Every now and then I read the news and I feel like I’m either having a bad case of deja vu, or some subeditor who’s about to get fired accidentally put a story from last year on the front page. I scroll up and read the dateline. Nope, today. I scroll back down and read the article. Nope, still says what it said the first time.
That happened to me this week when I read about the results of Bankrate.com’s latest poll of Americans on their savings habits: 27% of respondents had no savings, period. 50% reported having less than three months worth of expenses in savings, which is still three months less than financial authorities recommend.
But hey, at least almost one in four Americans has it together enough to have at least six months of expenses in savings so they’re prepared for job losses, major medical expenses, and other potential life events. Unlike the rest of us slobs who are living paycheck to paycheck, and, come on, show of hands here people. Don’t be shy.
The thing is, I feel like I’ve read this exact same article in the past. And in fact I have. I didn’t just read it: I wrote it, in July 2012, talking about the decline in savings in the US and discussing the fact that one of the reasons for it is the lack of money going around to save. It’s definitely a bit challenging to put money away when you, er, don’t have money to stick in your sock drawer (I don’t know about you, but my sock drawer is currently offering better interest rates than the local credit union).
What these numbers are showing us is that the savings rate in the US is remaining rather stagnant, and has been for some time; the 2011 survey actually showed similar percentages. This despite the fact that many people acknowledge that living paycheck to paycheck is really difficult. Gosh, it's almost like external pressures might be driving the savings rate in the US. Most of us would prefer to have some money set aside in savings for managing those little expenses like food, medical care, and transportation.
Or, if you’re a freelancer living the high life like me, traffic tickets, books, and renter’s insurance. Other people choose to prioritize expenses like therapy, which some people may think of as “optional” but really aren’t for those of us who need them.
And, as Emily pointed out when she, too, wrote about this issue last year, some of us just “buy a lot of stuff.”
I don't feel guilty for treating myself. I do feel bad when I can't afford an unexpected expense because I already spent any surplus cash on several tubes of that Limited Edition MAC lipstick I'm addicted to because it's not going to be around forever you know. And I feel super guilty that I can't manage to keep even just a little bit per check in my savings account in case I lose my job or need major surgery or have to leave my fiance in a hurry tomorrow.
Buying a lot of stuff is a thing some people do, and many of us have a complex relationship with it. When I’m going through manic periods, I do it, which is how I end up with things like giant purple chaise lounges. Maybe not the most well considered purchase I’ve ever made, but you know what? I’m totally getting mileage out of that baby, and I love it.
And I recognize that “retail therapy,” as people so scathingly call it (not recognizing that shopping addiction actually is a real thing, or that people who are feeling manic or hypomanic might express that through shopping instead of other potentially much more dangerous destructive behaviors), is something people like to be judgmental about. Especially when this conversation about savings and paychecks and survival comes up.
The fact is that some people live paycheck to paycheck because they have no choice. Every last cent is budgeted right down, and you use coupons at the store and cross your fingers, hoping that your last pair of work pants doesn’t give out because you can’t afford to replace them right now. This is a way of living for some people, and it's ridiculous to act like they're to blame for not having savings.
And in households like the one I grew up in, things may not be that dire, but there’s still not a lot of money floating around.
So guess what? You kind of pick up habits from your family, and you learn to spend it while you’ve got it. It’s not like I particularly needed a giant purple chaise, but it was there, and it was only $200, and I had $200, and suddenly, I wanted it.
Cracked, of all sites, had a great writeup a few years ago: “The 5 Stupidest Habits You Develop Growing Up Poor.” It made the rounds and many of us who had grown up poor read it nodding along going “yup.” But the entry that really rang true for me was, of course, #4: Extra Money Has to Be Spent Right Goddamn Now!:
When a windfall check is dropped in your lap, you don't know how to handle it. Instead of thinking, "This will cover our rent and bills for half a year," you immediately jump to all the things you've been meaning to get, but couldn't afford on your regular income. If you don't buy it right now, you know that the money will slowly bleed away to everyday life over the course of the next few months, leaving you with nothing to show for it. Don't misunderstand me here, it's never a "greed" thing. It's a panic thing. "We have to spend this before it disappears."
That’s how I got $8,000 in credit card debt right out of college, because I made the mistake of viewing “available credit” as “money,” and it took me 10 years of focused work to pay it off. And then I actually started building up a savings, and then I was unemployed for six months with a terminally ill cat, and then it was gone, along with the cat, and I was never really able to recover from either event.
There’s a lot of talk about financial literacy in this country and helping people understand how money works, especially when it comes to borrowing, interest rates, financial contracts, and related matters. The fact is that a large percentage of us have no clue what to do with money because we’ve never really had to deal with it, and we don’t know how to handle it. Even as we pledge to ourselves that we’re going to start saving, inexplicably, our paychecks are gone at the end of the month.
And while many people who think of themselves as “poor” are actually “broke,” an important distinction, a lot of us are broke because we don’t really know how to deal with our money, and we’re flailing around in a country that seems slanted toward the wealthy and powerful. We don’t have access, for example, to the sweet tax shelters wealthy people use to avoid a lot of their tax burden; while what we pay in taxes is a drop in the bucket numberswise in comparison to wealthy people, it represents a pretty big deal to us given how little we have to begin with.
We don’t have access to the tools like financial consultants and investment accounts and other things that people use to manage their money wisely. And we end up living paycheck-to-paycheck because it’s the only way we know how to live, and we don’t know how to break the cycle.
The pat response to this problem seems to be “more financial literacy classes” to teach people like me how not to be complete dorks with our money, but that’s not the only thing at play here, obviously. It’s not like I’m incapable of saving; I did it once, after all.
So clearly there’s a web of things at work here, making it impossible to cry “individual responsibility!” and run away. Like the declining value of wages against cost of living, which forces people (even those who are frugal and careful) to spend more to live. Like the continued division of society into have versus have-not.
And like the fact that many people are wrestling with mounting student debt and debts incurred while in school that aren’t directly education-related. That many people are struggling to support unemployed family members, or to help people afford school. So many people are out there doing what they’ve been told to do, or serving as the “sacrifice generation” (and what a foul concept that is) to give their children the chances they didn’t have, and that’s thrown back in their face with rhetoric about how Americans “should be saving more.”
I totally agree that everyone should have six months’ worth of expenses in savings, but let’s talk about the shades of difference involved in who does and doesn’t have that money, and why.