. Without savings, you can’t have credit to further invest in productive businesses. If banks had many productive clients, they would not be dealing with a crisis. Their problem is that their clients are net consumers.
What the article suggests, is that we should go out there and buy more Chinese products. How will this help the economy? We need more productive units, not more shoping malls.
Use it up,
wear it out,
make it due
do without
That’s what made America great in the past: Savings and Productive Businesses.
We have been saving for years and will continue to save even though the Fed has desperately tried to get us to spend savings by dropping interest rates to zero. Get a clue Washington, borrowing and spending beyond our means got us into the situation we are in, along with shipping all the good middle class, living wage, jobs out of this country with the blessing of Congress. The chickens are finally coming home to roost. Tear up these insane one-sided trade agreements, and bring back the jobs. When I have made in america products to buy, then I will spend.
Having a savings balance is not driven by the presence or lack of a recission. Only the amount of savings is affected. I recently got a 30% pay increase (shock). I am now in a position to save a substantial amount each month and still retain some discretionary funds after expenses. We’ve actually been in a purchasing drought and the tendency is to go hog wild with the increase in income. But spending “feels” better with a savings to back it up. We pay in cash and don’t use credit cards. We are saving not for fear of layoffs but for large foreseen expenses down the road. The recession just makes being prudent en vogue.
What government in its right or left mind would tell its people to go into debt. When people can’t pay off the debt, we all get to suffer. I have no desire to live in a welfare nation. I believe in smart choices and self-reliance.
With morons like Bush and Obama running the nation, a Depressionis no surprise.
A better voting system would fix this. Instant Runoff Voting. www dot fairvote dot org.
I wrote in Ron Paul as president. I sleep well at night.
The only way to stimulate the econonmy is to stop government spending. Is 40% of GDP not enough? How much will we need before it communism? We need to lay off teachers, police officers, firemen, politicans, and public workers immediately. We then need to increase the money supply to reflect the fact that the citizens are broke, and all the cash is now in the hands of foreign nations and US corporations.
The only bailout that will work will recapitalize the citizens. Not the banks. Next time you play Monoploy, put a trillion bucks into the bank, and see if the cost of Park Place goes up. It wont. We need more more in circulation, owned by US citizens. But nobody wants that. Instead, recapitalize the banks and corporations, and keep the slaves poor.
My wife and I are fortunate to each make six-figure incomes working for pretty stable companies. But we’re definitely in lock-down mode. We’ve always been good savers, with virtually zero debt, but we’re essentially buying nothing other than food and various necessities. Everything else goes into savings; either safe and easily liquidated money market funds or gold/silver.
Of course i’m saving. I have plenty of funds but i’m in no position to bail out the economy to the benefit of the institutions and individuals that helped ruin it.
I’m saving more because I got my home refi done now and will save $169 a month and that will be spent on extra principal payment or another bill. I refuse to buy another for the entire 2009 and maybe 2010 years because of the gov giving out bailouts! Screw the economy!
What do you mean labor protections? We have enough protections…what the government needs to do is cut taxes. People take that money and put it back into the economy.
No more regulations and protections… the government needs to cut taxes and let us stimulate the economy ourselves.
I have been saving for about 1/2 the recession. The 1st half was busy trying to pay off debt, but when my wife lost her job I moved into saving what I can. Thankfully she has working again.
I’ve always been more of the penny pincher, while my wife has always been one to spend large amounts on basically nothing. Hopefully this recession and period unemployment taught her something others can learn too.
Live well below your means. Why spend the last half of your life paying off the first half?
I’m not saving anymore, I’m generally not spending any less either. It’s RESPONSIBLE personal finance. The current national economics are merely a blib in the long-term. It is simple don’t buy more than you know can reasonably afford and save for the rainy day. Your house is where you live not your biggest investment. Buy and use what you need only, don’t let wants and personal competition influence your spending – save it for the court, golf game, bar, or whatever.
I have to save. The tax man cometh in April. What choice do I have? They need more $ for more bailouts.
When I shop and use my credit card, the store pays a fee to the BANKS. When I don’t pay my credit card bill in full, I pay interest to the BANK. Because of the economic situtation, the interest rate on my credit card was raised by the BANK. I have to pay my income taxes so the government can give money to the BANKS.
What. Is. Going. On?
