2006 personal savings drops to 74-yr. low

[sweeps]

People once again spent everything they made and then some last year, pushing the personal savings rate to the lowest level since the Great Depression more than seven decades ago.

2006 personal savings drop to 74-yr. low

[scfr]

So interesting ... and so very scary.

[JanH]

I'm wondering if some of this is because of all the natural disasters in the last year or two. People have had to spend money to get their homes and businesses back up and running. Some of it is covered by insurance, but many places have chosen to upgrade things a bit also and I'm wondering if they are investing more in their businesses at this time. I'm hoping that it is a temporary blip. It seems to be paying off here because this area is starting to really grow again since hurricane rita. Although there are many places that still haven't recovered.

[Ima saver]

I read that this morning and thought I would even mention it in my blog. It is very sad.

[creditcardfree]

Originally Posted by Ima saver

It is very sad.

I agree. And it is really time people wake up. Maybe they need a game show based on the $20 Challenge. Whoever can save the most money over a years time, gets a large cash prize!! I'd play. Everyone would win because they would have saved more than they would have with out the shows incentive.

[scfr]

Originally Posted by creditcardfree

I agree. And it is really time people wake up. Maybe they need a game show based on the $20 Challenge. Whoever can save the most money over a years time, gets a large cash prize!! I'd play. Everyone would win because they would have saved more than they would have with out the shows incentive.

I think that's a great idea! I also think that crazy show "What Not To Wear" where they go out and blow $5,000 on clothes in one shot should be replaced with "How to Clothe a Family of 4 for $500 a Year" ... But I guess it would have to be on PBS because how would you get companies to pay for advertising on a show like that?

[sweeps]

Originally Posted by creditcardfree

Maybe they need a game show based on the $20 Challenge. Whoever can save the most money over a years time, gets a large cash prize!!

Hehe. The ratings on that game show would be awful. Watching people eat Ramen noodles and shiver in their 55-degree houses would get old pretty fast.

[creditcardfree]

Originally Posted by Sweepsplayer

Hehe. The ratings on that game show would be awful. Watching people eat Ramen noodles and shiver in their 55-degree houses would get old pretty fast.

I agree...maybe it needs to be a radio call in show with how people saved money and how much they have saved to date. It sure seems there must be a market there to get people inspired.

[tinapbeana]

Originally Posted by Sweepsplayer

Hehe. The ratings on that game show would be awful. Watching people eat Ramen noodles and shiver in their 55-degree houses would get old pretty fast.

nah, just make it like survivor (thinking there was a thread on just this very thing). have it be 1 team against another and have competitions for reward. for instance, who can get the most groceries for under $25 and the reward is steak for the team to eat at the next meal...

[DebbieL]

I actually love that show "What Not to Wear" and would have absolutely no problem blowing SOMEONE ELSE'S $5,000 on a new wardrobe that really suits me! Actually, I wish someone would nominate me (but unfortunately I don't dress anywhere nearly bad enough compared to what I've seen on there, lol).

On a serious note, I also find the savings rate being in the negative numbers pretty scary. I'm in Canada, but I'm sure the statistic is pretty close to our numbers as well.

[disneysteve]

I read these articles and hear these stats over and over again and I simply can't comprehend how this is happening. Every major economic indicator shows that the country is doing great: unemployment is down, inflation is under control, the stock market is setting record highs, interest rates are up which helps curb borrowing and reward saving. And still, we learn that people continue to spend more than they earn. How is that possible? What the heck are all these people thinking?

Personally, our financial net worth was up 48% last year so clearly we aren't among those contributing to the negative savings rate. I just don't get it. :

[sweeps]

Maybe people are paralyzed by all the choices that Poundwise offers for MMA accounts. So out of frustration they spend their money instead.

[vsjhoc]

Originally Posted by disneysteve

Personally, our financial net worth was up 48% last year so clearly we aren't among those contributing to the negative savings rate. I just don't get it. :

Steve - You pulled the average UP. Without your household, the savings rate would have been even more negative.

[Ima saver]

I pulled the savings rate up also. Not as big a percent as Steve did, but I still managed to save quite a bit in 2006!

[Bookie]

Here's an article on the way the government defines savings that I found interesting. It might dispel some of the gloom.

See this article.

[thekid]

Originally Posted by Bookie

Here's an article on the way the government defines savings that I found interesting. It might dispel some of the gloom.

See this article.

Well, I find some of the dispelling in this article a bit shacky. It questions the commerce bureau report because it fails to take into consideration rising home equity and investment gains. I don't believe, however, that these are savings. The average net worth may not be as bleak as the low savings rate may indicate, but the study pertains to savings rate, not net worth. It still remains that, overall, people's income is lower than their expenses. A rise in maket value of their homes and a healthy stock market do not change that.

I do agree, however, that retirement savings should be calculated as savings even if it's in pre tax dollars.

[Joan.of.the.Arch]

I totally agree with you, thekid.

[meaghanchan]

Err, sorry... Posted in the other thread before I saw this one. Reposting what's relevant.


Under the guidelines the government uses for this report, a person who's saving 20% into their 401(k) (which isn't counted in the savings rate) but who is spending slightly more than the leftover 80% could be counted as having a negative savings rate, when they're really saving nearly 20% of their income.

I mean, overall... yes, our country loves to spend money. But it's important to have accurate figures, and these, I think, don't really reflect the reality.

[Broken Arrow]

Originally Posted by Sweepsplayer

Hehe. The ratings on that game show would be awful. Watching people eat Ramen noodles and shiver in their 55-degree houses would get old pretty fast.

Hey hey hey... what're you trying to say about me?

[disneysteve]

In a way, rising home equity should count as savings. For example, I've got a home equity loan. In the past year, I've made several extra principal payments on that loan amounting to a few thousand dollars. Had I put that money into a mutual fund, it would count as savings for the government study. But since I used it to pay down debt and increase my home equity, it doesn't count. That really doesn't make sense.

The way retirement plan contributions aren't counted as savings is ridiculous. More and more workers have 401K or 403B plans and are putting at least something, and sometimes quite a bit, into those plans. How can you not consider that to be savings? Leave it to the government to come up with such a twisted calculation.