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Wednesday, April 16, 2014

Can’t Save? Stop Blaming the World

Posted by Tim Stobbs on January 17, 2013

I normally try to be respectful of other people’s point of view, but I have to admit this article “Can’t Save? Here’s Why” at the NYTimes really got under my skin.  If you haven’t read it, I suggest you go have a read.  I’ll wait.

Done? Good.

It took me a while to understand what was driving me nuts about the article, but I finally worked it out.  While I agree that wage stagnation and increased costs like housing isn’t helping people save more, there is more to the story than that.  The simple fact of the matter is the writer is comparing apples to oranges when comparing housing over the decades.  Ideal average house size in the 1950′s was only 983 square feet in the US, meanwhile in 2010 that value is 2100 sq feet (see here).  So yes obviously the house prices would exceed inflation since they are double the size!

Our issue is our expectations have increased around our lives.  It’s normal to live in a bigger home, it’s normal to have multiple TV and computers in every home.  It’s normal to own a smart phone or tablet or both. It’s normal that a lot of people live alone (which of course costs more).

Yet what brothers me most about this article is the tone that people can’t save for all these reasons and then basically it isn’t your fault.  The defeatist and blame the system attitude isn’t helping people save.  Take some responsibility for your own lives and you make the choices to get the life you want. Yes the world might tilt your options one way or another, but you are still in charge of where you want to go in life.  You can save, you just have to want to do it.

The first way to save: stop living like everyone elseGet rid of normal.  Live in a way that makes sense for you, perhaps you don’t need a car since you live close to everything you need.  Or perhaps you get a roommate for a while to pay off that credit card debt.  Or perhaps you start a new trend with your friends where you rotate hosting dinner parties rather than eating out every Friday.  Yes keep what matters most to you on your little luxury spending on life, but don’t pour money down the drain on crap you don’t care about.

So yes, perhaps you keep spending on your lattes and keep part of your cable package.  Or perhaps you toss your TV in the trash and drink tea instead.  Find your own path to savings, yes it means some work, but don’t blame the world.  You are not saving because it is your own fault.

Comments

9 Responses to “Can’t Save? Stop Blaming the World”
  1. Goldeneer says:

    This NY Times article rubs me the wrong way too.

    Following the American dream of owning a nicely furnished big (+2000 sqft)house in the suburbs, a new car for all household drivers, and all the take out because they are too exhausted from their long commute and household chores does not leave room for savings and retirement if they can even live within their means. This is where people need to reevaluate their lifestyle and think for themselves how important retirement and savings are to them. They can’t blame others for the life of relative luxury they have been living in for the last few decades.

    I did not reach FI by following the typical dream. I made frugal sacrifices of restricting my discretionary budget, minimize my housing and transportation costs and have led a very happy life as a result.

  2. Lena says:

    We are striving for FI and it is at the cost of living like others do.

    That being said, articles like this make us nervous because if everyone is just spending 100% of their money, 100% of the time, then the critical mass will vote for policies that bail themselves out–and we’ll be stuck with the bill. (They don’t now, but they could start taxing wealth.)

    If that happens, then all this saving and not eating out and not going to Hawaii every winter is going to make me bitter. But I guess there’s a hope that this won’t happen… What do you think?

  3. Jim says:

    @Lena I think this has already hit me as far as housing goes. I’ve always been frugal and was working towards saving up a big down payment for a house. Then the housing boom hit Saskatchewan and I was forced to take out a 40 year loan and pay CMHC fees when I finally bought a house (900 sq ft). If they had never allowed $0 down payments and 40 year loans the house prices would have likely never gone as high and in theory I could have paid 25% down (which would avoid the $8000 CMHC fees) and gotten a 25 year loan on a much smaller mortgage.

    I was feeling very depressed about all the debt and the time frame of the loan but now several years later my wife is working again and we have been making lump sum payments and we are on track to pay it off in a total of 13 years.

    It’s sad to think that if I would have only bought a year earlier I could have saved $80 – $100k on my house.

  4. Jacq says:

    I just find it odd that she references graduating with $26,600 of student loan debt like it’s a big deal. When I graduated university more than 20 years ago, my debt was about $25k, I was making $23k/year working like a freaking slave billing 200 hours a month at a CA firm and had that sucker paid off in less than 3 years.

    I had a good friend at the time who lived in the same townhouse complex whose husband was an airline mechanic. He made about double what I did, she was a SAHM but pre-paycheque, their fridge was empty and they were eating macaroni with ketchup and I felt bad for them. I used to bring groceries over to them until I went to their house one day with my oldest son (who was the same age as their oldest kid) for pizza. They all ate the cheese and toppings off the pizza and threw the rest out. My son was horrified and I re-thought my charitable giving strategy after that.

    Having said that, I’m sure that I’m out of the loop from the average person since I live and work in an older, white-collar world nowadays. But there’s a reason why my (currently working blue collar) son makes payday loans to his co-workers and why they get fired for laziness while he gets a raise.

    Apologies for not being sympathetic to the working poor but I bet they have a grocery and restaurant budget that’s higher than mine.

  5. Wants have become needs. I don’t know how it happened but it is as much a flaw in our society as the growing obesity rate.

    My car will only last for about 2 more years. I have started a savings category in my TFSA to prepare for it. I save for everything and am building an emergency fund for those things I cannot plan for.

    Does anyone wait for anything anymore?

  6. Tim Stobbs says:

    @Goldeneer – Good for you! It’s nice to hear not everyone fell into that trap.

    @Jim – Ugh, I feel for you. I know several young people who picked up the houses in Regina post boom and I can’t believe the debt levels they have. Also I just can’t believe they signed up for debts like 4 or 4 times their annual income. I think I would have kept renting at those prices.

    @Jacq – Oh, I’m not the only one that notices some fairly horrible eating habits. Thanks. I still feel a bit of sympathy, but I agree I can’t support self inflected problems.

    @Lena – True that can occur to a point, but at the same time being FI means you have more cash, property and investments than the average person which also means the entire damn system is built to support you. Let’s face it the tax code is written for people to invest. So I’m not that worried about it, even in the US when the housing market went to hell, they still gave more cash to the banks than the average person. So if you own banks you tend to be ok. So overall, yes live a little bit, but don’t panic by other people’s over spending. It will still be at least mostly their problem even if your taxes go up slightly because of it.

    My thoughts,
    Tim

  7. RE says:

    “Stop living like everybody else” This is wise advice unfortunatly this is probably one of the hardest things to accomplish in our society. But I think there is no way one can become wealthy by living like everybody else. As the saying goes “live differently today so you can live differently tomorrow..”

  8. greg says:

    @Jim – “Apologies for not being sympathetic to the working poor but I bet they have a grocery and restaurant budget that’s higher than mine.”

    I do feel a bit the same way. The way I look at the facts are that my core expenses (rent, internet, food, transportation, gym membership, periodicals, insurance) are less than the median *zero-income-earning* household was given for free in 2010. And that’s why my tax bill is 140% of my expenses.

    Given just the data, I feel it speaks for itself to many people, but not enough of them.

    @Tim / @RE – “Stop living like everybody else”

    Preach it!

  9. Dee says:

    On the other hand, I really like the note the article ends on: “So let me suggest another financial resolution, one that will do more for our future financial outlook than simply forgoing a few consumer goods: talk about money.”

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