Lurking at the New York Times website, I read an opinion piece by Barbara Dafoe Whitehead, titled “Saving Takes Time and Discipline.” You can go read it for yourself, it’s very brief. The thesis is that the primary driver of savings is a slow accumulation of money by denying short-term pleasures for long-term gain. The conclusion, of course, is blaring in the title: saving takes time and discipline.
This attitude is very common in financial planning articles that are published for the lay reader. While Barbara Dafoe Whitehead’s article isn’t as pejorative to spending as many other articles on the same subject, it still falls into the assumption that the reason people aren’t saving is that they’re unwilling to deny themselves geegaws. I would like to say there’s more to it than that, and here’s why.
First, let’s start with a simple formula:
Income – Expenses = Savings
So there is only one way to increase savings, one must earn more than one spends. So you can either increase income while leaving spending unchanged (in increased to a lesser extent), you can leave income unchanged while reducing expenses, or you can both increase income and decrease expenses.
Looking at this from the point of view of the layperson reading a financial planning article. I think you’ll agree with me that our reader would probably prefer to increase their savings by increasing their income significantly while increasing their spending to a lesser extent. After all, it provides dual benefits to our reader, they increase spending and savings. What’s not to like?
Now, look at this from the point of view of a professional writing an article. Our professional has, say, a thousand words with which to write. A four point list of expenses that can be easily cut is simplicity itself to write. A strategic analysis on increasing income is simply too long to treat properly in a print column, and if it’s truncated it comes of as trite.
So, we end up with lists of 3 through 10 ways to save x dollars per month, in a thousand permutations. We also get the perspective that, if only we Americans would get our wild, delirious spending under control, we would have ample savings for our retirement. This ignores what I believe is the primary reason Americans don’t save: we don’t spend too much, we earn too little.
Because saving doesn’t just take time and discipline, it also takes an income greater than expenses.