We Need a Rehab Program for Spenders
They tried to make me go to rehab
I said no, no, no.
-Amy Winehouse
I don't know if they have rehab for spending addicts. If not, someone ought to start one.
I was flipping though the news channels when I heard a guest demand that more tax rebates go to poor people.
"Rich people accumulate wealth. Poor people accumulate things," he said.
He had a trickle up theory of economics. The money will burn a hole in a poor person's pocket while wealthy people will sock it away.
Many poor people need their income to survive but there are some who are broke simply because they can't handle money.
There is a financial dividing line that separates savers and spenders.
The savers wind up with wealth and the spenders wind up with debt. Debtors can only get bailed out if they are Wall Street bankers who are "too big too fail."
Working Americans aren't deemed "too big to fail."
The line between affluence and poor is getting bigger.
For many years, poor people wanting to go a go on a spending spree, had plenty of credit card companies, payday lenders, "buy here, pay here" car lots and sub prime lenders to help them along.
Many people got in over their heads and can't make payments. Companies like Citigroup bet that the fun would never stop and kept lending.
They were both wrong.
The economy is near depression because companies and consumer put too much faith in a system of endless spending and borrowing.
People on their way to wealth have good savings habits. People on their way to lifelong struggles blow money on stuff they don't need.
Spending is an instant gratification, like snorting cocaine. One shopper told me that she got a high from shopping like a high from drugs.
Shopping doesn't work for me. When I walk into a store, the hatred of shopping contorts my face to resemble a professional wrestler. People run out of the aisles when they see me. I buy what I came to find and get out as quick as possible.
My goal is to accumulate wealth, not things.
When I was growing up, I used to think some people didn't have good jobs. They lived in run down houses and often had their cars repossessed
I found out that they made as much money as my parents. The people who lived in run down houses spent money on things they didn't use and motorboats that never made it in the water.
They lent money to "family and friends" even though they should have paying their own bills first. They had no sense of long term planning. Ultimately, they had no money.
Spending beyond your means is an addiction. A spending addiction is probably as hard to cure as a drug addiction. It requires changing your lifestyle.
Money is a leading cause of divorce. The stress of debt pushes people to escape reality with booze or drugs.
When the economy slowed down, the addiction became a crisis. People keeping the balls in the air suddenly couldn't. They had no back up systems.
I've frequently hired a casual laborer. He is good at his craft and for 20 years, he made really good money. None of which he saved. Whenever I saw him, he talked about skiing trips, his bass boat or his brand new trucks.
Now the economy has turned. His house is being foreclosed on and they repossessed his trucks. He has no savings or credit.
His focus was on accumulating possessions. Now he doesn't have those possessions. Or any money either.
The nation's economic system has also gotten addicted to shopping.
To turn the economy around, Americans need to find a spender's version of rehab.
Don McNay. CLU, ChFC, MSFS, CSSC is the founder of McNay Settlement Group in Richmond, Kentucky. He is the author of Son of a Son of a Gambler Winners, Losers, and What to Do When You Win the Lottery. You can write to him at don@donmcnay.com or read his award winning syndicated column at www.donmcnay.com. Don is the Treasurer of the National Society of Newspaper Columnists.
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While he makes good points about our national spending spree, he ignores the people who saved and got wiped out anyway.
I trust he will forward his post to our corporations, who also need a lesson in frugality.
NOT all savers end up with wealth. I'm sure there are a lot of other stories out there like mine. My husband and I both contributed the max to our 401ks. The tech stock crash in the 90's saw my 401k go totally broke. My husbands lost $250,000 so all those years of doing without vacations,no eating out, not buying new clothes, not going to the movies, buying used furniture, driving our cars til they fall apart netted us NOTHING.
So I start over, my husband keep plugging along doing without saving, saving, saving, ..........
In retrospect I would be in the same place if I would have been frittering away our money buying whatever I wanted, doing whatever I wanted.
Good point in this one.
Only one thing is the problem: no one knows how much anything is really worth anymore.
US Consumers can take control of the economy by watching their spending and WAITING to spend. That's the best control over prices.
You don't have to have everything, NOW.
OVER 50 YEARS OF "CONSUMERISM TRAINING " WILL BE HARD TO BREAK !!
Everyday and every advertizer is telling people they suck, buy they won't suck so much if they buy this or if they buy that.
Products are even made to fail so they consumer has to buy a new one. Few products are made to last over 6 months.
Its all well and good to talk about savings during the crisis but then face the paradigm of thrift. where everyone saving creates less savings.
The Fed and the economy didnt need savings. Didnt want savings. if they did would they want interest rates at 1% for 5 years. China (Chimerica) was doing all the savings for us. So we borrowed their savings.
