Far too many aren't serious about saving

Your Money

February 25, 2007|By Humberto Cruz | Humberto Cruz,Tribune Media Services

Lou Dobbs, a news commentator on CNN, often asks why it takes middle-class American families two incomes "just to get by."

"It's time for answers," he demands.

I have some, but not the ones he is looking for.

To be sure, many hardworking middle-class families struggle financially because of corporate greed and downsizing, job outsourcing and skyrocketing health care costs.

But for many others, the answer to Dobbs' question is staring at them in the mirror.

I've come to this conclusion after coming across numerous examples of our profligate and wasteful ways, together with our propensity to shift the blame.

The Commerce Department recently reported that the nation's personal savings rate slumped to a negative 1 percent in 2006, the lowest since the Great Depression. Americans, on average, are not only spending all the money they make after taxes but also are dipping into savings or getting into debt so they can spend some more.

Granted, the way the savings rate is computed often understates actual savings. For example, the government formula does not consider any increase in the value of investments. Many economists theorize that some people feel they don't need to save because of the run-up in their portfolios.

I lend more credence to another theory: Middle-class wage earners won't give up their current lifestyles even if their wage gains have been depressed by global competition. They will spend all their disposable income if necessary, and then some.

Consider the buying frenzy for large-screen high-definition television sets in the days leading to the Super Bowl. Based on estimates by the National Retail Federation, about 2.5 million Americans bought themselves an HDTV and 1.3 million bought new furniture, including home entertainment centers.

On top of that, those watching the game on TV spent an average of $56 per person on Super Bowl-related merchandise, food and beverage, expenditures that don't jibe with the lament that it's impossible for middle-class Americans to save.

Want to spend some more? The newest "cool" gadget making its way into American homes is a computer perched on the kitchen counter. For a decidedly uncool $1,800, it is supposed to function as an electronic organizer that replaces the reminder notes and photos many families stick to the refrigerator door. It also features a built-in television set, as if we needed one in the kitchen, too.

Next, let's move to the blame game. Last month, several consumer advocates bemoaned the fees - some as high as $35 - that more banks are levying on customers who overdraw their accounts on small debit-card transactions, such as for a drink or a latte.

Previously, most banks rejected debit-card transactions if the customer didn't have enough money in the account. Now, they are letting the transaction go through, temporarily covering the amount with the bank's money and hitting the consumer with overdraft fees that can be several times the amount of the purchase.

Is this a sneaky way for banks to collect more fees? Perhaps. A survey by the Center for Responsible Lending found that 61 percent of consumers with a preference would rather have the bank deny the transaction than approve it and charge a fee if it overdraws the account.

But what, may I ask, prevents us from keeping tabs on our account balances so we don't overdraw it in the first place? With most banks, you can check your up-to-the-minute available balance online or with a toll-free telephone call any time of the day or night.

It is our job, not the bank's, to keep track of any impending electronic debits that can reduce our available balance, or checks we have written that have not been cashed. Spending money we are not sure we have - that's what we do when we use a debit card without knowing our account balance - is irresponsible.

The simple solution? The same you've heard from me over and over: Keep track of all the money you receive and spend. If you say that's too much of a bother, I say you are not serious about saving.

Keeping track can save you a bundle. A couple I saw on a cruise - aboard a ship that caters decidedly to the middle class - didn't realize until they received their bill on the last day that they had charged more for drinks, casino chips and gift-shop items than what the cruise itself cost. That was their own doing, and why it takes some middle-class families two incomes just to get by.


Humberto Cruz writes for Tribune Media Services.

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