Many Americans were disappointed to learn that existing home sales in the United States fell 8 percent in September, and that sales have plummeted a hefty 19 percent during the past year. At the same time, national median selling prices are down 4 percent from a year ago.
These are worrying statistics, particularly because after a half century of increasing housing prices, many had come to believe that housing prices would always increase. Indeed, many Americans have come to depend on the increasing value of their home to provide security in a crisis and support in their retirement years, rather than to routinely save some of every paycheck for those critical purposes.
There has also been a recent flood of stories about home foreclosures and personal bankruptcies stemming from easy credit and overspending. During recent times of relative prosperity, Americans have become poor savers. The U.S. savings rate has declined from approximately 10 percent in the 1980s to 6 percent in the 1990s and to a negative ½ percent in 2005. That means that Americans spent more than they earned in 2005. The last time the savings rate was negative for an entire year was in the Great Depression years of 1932 and 1933.
Something doesn’t feel right about these numbers. In the last decade, total household net worth for Americans has doubled -- yet America’s personal savings rate has now sunk to among the lowest in the world.
These statistics should not panic us, but they should be a wake-up call for us to return to better financial habits that most Americans remember, but fewer and fewer practice. Our savings dearth has been fostered by politicians who fail to recognize the need for better public policy and tax policy for encouraging more savings, and who at the same time provide awful examples by the careless way they spend every last dollar they can snatch from the public purse and then, once spending them all, continue to spend by incurring runaway public debt.
Government seems oblivious to the problem of our low personal savings rates. American Debt Resources, Inc., a non-profit credit counseling organization is one of many private sector organizations helping Americans reclaim control over their financial future. The organization points out that in any ten year period 75 percent of families will experience a major financial crisis, whether it is loss of a job, illness, divorce, or some other unexpected challenge.
Its advice is to save, and it emphasizes that the best way to save is to always pay oneself before paying anyone else. Its counselors explain that to do that requires “taking a set amount of your paycheck before paying any bills and putting it in savings. Then plan your budget around the remaining income.”
Saving through automatic payroll withholding is a foolproof way to develop better savings habits. That technique allows you to save first before spending the first dollar from your paycheck. I’ve never known anyone to regret that they saved. Automatic saving is one of the best practices available to rich or poor for building wealth and financial security, but it is also one of the most frequently ignored practices.
Time is running out for many baby boomers, and many are underestimating how much they’ll need to make it through their retirement years. A study by The Center for Retirement Research estimates that Americans are saving at a rate that will allow them to replace only 57% of their pre-retirement income after they stop working. Many have optimistically assumed that by selling homes that are constantly appreciating in value they will be able to meet retirement income shortfalls, yet emerging housing statistics challenge the validity of that assumption.
We should all return to better savings habits. Good savings habits are not only good for families, they are vital for our country and its economy. Our household and national savings provide more than just funds for the future, they also provide the capital for investment by new and existing businesses, which in turn ensures that there are well-paying jobs for all Americans.
Albert Einstein said that the definition of insanity is doing the same thing over and over again -- and expecting different results. Your failure to save will do nothing to produce the financial security you want. The surest way to reclaim a sound financial future and peace of mind is to begin saving today. While time is a saver’s best friend, it’s never too late to begin.
These are worrying statistics, particularly because after a half century of increasing housing prices, many had come to believe that housing prices would always increase. Indeed, many Americans have come to depend on the increasing value of their home to provide security in a crisis and support in their retirement years, rather than to routinely save some of every paycheck for those critical purposes.
There has also been a recent flood of stories about home foreclosures and personal bankruptcies stemming from easy credit and overspending. During recent times of relative prosperity, Americans have become poor savers. The U.S. savings rate has declined from approximately 10 percent in the 1980s to 6 percent in the 1990s and to a negative ½ percent in 2005. That means that Americans spent more than they earned in 2005. The last time the savings rate was negative for an entire year was in the Great Depression years of 1932 and 1933.
Something doesn’t feel right about these numbers. In the last decade, total household net worth for Americans has doubled -- yet America’s personal savings rate has now sunk to among the lowest in the world.
