Why can so few people seem to save any money? The number of people scraping along from paycheck to paycheck is astonishing; surveys routinely find that somewhere between a third and half of all Americans don’t have the savings to fund ordinary emergencies—a moderately large repair, a month with no income. These are not the kind of astonishing runs of bad luck that no one could realistically expect to cover, like a $100,000 medical bill, or a multi-year illness that makes it impossible to work. They’re just the normal vicissitudes of regular life, and somehow, Americans are unprepared.
These are the questions that Neal Gabler tackles in an article for the Atlantic. The answer he arrives at boils down to: we need to keep up with the Joneses, only our incomes aren’t growing, or even stable in the face of inflation, and meanwhile, access to credit enables us to live, for a while, as if that last part weren't true. The result is a recipe for disaster. Or at least, for Neal Gabler’s disaster.
Gabler has done something very brave: He has confessed his own personal financial disaster, rather than making vague remarks about all the trouble other people are having. That’s hard to do, for people are more furtive about their financial lives than about almost any other topic. You can open any magazine and find someone gaily chatting about their last five sexual encounters; find books and books about the loss and redemption of getting fired or going to prison. But it is very hard to find people confessing to something we all do an awful lot of: worrying about money.
To be sure, Gabler is perhaps not as brutally honest with himself as he might be. “I never wanted to keep up with the Joneses,” he says, while recounting his decisions to live in Brooklyn, and then in the Hamptons, while sending his daughters to private school and expensive colleges. This is keeping up with the Joneses, of course. Gabler happens to belong to a social class in which the markers of success are living in the orbit of an expensive coastal city and educating your children at an elite school, not necessarily driving a fancy car or having a second home on some Florida golf course. Yet the former often costs more than the latter would. The majority of the people in the world do not live in the New York metropolitan area, and do not send their kids to Stanford University, and yet they somehow manage to get through their days—even, I dare say, to occasionally live worthy lives and die happy.
I say this not to rake Gabler over the coals particularly; note that I too live in D.C., an expensive city, even though our money would undoubtedly go much further in exurban Virginia, or western Kentucky for that matter. Rather, I say this to suggest that the primary reason people have so much trouble saving is that they can always find a reason to justify not doing so. The details of what they’re spending on may change, but the justifications have a curiously similar sound to them.
After all, the personal savings rate peaked decades ago, when incomes were, for most people, not lower than they are now. People in the 1970s saved more because in general, they spent less money on stuff. Their houses were smaller, they were hawkish about turning off lights and keeping the thermostat down, they had fewer cars, fewer televisions, and yes, fewer years of education. Their health care was cheaper, but that was in large part because there was less health care available to be bought—many of today's drugs and procedures having not yet been invented. And even leaving aside health care and education, we can’t really defend the decision to buy more of everything else rather than saving as a necessity. It’s not as if my generation’s parents were exactly living in squalor back when the savings rate was high.