“The hard truth is: the amount of money we earn is not always directly proportional to the amount of money we save because, more often than not, the more money we make, the more we spend.” David Bach, author “The Automatic Millionaire”

Let’s face financial reality and an inconvenient truth. Whether on Main Street, Wall Street or Pennsylvania Avenue, Americans continue to have and have long had a spending problem. Government statistics and other studies show that Americans’ spending has generally risen in the years since the 2008 – 2009 Great Recession. This trend is reflected in Americans’ general pattern of consumer spending and reflected in the rising levels of consumer, corporate and public debt which has topped a whopping $75.3 trillion in 2019 according to the stats coming out of the Federal Reserve.

Moreover, Gallup found in an April 2018 poll that people “…want see themselves as fiscally responsible, to some degree.” Even Americans who admit that they are spending more than they earn over the past several months are more likely to claim this is only temporary, rather than their normal. Those who say they are spending less believe it is permanent, despite what the numbers reveal.

And Americans’ have a predilection to say that they enjoy saving more than spending, which rose dramatically between the period before and the period just after the recession, has remained in place, even as the economy has improved.

Positive Cash Flow

Asked about their spending habits, Gallup results show that Americans are as likely to say they are spending the same amount as they used to (35%) as to say they are spending less (35%). Slightly fewer, 30%, report spending more. The takeaway is that Americans’ conspicuous spending habits will not change unless they first acknowledge it as a problem.

On the other hand, most wealthy people understand and stress the importance of spending much less than their means. Spending less gives them financial freedom which then translates into various opportunities such as career mobility, flexibility to venture into activities outside of work, and of course the ability to increase their wealth.

On the other hand, if Americans are spending more than what they earn, then even with a big six-figure income, they will be excessively reliant on each of their paycheck. It is very important that they are financially independent before the time comes when they decide to become self-employed or to retire. So it’s important to start saving, investing and accumulating wealth.

Simply spending less than we earn, eliminating bad debt, managing taxes and fees, paying ourselves first, starting to save early, automatically saving and investing for the long-term, and developing smart financial habits and positive financial mindset will result in huge results over a long period of time.

References:

1. https://www.federalreserve.gov/releases/z1/20190307/z1.pdf
2. https://usdebtclock.org
3. https://news.gallup.com/poll/209432/americans-say-saving-spending.aspx
4. https://www.bea.gov/news/glance