Greed: Americans spend more money than they make

It’s easy to paint investors and Wall Street brokers as money-crazed Scrooge McDucks swimming in their giant money bins full of gold coins and cash.
Blame the irresponsible investors for this quicksand that only seems to get worse as we squirm. You’re right.
But most Americans are just as guilty of greed.

Since 2005, Americans have been annually spending more per year than they make, according to the U.S. Department of Commerce. In 2005, the national savings rate was negative 0.5 percent, meaning that most Americans spent more than they made and put nothing into savings. 2006 was even worse with a savings rate of negative 1 percent, the lowest since the Great Depression, when, in 1933, it was negative 1.5 percent.

If in one year you don’t put a cent into savings, then spend a little less.

But everyone thinks they deserve a house with a three-car garage, a new car, a Sony flat-screen TV, and an iPod. “I need the iPhone,” they say. “It has text messaging, a video camera and MP3 player. Buying the used car or generic brand is below me, and renting is out of the question.”

Many middle-class Americans buy all these things they “need” but can’t afford, and dip into their savings to do so. And it’s because people like to believe they’re better off than they really are.

We’re all middle class. But, in truth, we’re not.

People aren’t putting any cash into savings to weather hard times. In fact, they’ve been doing the exact opposite and racking up the debt in loans, in effect creating the hard time we’re in right now.

Don’t buy something when you can’t cough up the dough. A loan is no different than anything else you buy. Paying for it is just drawn out. This whole business of risky loans was a two-way street that investors and homeowners both crossed.

Hell, retailers offer loans for TVs and furniture, like La-Z-Boys, things that shouldn’t be so expensive that you can’t just pay for it up-front and save the few hundred dollars in interest.

But people do it, and burn their money through interest fees so they can recline in their La-Z-Boy surrounded by plush black leather.

It’s often advised to put away 10 percent of what you make for a rainy day. And people did it…in the ’80s. In 1984, the national savings rate was 10.8 percent, but that steadily decreased to about 1 percent in 2000 until it dropped below zero in 2005.

You can’t blame the investors and Wall Street for that. You balance your checkbook, swipe your credit card, and ask for the loan.
Live within your means, and when we hit quicksand like this, you’ll have a vine to hold on to.

Trevon Milliard, news editor
trevon.milliard@umontana.edu