Working Up

by Dwayne Phillips

Some musings about personal spending and saving.

I’ve never been a good consumer. By that I mean that I have never consumed enough. It seems that the American economy in the past half-dozen decades has been driven by consumers. The more people consume, the more jobs there are for producers who then become consumers which spurs producers to hire people who become…and so it goes.

I believed that through my adult life I had been a good consumer. I researched what I was buying and sought the “good deals” like sales and such. Research and comparison shopping only slowed my consuming and increased my savings. I thought those were good things. I have learned that they were “bad for the economy.”

Years ago, I heard a simple formula for “getting rich.” It was,

spend less than you earn for a long period of time.

I am happy to report that formula works. I “am rich” financially in that I have more money saved than I ever believed I would. Over the years our (my wife and my) savings rates have been far above the national average. I have to compliment or convict my wife for being an equally bad consumer. Poor consumerism works much easier if your spouse holds the same skewed belief about consuming and saving.

Here is a link to one article about how saving money instead of spending it is adding to the misery in the economy. People in the article are buying one pair of shoes instead of three. That makes good sense to me as everyone I have met has at most one pair of feet, but such poor consuming is ailing the shoe stores. There is nothing special about this article as it merely appeared near the top of my Google search. From the article:

Government data today showed that the household savings rate rose to 6.9 percent in May (of 2009), the highest since December 1993, as personal spending increased less than incomes. The rate in April 2008 was zero.

Savings rose to 6.9%? That is the highest in 16 years? (Here it comes folks!) My dad used to tell me, “give away ten percent, save ten percent, and live on the rest.” Hence, saving 6.9% isn’t good enough for a bad consumer like me. As an aside – cover your ears those of you in the real estate business – my dad also told me that your home should never cost you more than 25% of your monthly take home pay.

I guess my dad was a bad consumer. There have been times when I thought that my dad’s entire generation comprised bad consumers. Then again, I hear tales of an aunt or uncle here or there who skipped town during the dark of night to avoid the debt collectors, so I can’t stereotype a generation.

Anyways, if at the end of 25 years you want to have more money saved than you ever imagined, my wife and I are one data point that proves these old sayings:

Give 10%, save 10%, never spend more than 25% of take-home pay on housing. Also, drive your cars for eight to ten years as long as they are not costing $1,000 per year in maintenance.

Producers and retailers may disdain you, but there are some personal benefits.