These statistics should not panic us, but they should be a wake-up call for us to return to better financial habits that most Americans remember, but fewer and fewer practice. Our savings dearth has been fostered by politicians who fail to recognize the need for better public policy and tax policy for encouraging more savings, and who at the same time provide awful examples by the careless way they spend every last dollar they can snatch from the public purse and then, once spending them all, continue to spend by incurring runaway public debt.
Government seems oblivious to the problem of our low personal savings rates. American Debt Resources, Inc., a non-profit credit counseling organization is one of many private sector organizations helping Americans reclaim control over their financial future. The organization points out that in any ten year period 75 percent of families will experience a major financial crisis, whether it is loss of a job, illness, divorce, or some other unexpected challenge.
Its advice is to save, and it emphasizes that the best way to save is to always pay oneself before paying anyone else. Its counselors explain that to do that requires “taking a set amount of your paycheck before paying any bills and putting it in savings. Then plan your budget around the remaining income.”
Saving through automatic payroll withholding is a foolproof way to develop better savings habits. That technique allows you to save first before spending the first dollar from your paycheck. I’ve never known anyone to regret that they saved. Automatic saving is one of the best practices available to rich or poor for building wealth and financial security, but it is also one of the most frequently ignored practices.
Time is running out for many baby boomers, and many are underestimating how much they’ll need to make it through their retirement years. A study by The Center for Retirement Research estimates that Americans are saving at a rate that will allow them to replace only 57% of their pre-retirement income after they stop working. Many have optimistically assumed that by selling homes that are constantly appreciating in value they will be able to meet retirement income shortfalls, yet emerging housing statistics challenge the validity of that assumption.
We should all return to better savings habits. Good savings habits are not only good for families, they are vital for our country and its economy. Our household and national savings provide more than just funds for the future, they also provide the capital for investment by new and existing businesses, which in turn ensures that there are well-paying jobs for all Americans.
Albert Einstein said that the definition of insanity is doing the same thing over and over again -- and expecting different results. Your failure to save will do nothing to produce the financial security you want. The surest way to reclaim a sound financial future and peace of mind is to begin saving today. While time is a saver’s best friend, it’s never too late to begin.
9 comments:
and never, never say never
Okay, you're right. I wish I had never said never.
Good points. To save is to know freedom. Couldnt that be why the bloodsuckin pols dont want people savin? Itll weaken the pols power!! Maybe youve hit on sometrhing here.
General, you're right - A lot of people rely on their real estate investment for financial security when they retire. It isn't supposed to be a get-rich-quick scheme. Americans should save money every week for retirement, so they dont have to rely on a boost in the real estate market once they become a retiree. Responsibility is the key for the future.
Richard, 12% of my gross goes into my 401K. Like most companies with such plans, my employer provides matching funds.
As an HR person in my company I try explaining that this means you get a second bonus or raise every year from the company just for being smart enough to plan ahead.
Sure i had to cut a lot of things out to be able to afford that, but in the long run, the financial independence it will provide is worth every penny.
As to the housing "bust", this to creates new opportunities for home ownership. Plenty of the value lost in the bust is not real worth. Those who hold onto their homes and see them as long-term investments will still realize good value.
Those who "flipped" homes, hoping to make a 10% profit for a home they owned less than a year but put nothing into, those are the ones who will really lose out. They deserve to for shamelessly ignoring economic laws of getting something for nothing.
EARL CAPPS IS A FIRST TIER BLOGGER AND IT IS GREAT HE READS THIS BLOG, NOW I KNOW IM IN GOOD COMPANY WITH THE BLOGS I READ. KEEP GOIN THIS STUFF IS SO RIGHT ON.
i meant u should never never think its too late to start savin.some r discouraged cause they didnt start early but its never never too late!!!keep up the good advice
Sorry, Hope.
I misunderstood what you were trying to say with your first comment. You make an excellent point, as does SISC in the comment above.
You both display keen insight. Keep reading and sharing your comments.
good scoop and earls right about the flippers you dont get nothing for nothing and thats a law of economics, its all about workin for your $$$
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