The govt wanted us to buy houses. As much as we could "afford". The debt markets wanted more diversity in their portfolios. so we created exotic debt derivatives to hedge the risk of default. we feed that demand. When the house of cards fall apart we blame the consumer?
The US has no income growth. Most americans get their incomes through wages. wages are and for the most part been stagnant since 2000. They have barely budged in 20 years. Yet we have created all this technology that we mfg in less productive low wage countries. They create a trade surplus. Then we borrow the surplus so americans can consume by going into debt.
and now we are bitching about savings. Polices create savings. Interest rates encourage savings over consumption. Create monetary, fiscal and trade policies that grow income, (broadly) encourage savings and you wont need to borrow from foreign central banks! and with an added benefit. Foreign policy wont be determined by our addiction to foreign imports.
Turn OFF the Wall Street Advertising Machine and having Bush get on TV in 2002 and pushing minorities to buy homes and telling banks to create No Down No Qualifying "TRICK&TRAP" mortgages.
This consumer Bubble was brought about by unlimited Cheap Credit and Advertising.
It pays to Advertise!
Doesn't help that the national average saving rate is in the negative and has been so for quite some time.
http://www
We're working on it Mr. McNay,... been managing to live on what we actually make for almost two years now,... AND have been managing to pay down some of the old debt.
But man,... it sure isn't easy digging our way out of that hole,... probably won't be 'free' for another 3+ years (barring lottery winnings or something). The cars are paid off,... the credit card debt is starting to slip away,... and are even managing to slip a bit into savings now,....
Bravo!!! This article should be required reading across the land. Don is absolutely right. It's time we, as a nation, learned to "save ourselves from ourselves" financially speaking.
Yes. Yes. And Yes!
...but the major flaw in your piece is that it was precisely the savers (the wealthy) who created this economy that was dependent on spending more than people had. Sure, it's good to be saver. I haven't been able to, but then, I've been living on six grand a year for the last ten years
This is all a complicated situation but the solution is simple. It won't be quick, but our so called leaders need to work in the public interest again and not for the corporations. What a corporation wants is always going to be the opposite of what is good for the public in the long run. This is the crux of what's gone wrong the last forty years. Without protection from corporations we will go down the drain and quick
So you are your own third world nation in a sea of first world opportunities. Sorry to hear that.
Don't be. I'm not. I chose to live outside the system. Of course, I could have grabbed some of these 'opportunities' you mention, but that would have required me going into massive debt. Not gonna happen
Thanks for the laugh KTM. opportunities my ***
Finance #101 should be taught in grammar school. The simple fact that you don't spend more money then you take in leads to a happier life. Also; parents, you don't have more children then you can afford, monetarily, emotionally and mentally. It's simple, but not being done.
Well, that a whole other quagmire, one that is going to require another long hard slog to reverse. Welfare has created a situation where poor single moms can be supported by the gov't,and the more kids they have the more money they get. I think we can safely say that a child's environment affects how he turns out as an adult. This is probably a contributing factor to the problem we are facing today, it wouldn't surprise me if many of these over spenders just didn't know any better because didn't grow up in an environment that taught reponsibility
They teach finance 101 in grammar school. It's called 1+1=2. Everything else follows from there and simple equivalence operations which we all teach. The only thing we fail at is to hammer into people's brains that money follows the same rules. They seem to believe that one can magically spend more than one is earning.
here is an excellent calculator for the cost of raising a child. http://www
I dare say most people can NOT afford even one. When I was at the grocery store I heard a conversation going on about how hard it was to feed families today. One couple had 4!!! A huge number by today's standards/economy.
Good one. My hatred of shopping comes from my revulsion at being manipulated. These shopping addicts are total sheep, they are being played. Gambling is even dumber than shopping, and guess what? Strapped States are going all in with gambling to balance their budgets. Go America! Spend spend spend...on nothing
It's not that bad. You can get really good deals in sales. One simply has to wait until the once newest item has become an old but cheap hat. It's still as good as it was when they sold it for the first time, but it's not being sold 400% over value any more.
We used to have an institution that was available to ALL individuals who had gotten in over their heads... It was called bankruptcy! Now those who need it can't afford it and those who can get a Bailout! Wasn't that one of Obama's campaign promises! I know that its not as sexy of a topic as torture and gay soldiers, but poor saps voted for obama too. They just didn't donate as much... cause they're POOR!
What about the people who make minimum wage?
Surely, it is far easier to save money with a large income than with a small one. When I was in my 20's I saved over 20% of my pretax income every year. And my lifestyle was better than it is now when I am broke and can't save because I make less than $10,000 A YEAR. Sure, the big BORROWERS drove the housing bubble. So I guess I just disagree with a one size fits all statement.
I do not know your circumstances, but being on minimum wage is not something you will be able to survive, quite literally. You need to do something to make more.
Trust me. You will get your turn at bat.
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