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Why Should I Care about Spending Less/Saving/Investing?
A while ago, my wife and I were sitting around the table chatting and working and, as often happens with me, I must have made some comment about saving money or avoiding debt. She asked me what the big deal was about not having debt? Why should we sacrifice to spend less so we can get out of debt and save and invest? If so many people are using credit cards and home equity loans to buy the stuff that they want, do we really need to care about this stuff so much? Are all of those people going to end up destitute or are they all going to be fine even if they used credit throughout their life?
Aside: I’m not sure why she asks me questions like this. Sometimes, I think she just says this stuff to see how I’ll react ("I wonder if his head will explode if I ask him this?"). Maybe she is truly curious. Possibly, she is trying to engage in an honest, albeit slightly controversial, conversation. You know, like she pushes some buttons to try to get me thinking about things from a different perspective. Yeah, let’s go with that one.
Anyway, given the current economic conditions in the US, this is a good time to discuss this topic (Ok, actually, it’s about a year too late to do anything positive about your situation, but humor me here). First of all, a good deal of the economic turmoil we are currently experiencing is related to debt in one way or another…but that’s a topic for another post.
Fewer monthly expenses and more savings
So, let’s look briefly at some of the benefits of not having large amounts of debt in a time like this. Obviously, if you don’t have a lot of debt payments to make, you therefore have less fixed expenses each month. And if you have been paying yourself instead of paying debtors, then you probably have more money in savings and investments (well, in savings at least). And put those two things together in a box and wrap it up and you’ve some protection and flexibility.
You have protection that enables you to pay big expenses that might arise (like if your water pipes froze and burst ) or help you through situations such as losing your job or encountering some other major problem. You also have flexibility in your life. While most people are just very happy to have a job in times like this, your reduced expenses and increased money in the bank allow you to retain your flexibility – if you really hate your job and/or (somehow) see a better opportunity, you can actually consider taking that risk.
Not only surviving but also thriving
Most people focus on survival in these economic conditions, but there is another aspect that should be considered. If you have done a good job of staying out of debt and saving some money, you are in a relatively unique position right now. You have money at a time when things are on sale. Think about it – houses can be purchased for much, much less than a year or so ago. The same is true of stocks. You are not in a position, like so many appear to be, of hoping to survive, you are surviving and looking to thrive.
I can’t remember who said it (I think it was someone with a large net worth) so I can’t look it up, but I always found this (paraphrased – since I can’t look it up) quote interesting:
You make most of your money during a recession, you just don’t know it at the time.
If your job is secure and your debt load is low and you have money on hand, maybe now is the time to invest in that rental property you’ve been considering for a long time. Been thinking about purchasing a property in foreclosure? There are many available right now. Almost all stocks are much less expensive than a year ago so even dollar cost averaging should pay off in the long-term. These are but a few examples of opportunities that are available if you look around.
Then again, I’m sure the government will take care of us no matter what
On the other hand, to my wife’s point, why worry too much about debt and what-not – we’re in a bad place right now but our wise leaders in Washington are hurrying an economic stimulus package that I’m sure will help everyone out and immediately get us out of this funk. Pork? nah, surely they have the people’s best interest in mind and not only their own…(and if that doesn’t scare you into wanting to get out of debt, I don’t know what will).
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3 Responses to “Why Should I Care about Spending Less/Saving/Investing?”
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I love the last line about the pork! Funny but sadly true!
I think living debt free leads to a less stressfull life as well as an ability to have nicer things. Look at the famous Duggar Family. The lived in simple homes for a long time which enabled them to get their dream home. My inlaws live in a modest 2 bedroom home, but it is the most beautiful 2 bedroom..being debt free has allowed them to really invest in it. If we were not paying any debt it would only take a couple of months for my husband and I to completely renovate our kitchen with cash. The debt free people I know just have it better!
I really believe in Dave Ramsey’s famous saying “LIve like no one else, so later you can really live like no one else!”
The one and only downside I can think of for having been good money managers and being in a fairly good position now is that thing you said about the ‘government’ taking care of us. Since not everyone can be a receiver, who is left to be a giver (or taken from)? That would be me, thank you very much!
@D – I totally agree with Dave’s saying as well…it just seems that a lot of people find it too hard to follow unfortunately. Here’s another one to your point – “The borrower is servant to the lender” Proverbs 22:7b. Debt really restricts our ability to be free and do whatever we want to do. Not many people can quit the good-paying job they hate to chase their dreams when they have a mortgage, a home equity loan, credit cards, and two car payments!
@Sheila – Unfortunately, you hit the nail right on the head…and whatever the “givers” can’t pay for now, all of our children will be paying for in years to come!