My wife and I work in health care, and have actually been spending more now than we did last year! I am enjoying the retail deals out there since I have money to spend.
When the market dropped in August, I increased savings about 20% to ‘buy low’. It’s a good time to invest, but it’s a good time to buy too so the money that I have left goes looking for bargains.
The substance of this article is all wrong. The pain we’re seeing now becuase of saving is a NECESSARY pain the country must go through on its way to recovery. Americans MUST live within their means to survive financially in the long run. If that means the current recession is prolonged, then that is just something we’ll have to deal with. I make a good living, and as an accountant/CPA, have very transferable job skills. But we are certianly not making outlandish discretionary purchases, and are saving as hard as we can. We recently changed homes and are sitting on most of the proceeds rather than plowing them into our new house, on which we put 6% down. We are doing both of these things because we are awaiting the coming historic buying opportunity in stocks, when they do finally bottom out. We are saving but not necessarily paying down debt aggressively, because right now – cash is king.
With the current economic state and the substantial job loss from outsourcing manufacturing facilities over the past 15 years, and no insurance for the family, it is important that every penny goes into savings to help pay for medical, job loss,school repayment and food.
It’s not because of the recession – it’s because of the fear of layoffs! If Congress really wants to get the economy stabilized, they should pass some labor protections in addition to stimulus.
It’s almost as if we live in a debt based society! Next we’ll figure out that the income tax we pay simply pays the interest our government debt and that it goes to a private company called the Federal Reserve!
I hope the title of this article shows the public what an upside down economy we have. Stop living responsibly and within your means, that’s not what the government wants!
Yes, I am saving more, but it has nothing to do with the recession. Because I live within my means, I paid off my mortgage in July, 2008, and started using more than 50% of my monthly mortgage payment to put into a true savings account and to maximize my Roth-IRA contributions, as well as add to my Investment portfolio. I do not have a car payment or credit card debt. But I will be spending some money buying a new computer and maybe two new TV’s this year. As is says in the bible of the parable of the fat cows and skinny cows…you SAVE when times are good, and spend when times are lean. And there will always be ‘lean’ times
Yes, my wife and I are aggressively saving and paying down debt. Our goal is to be 100% debt-free by three years from now, and to save a significant amount in the same timeframe. The capitalist mantra, “be good consumers and prop up this overblown and irresponsible financial monstrosity by spending, spending, spending,” just smacks of total desperation to me. I think this downturn is a necessary and permanent adjustment. The sooner we get used to that and adjust our expectations for “the American dream,” the better.
“The government calculates savings by totaling up after-tax income and subtracting spending. The remainder is considered savings by the government even if consumers are using the leftover money for investing or paying down debt instead of saving it in a bank.”
I believe that investing and paying down debt might be taking precedent over “savings” in a bank as mentioned here.
No.
I was saving before the recession, and I still save now. I still love shopping and going out, and I spurge occaisionally. Everything in moderation.
I agree with most posters here. It is not the consumers’ job to pull the economy out of this slump, it is time for the economy to adjust to us. If corporate america wants me to spend more money, pay me more money.
No, we’re not saving. Nor are we spending. We don’t have enough income to do either, since our lives were turned upside down 4 years ago by the greed rampant at the end of the real estate bubble.
No, we didn’t make an unwise house purchase, we were actually being conservative, trying to remain in our nice, inexpensive rental but our landlord sold it out from under us at a very inopportune time (for us, not him).
We’ve since burned through our $70k in savings trying to recover, haven’t been to a restaurant or movie in over 3 years, and now we’re in the middle of a severe recession. We’re clearly not doing our part to stimulate the economy.
The fact that this article was even written is indicative of how ignorant the general populace is of economics. You can’t spend yourself into prosperity. Lack of wise money management (i.e. saving) got us into this “crisis” and spending like fools will not create long term wealth creation. Don’t be like sheep led to the slaughter!
If anything the savers are holding up the economy right now. I’ve had construction guys working on my home the past few weeks because they are charging me 30% less than what they quoted me for the same job two years ago. And since we’ve been saving our money all along we can afford to pay them for the much needed work now even with the uncertain times. One of the contractors said that we are one of two customers he has right now. VS the 10+ he had a year ago.
