The Revolution of #Savings Culture: How to Keep Spending Low and #Save #BIG
Savings culture has been in a state of crisis since the recession. With the rise of digital media and finance technology, virtually anyone can become knowledgeable about personal finance and investing. However, almost everyone also lives with debt at record levels and spends above their means. The result is that we have trouble saving money, and it’s getting worse. For example, the savings rate for American households dropped from 6% in 2000 to just 2% in 2016. Even more concerning is that most people are unable to answer basic questions about financial literacy or perform basic calculations involving compound interest or annuities. We’ve entered a world where spending extends beyond our incomes but our savings accounts no longer do so as well. This article explains how this happened and why it’s important, as well as how you can reverse this trend by changing your saving habits — to start putting away 10% of your income instead of just 2%.
Why is Saving Money So Hard?
Part of the reason why saving is so difficult is that it requires a conscious effort to put money away instead of spending it. But that doesn’t mean that saving is impossible, or that you’re doomed to live with debt and spend too much. There are three factors that have led to the current crisis of savings in America: — The rise of credit-financed living: Credit cards have made spending more convenient, which has shifted the balance of power in favor of consumerism. — The changing of the savings equation: Financial technology has created new and improved ways to invest, which has led to a greater appetite for risk. — The shifting of cultural attitudes toward saving: Most Americans think of saving as a necessary but unpleasant act. — The Revolution of Savings Culture: How to Keep Spending Low and Save BIG
Debt and the Trick of Time
Debt can be extremely powerful, so much so that it can often feel like it has more power than money. This is a very understandable feeling, but it can also lead to the feeling that saving is impossible. However, the true value of your debt — and the difference between it and money — is that it can be repaid only in the present whereas money can be invested now to repay you in the future. Therefore, saving is not impossible and you can repay your debts. However, the trick of time is that if you don’t make saving a priority now, it will become exceedingly difficult to save in the future. To ensure that you can save as much as possible, you should make saving a priority as soon as possible.
Dependency on Credit and Confusion Over Interest Rates
Credit is a powerful financial tool, but it can also be dangerous. Credit creates a false sense of security, and it can diminish our ability to save because it gives us easy access to money that we don’t actually have yet. Credit can be dangerous in a couple of ways. Firstly, it can make it more difficult to keep track of your overall financial situation and keep tabs on your spending. This can make it harder to save money. The second issue is that credit is accompanied by interest rates, which are tricky to understand. Credit that comes with an interest rate is essentially a promise from the lender that they will lend you money now but charge you more later. Such a promise sounds odd and almost too good to be true, and it’s easy to fall for the trap of confusing interest rates with the price of borrowing money.
Lack of Knowledge About the Value of Money
People have become less intuitive about the value of money. This doesn’t mean that people have suddenly become dumber. Instead, it reflects a change in the way that companies interact with consumers, as well as a change in the way that people interact with each other. The change in the way that companies interact with consumers means that they are now less likely to provide goods and services at a fair price. Instead, they are more likely to change prices frequently and increase their prices in response to the slightest changes in supply and demand. This has led to a change in the way that people interact with each other. People no longer haggle over prices, and they are less likely to understand the true price of anything.
Concluding Thoughts
Saving money is difficult, but it’s not impossible. Start little from your current situation. It can be done. There will always be life challenges anyways. Some of the challenges that stand in the way of saving money are cultural. Reversing the current crisis of savings culture won’t happen overnight, but it’s important to start now. That means taking the time to understand how to save money, as well as how to avoid the pitfalls that can lead to debt.
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