Sun's Financial Diary posted a graph on the uptick in the US national personal savings rate. It's reached a 7-year high, breaking 3%. This is a far cry from the 1970s and 1980, when the savings rate was north of 10% of disposable income. Over the past fifty years we really haven't excelled at saving, but the past few years have been especially profligate.
It will be good for the economy and our country if we save more. I have absolutely no doubt about that. As we buy more than we can afford, we cripple our financial futures, individually and as a country.
Yet we have ever more opportunities to buy, buy, buy. Why, why, why?
There's a $15,000 tax credit for home buyers that just passed the Senate floor being batted around for home buyers. This is a subsidy that will encourage more potential homebuyers to pay higher prices than they would otherwise, and allow some sellers to get out from under their homes at a little bit less of a loss. And if you're not in the market to either buy or sell a home, guess what? You get to pay for some of it!
Will more people lose their homes if we don't rush out to buy them? Sure. Will businesses close if we don't rush out to upgrade our plasmas? Probably. But I can't buy the line that this kind of spending is good for the economy. The spending isn't coming out of increased productivity. It's spending being put on an already gigantic tab that is going to come due sooner than we all think.
We personally have been spending a lot less money recently for a number of reasons, and I'm liking this fact. A lot! Perhaps it's that I've taken to heart that it's up to me to be a good steward of the resources God has given my family, and that I need to be the one that remains responsible for it. If I depend on anyone else, or anything else, then I'm playing into someone else's agenda and someone else's interests.
If my family saves more, we have more to use however we see fit: investing in ourselves, investing in God's kingdom, investing in our children, investing in things we deem important. If we save less, then we can't do as much. It's bad for our economy.
So resist the temptation to use money handed to you from whomever, and resist the temptation to buy just because it's a little cheaper. Save more, and invest in yourself.
While I also disagree with the potential home buyer credit and believe more people should save, I would just caution people against lumping everyone who is out buying right now into the same category. I am purchasing a home, and it's exactly because I've kept my personal savings rate very high over the last several years that I can take advantage of the deals on the market right now while still maintaining a substantial cushion.
While I disagree with the huge home buyers non-repayable credit, if it does come to fruition, then I would be foolish not to take it. But note, the purchase is not driven by it happening or not happening, it's just another symptom of the problem we're in that has made it an excellent time for a saver to buy a first home.
N. Avery: Oh I agree. It could be exactly the right time to buy for some people, and this is just icing on the cake. The home buyer credit will help you.
What I was going for was talking about people "at the margin," such as folks who were stretching to buy (used 100% financing, interest-only ARM, etc.) The home buyer credit will make those homes just affordable enough to work, which is the kind of issue that got buyers into trouble. You're not at the margin.
"What I was going for was talking about people “at the margin,” such as folks who were stretching to buy (used 100% financing, interest-only ARM, etc.) The home buyer credit will make those homes just affordable enough to work, which is the kind of issue that got buyers into trouble. You’re not at the margin."
Yeah, my friend and I were discussing this the other night. Hopefully lenders have tightened up their standards to a point where this will be less of an issue this time around.
I welcome people saving more, but we have to make up for those savings coming out of other people's incomes or our attempts to save won't be possible.
my friend and i were talking about this the other day and she called me unpatriotic for not spending my stimulus check from last year (i put it into savings). the inference was made that my patriotism would be further questioned if i didn't spend anything coming my way as a result of this stimulus.
at the end of the day, i have to look out for #1. if i knew that, if i overspent and got into trouble, someone would be there to help me, like the government buying out a problem mortgage, or a credit card company reducing interest rates instead of cutting back credit limits and raising APR's to 35%, maybe i'd be more inclined. clearly that's not the case, as it's hard not to feel that these people are just twiddling their thumbs, taking long weekends and retreats while we're working to the bone trying to support ourselves and not become another statistic that you read about in the paper every day. it's frustrating. when there's a problem at our jobs, we stay until it gets fixed. it upsets me that i don't see the same drive and ethic from our elected officials, especially in a time of such national (and global) concern. and the trust just isn't there.
truth be told, i'm very appreciative of our government and our country and the things it enables me to do in my daily life, but the only thing this stimulus will be stimulating is my savings. and i don't feel selfish or unpatriotic about that one bit.
I agree we should be saving more. I think having responsible consumers is the base of a good economy. Spending a bunch of money on products and houses doesn't do much good if we can't afford to pay for them later.
I'm saving more than ever, and I plan on increasing the amount every week.