What a bunch of Keynesian drivel… Saving money is a great thing, and paying off your debts is a great thing. It’s all about time preferences. This saved money will get spent, it’s just that it won’t get spent this second like the government wants.
Thank God people are saving money. Hopefully they are also investing some of that savings into gold and silver; it would be a wise choice.
Austrian economics and the people that study it told us this sort of crash would happen and if you want to know, can help guide us back to a solid prosperity not seen in this country in decades… Listen to people like Peter Schiff if you really want to know what’s going on…
We are doing all we can to pay down debt. Have been at this for 3 years. Have no luxury spending and necessary spending is at a minimum.
Everyone commenting on here has it right. Save! The economy needs to be corrected rather than continued in its current mode of self destruction. I don’t understand why the government wants us to borrow more money that we don’t have for things we don’t need (bigger houses and newer cars) when everyone know that you shouldn’t spend more than you have.
http://www.minyanville.com/articles/CTX-gm-F-bailout-DHI-nahb/index/a/21079
Oh and a follow up to my post below, I do not have any credit card debts or other intallment loans. I only have a car loan where the payment is below $200, which I could easily payoff but I want to support the economy 
On this point I am really confused here:
The Fed wants to give bailout money to the bank because if I get it I will probably just save it. But if I am saving it, won’t I typically put it in a bank??? So why is giving consumers bailout money worse than giving it to the bank?
For that matter, if the economy has to go through this horrible de-leveraging process, why is it worse for me to get some money, spend what I need/want and save the rest, than it is to leverage up the fed, they give money to the bank, then lean on the bank to loan money to people who can’t afford stuff? (–which explains why they are needing loans). Isn’t this more leveraging?
With both my points I see BAD BANKS benefitting and the taxpayers getting screwed. LET FREE MARKETS REIGN, and if money has to be pumped into the system, GIVE IT TO THE PEOPLE to put it to work where it best suits them.
I am in utter disbelief as to how our government is handling this. I have no confidence to spend. I don’t like where we are headed with this at all.
A few more things: Why is it that so many people disagree with what the government is doing but they do it anyway? Why does Pres Obama go to the county with the highest foreclosure rate to pitch his foreclosure relief plan? Isn’t this like selling water to people stranded in a desert? I COULD DO THAT!!!
Did I mention I have no faith in government? Winston Churchill once said to never underestimate America’s will to do the right thing after extinguishing all other possible options. When will this day come?
Have a nice day.
I am spending as fast as I can- albeit on the small balances I have left on my credit cards. As soon as I have paid off the last one (maybe a couple months), I will start buying gold and silver, seeds and water storage. The banks punish you for being “good stewards” of your credit, so I am punishing them back by cheating them out of as much interest as possible. They’ll soon be just another tentacle of the government anyway, much like the IRS (and probably have as much power!), so I’m trying like hell to pay everything off ASAP.
Saving and spending have a similar effect on the economy – if I save a dollar, I put it in a bank and it gets loaned out; if I spend a dollar, the store puts it in the bank and it gets loaned out. The only way to really hurt the economy is to take a dollar out of circulation and put it under your mattress…
That said, I’m better off with money in the bank, so I am definitely saving.
In Jan. 2008 I made the following changes that I still stick too. I take the bus to work now, to avoid paying for gas each week (now buy gas every 2-3 weeks) and paying for a monthly parking contract of $125 in downtown Saint Paul. I also increase my 401K contribution to 23% of my income and doubled my contribution to my savings account, into a credit Union a few states away to $100 per paycheck. I also increased my contribution to the company’s stock purchase plan of another $100 per paycheck. I reduced my grocery bill by 25% by eating more pasta and rice items which sucks. I don’t buy lunch anymore and now pack my boring lunch daily. I rent DVD’s instead of going to the movies. I cut my satellite TV to the base subsciption from the mid level. If I get a raise I will up my contribution of that raise to my 401K. I still buy my Captain Morgan rum from the liquor store, instead of going out to happy hours. You are not going to take my rum!
I’m saving a little bit each month. I’ll eventually “put it to work”, but right now I want to have plenty of cash on hand.
