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A Passion for Plastic
Most Americans are shopaholics with a “swipe and go” spending addiction severe enough to dig their financial grave.
According to a recent article published in the Wall Street Journal, the Bureau of Economic Analysis estimated that in 2005, Americans were spending 99.6 cents of every dollar they earned. While you may think that given the recent economic crisis with its foreclosures and rising unemployment, people would be trying to increase their savings. However, according to Charles Biderman of Trim Tabs Investment Research, an economic-analysis firm in Sausalito, CA, this is actually not the case. His estimates indicate that Americans might only be saving about .9% of their income. Certainly, anyone out of a job would have a hard time trying to save anything.
Why do Americans tend to spend more than they save? The research on this subject points to a number of reasons. One of the top reasons is simply that Americans can’t say “No” to spending. In other words, they don’t want to disappoint anyone such as their kids, their spouse, their friends, or themselves. Americans also don’t want to wait for what they want. They want it now! Furthermore, spending money can give a person a sense of self worth. For instance, some think that if they drive a cool Ferrari, that they are then cool.
Spending money can also give people a sense of power. They can actually get a “rush” out of spending. The more they spend the bigger the “rush.” Also, since most Americans use plastic credit cards to buy things instead of cash, it is easy to live in denial and not register how much you are spending when you swipe a card and don’t have to count the cash.
In addition messages the government sends out can be confusing to consumers. "That's always the rub in recessions: that what's good for the individual — save, save, save — isn't always good for the economy, which is helped if people get out there and spend, spend, spend," says Greg Daugherty, executive editor for Consumer Reports. With the current state of the economy and the bad messages from the government to spend our tax rebates, our credit card debt is growing and so is our spending addiction.
The biggest problem that Americans have with spending is “Can’t say no.” Americans keep on charging money to their credit card even when they cannot afford it. Over time this will lead to overdue payments and even bankruptcy. The dumbest reason according to filingforbankruptcy.com is being “IPoded” into something. “IPoded” into something means being swayed by a marketing campaign, public opinion, or a luxury item just because it looks cool. Americans are very good about being “IPoded” into something even when they cannot afford it.
In spite of this problem there is a way to fix our “swipe and go” spending addiction. Americans need to find a way to limit our spending. Some ways to do limit spending are to distinguish between needs and wants. Some needs are food, clothes, shelter, transportation, and education. Take a car for example. A car is a need. But is that new Mercedes Benz a need?
For instance, I had an experience with spending too much money on songs from iTunes that I thought I had to have, when really I didn’t need them. Instead of spending money on songs I don’t need, I could just listen to the radio and save that $15-20 per month. So next time you go to the store, ask yourself, “Do I really need this, or is it just a want?”
One possible Solution is the save to win plan. Jason Zweig a writer for the Wall Street Journal, wrote about the “save to win plan” Recently, Michigan launched a program called “save to win” It is for members of eight credit unions. Members put $25 dollars in a “save to win” one year-CD and are entered in a monthly savings raffle, and are able to win up to $400 weekly and a onetime win of $100,000. This unusual CD is federally guaranteed by the National Credit Union Administration and pays between 1% and 1.5% annual interest, a bit lower than conventional rates. In 25 weeks, the program has attracted about $3.1 million in new deposits, often from people who have never been able to set money aside.
People love to gamble and hate to save. With Save to Win, says Communicating Arts Credit Union President Hank Hubbard, "You are sort of betting, but there's no losing." If we are to become a nation of savers again, we will need more innovations like this -- and the regulatory flexibility to allow them.
The logical conclusion is that Americans spend too much money. If we do not stop this spending habit this could result in our economy crashing just like it did during the great depression. This means that it would be hard to find work and business would go bankrupt. Is this the way we want other countries to look at the most powerful nation in the world? It is totally possible for Americans to save money; they just need to decide to. Even a dollar or two can make a big difference. After all, “A penny saved is a penny earned.”