People Are Starting To Save More
October 20, 2008 – 5:29 am
Fortune magazine reported last Thursday that people in the U.S. are starting to save more. Savings rates jumped to 2.7% of disposable income in the second quarter of 2008, up from <1% for almost the four prior years.
Although this improvement is a step in the right direction, it seems hardly worth getting excited about. I’d also think it’s worth nit-picking the wording from this article.
The article mentions “disposable income”, which has a definition of gross income minus taxes. Discretionary income is defined as gross income minus taxes and necessities for things like food, housing, etc. What I would like to know is what percentage of a families discretionary income is being saved at this point in time. Are people really starting to cut back and make the hard decisions or have they just picked a few “easy” things to cut back on like dinners out?
Just going from spending less than you earn is a big step, and if everyone could go from saving less than 1% to 2.7% in a short period of time my hope would be that this change in behavior could continue. If people’s “necessities”, like too much car and too much house make up an abnormally large portion of their spending, then it seems less likely that an increase in savings can continue.
Have you made any adjustments recently to save more? Have then been easy or hard changes?
Image Credit: dawnzy58
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One Response to “People Are Starting To Save More”
It doesn’t surprise me that people are starting to save more. What we have learned through the past few months is that we can no longer rely on even something as simple as our jobs, so with everything financial being up in the air for so many people right now, it is safest to save money just in case this financial crisis gets even worse, which just may happen in the near future. This is the reason why I am happy and secure in being an entrepreneur. I rely on myself, know when I have money coming in, and know that I can’t suddenly get fired from my job. During a financial crisis, such as what we are experiencing now, a lot of people don’t know that home-based businesses and entrepreneurship really takes off. More people want the security in a job and being an entrepreneur does that and most often, you are doing work you believe in and love doing.
By Karina Harris on Oct 25, 2008