I paid off my mortgage and home equity line in 2008 in anticipation of the economic fallout and am saving the entire mortgage payment each month versus spending it. I have also cut all unnecessary expenditures and have postponed all construction/remodeling activities until I have cash saved to pay for them. I have shifted entirely to living debt free and am happy to have the huge weight of loans off my shoulders in these difficult time. This turned out to be good planning, as all of the part-time work that I used to do on the side dried up completely as of 11-2008.
You bet I am saving!
My company is going under and closing up by the summer.
Until I find another job, everything goes on a diet. Cable, eating out, gifts, etc, etc.
My car is 10 years old, and I thought perhaps with the ‘purchase a new car rebate’ in the stimulus package that I might replace it (since it is a good time to buy a car anyway, and the tax credit would help).
But, no income = no spending.
And a wise and prudent individual who is lucky enough to know that his job is going, going, gone… should be saving every penny.
If ‘business’ wants the American consumer to continue purchasing products they should do some basic math.
Unemployed = no money.
Underemployed = money for necessities.
Gainfully employed = money for necessities and then some, which = more purchases across the entire spectrum.
Since there are no job guarantees, save, save, save.
We are not going to get either A) a bail out, or B) a bonus!
Best of luck to all.
I am definitely spending less and also saving less, thanks to the 10% wage cut vs a job cut.
I’m lining up the ducks to pay off the mortgage by the end of the year. At that time my standard of living needs will drop by 66%.
I have pleaded with my congressional representatives that the spending bill is not tolerable – too much free money being re-distributed, to no avail.
The end result will be to check out as a tax payer just in time for Obama’s tax increases to hit.
So I wish all the Obama supporters luck with the spending bill as I should be able to survive on wages that will be low enough to avoid paying taxes – quite possibly I maybe able to get a refund for not paying taxes – double bonus.
I say if they won’t listen; try doing the same.
I’m definitely saving more and spending less because of the recession. Examples of good things to save: use less oil (mostly imported) by driving less and flying only when there’s no other option, not buying anything imported (especially from China), and the list goes on. If we cut our spending on imports, which we need to do anyway, this will help our economy by keeping the cash onshore. China and OPEC can buy their own products with their money, not ours.
I still live well and spend on essentials: food, clothing, shelter, health, and social. Just buying what I need at good prices. Spending money strategically to save money or make more money.
Once people pay down their debts or get them written off by the bank(robber)s, real spending will start to rise, again. People still love to shop.
We should have been doing this all along, instead of gorging for the last 5 or 10 or 20 years.
I wish everyone well: this too shall pass.
Saving will help the economy – the investments will give banks the funds to be able to lend. Saving won’t support sales immediately however. I save by using libraries and buying from consignment stores. All these bank bailouts are a bad idea and may only hinder our recovery. Let bad actions fall, and those that do right progress. That’s how everything improves instead of going backward.
When you factor in rising inflation on goods\services, energy, taxes, health care, getting nickeled and dimed on everything and then factor in my wages have gone down every year since I graduated college 10 years ago the answer is no. I am not saving jack sh*t. Driving an hour each way to and from work in a technical job for less than 2000 a month takes a lot money away from my accounts. Feels like I am volunteering my time. Better than not having a job? I guess yes. If I hate it? I don’t know.
dog grooming saves 400 a month
Star buckets 30. a wk,
stop going to movies & renting 50 a wk
I have cut over 1500 a month in wasteful spending that nets nothing.
I will not resume my wasteful spending any time soon. Penny saved is a penny earned. The economy is not stable. The government is not giving any one confidence. We are looking at 3-5 yr maybe more of De-leveraging.
We have postponed all unnecessary expenses, we are not changing our car, the old one is paid for and works fine. We are doing more home improvement ourselves (painting and small repairs)
We are paying down our debts.
We go to the restaurant only once a week and eat more at home.
Complete idiotism…
Well said in article below:
http://www.minyanville.com/articles/Paulson-government-Wall-Main-conspiracy/index/a/20866#
1. Conspiracy of Fools
From a New York Times analysis of the components of the proposed economic stimulus package:
“Saving, or paying off debt, might make sense for individual households, but what the economy needs most is for people to spend money, helping stores to sell more, factories to produce more and employers to avoid cutting additional jobs.”
Sorry, but this is completely incorrect. By this logic, all we would really need to do to “fix the economy” is burn down a million houses a month, destroy our cars and throw away our clothes after wearing them (sorry dry cleaning industry!).
