After the recent election, we are going to have a bunch of new people running the show.
I wonder if they will encourage consumers to focus on saving.
I once heard an economist say, Rich people accumulate wealth. Poor people accumulate things,” he said.
He had a trickle up theory of economics. He felt that money burns a hole in a poor person’s pocket while wealthy people will sock it away.
Poor people often spend all their income just 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 banks who are “too big to fail.”
Working Americans aren’t deemed “too big to fail.”
The line between affluence and poor is getting bigger.
For years, poor people wanting to spend had plenty of help from credit card companies, payday lenders, “buy here, and pay here” car lots and subprime lenders.
Many people got in over their heads and couldn’t make payments. Companies like Citigroup bet that the fun would never stop and kept lending.
They were both wrong.
The economy tanked because companies and consumers put too much faith in a system of endless spending and borrowing.
People on their way to wealth usually have good savings habits. People on their way to a 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.
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 backup 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.
If our next set of leaders truly wants to make an impact, they need to get America focused on saving.