Where’s the Money?

Why is our savings rate so low? Lack of motivation? Denial about the need? A penchant for big screen TVs? In its 6/21 issue, the Wall Street Journal fixed the blame on our housing and transportation spending. It cited government figures showing that while the portion of our spending devoted to many categories has fallen or remained flat over the years, our housing and transportation spending has grown. Together, the two categories accounted for 52% of our spending in 2002-03—up from less than 41% in 1950. While homes and cars are more realistic options for most people than pup tents and bikes, the article said most people could easily dial back spending in those categories: “If you’re willing to skip the heated car seats and the third bathroom, you would probably still be living better than your parents did—and you will free up money that can be saved.”
h3(matt). Matt’s View
p(matt). Our transportation spending can be explained, in part, by a comment from Charles Kettering, a former general director of General Motors’ Research Labs. In the late 1920s, he was quoted as saying business needs to create a “dissatisfied consumer.” Its mission, he said, is the “organized creation of dissatisfaction.” GM’s contribution to the cause was planned obsolescence—annual model changes designed to make us dissatisfied with what we’re currently driving. It’s a big reason why trade in our cars after just 4 years on average. One way to add efficiency to our money management is to keep cars for at least 10 years, finding satisfaction in having money in the bank more so than in having wipers on our headlights.

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