No wonder so many people believe in conspiracy theories. When these types of demonstrably false assertions are repeated over and over again it could lead one to believe there really is a coordinated effort between Washington politicians, the Federal Reserve and mainstream news organizations to make people dumber, presumably so they can take their money.
…
YES! I’m saving always have. News flash I and all my other 30 something friends do not have pension funds or expect to have social security. So YES I’m saving money wife and I max out every tax sheltered option we can find, Save about 30% of our take home every month. Both of us work full time and own a home that one income will easily cover if needed. According to the loan agents we can “afford” a home that costs twice as much then again thats only assuming we stop saving our money and both of us have a job.
The 30 somethings not saving 30% of their income will all be begging for spair change in another 40yrs. Long term financial planning is not happening in the US at any level.
What really screwed up the economy? Simple cheap easy to access money and lots and lots of people spending money they didnn’t have. It created a false economy based on IOU’s
The answer is I am spending what I need for “things” that I need with money that I have.
I hope everyone else is doing the same.
The retailer’s will just have to adjust to this reality.
Hopefully the era of spending MORE then we have is over.
Yes, I am saving and paying down debt. I have cut spending in some places, but it isn’t because I really need to, but more as a ‘just in case’.
Saving and paying down debt isn’t killing the economy. It is correcting it. The massive spending, inflated home prices, and easy credit is just coming down. It is just hurting a little more because of the Fed’s guarantee on Fanny and Freddie making it a no-brainer investment. Now we are paying for it (another failed government intervention). Not even 8% unemployment is historically anywhere near the crisis our current administration would like us to believe we are in to justify their spending a trillion dollars on special interest groups that won’t create any real jobs that will produce anything for the private sector. It is a huge scare tactic to scare us into believing more and bigger government is the only answer. This is the exact opposite of what should be happening. We are going to be in this “almost depression” state for a long, long time.
Even before the crisis, my wife and I were saving about 15% of our earning in the bank. Now, we are definitely cutting down on our spending and are putting away about 20% in our savings account. We used to eat out at least twice a week, but now we might go out to eat once a week. We are only buying clothes for our 10 month old son at deep discount. We are hoping to save about 25% of our earning so that we can buy a place sometime this year!
Now I know the economy is being run by morons. There is absolutely no way in that hot place that saving is bad.
This is absolutely the dumbest, most stupid theory and I cannot believe it wasn’t given space here to espouse it.
My wife and I are saving like crazy, because we’re not crazy like these boobs quotes in this article.
Of course we are! You would have to be an idiot in this economy to be spending like there is no tomorrow. Every job is suspect, every industry subject to downsizing, even specific trades can be impacted.
Of course major shifts in spending/saving habits in a short amount of time hurt the economy, but weren’t the economists telling us the past decade that Americans weren’t saving enough? Now we’re supposed to go out and make major purchases when we don’t know what we’re going to be making tomorrow or next month? Which is it?
My Wife and I are not saving because we are barely paying our bills. We have been in a recession since 2002, when I lost my $72k job. I now make $42k and my Wife has been laid off again.
Of course i’m saving. it would be insane to go out and buy something right now. why would I go buy a tv or a car from a store that might not be there in a month. Save save save! I love watching my savings accounts and CD’s grow while my spending is next to nothing. Sorry economy but I am saving on these rainy days!
Absolutely. However, since after the election my houseold is now considered ultra-wealthy, I am using a foreign account to get the cash out of reach of all the people in line with their hands out for the fruits of my labor.
I’ve been saving since before the last recession. I’ve been through mergers and layoffs. I’ve seen more than 100k in layoffs in the 13 years at my company. I’ve got a year saved in salary plus the rest of my assets. I’m not worried about this recession.
I have been saving since I was 10 years old. We were taught to do so back in the 50’s, and it has given me peace of mind now. My wife and I payed off our house last year and are saving $400 a month by doing so. There was no place to earn that much interest with the money we owed. We are being penalized though since our savings rate goes dowm every time Ben Bernake opens his mouth!
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A better article would be “How Free Trade and Deregulation Killed the Economy”. Corporations need to go sell their imports to the foreigners who are doing our jobs. I only buy American made and there isn’t much I can spend my money on. I also won’t do business with companies who contributed to the meltdown or profited from it.