Friday, June 24, 2016

More Discipline Evidence

I was not surprised, more discouraged, to see this headline on CBS:  “Nearly a third of Americans have no emergency savings.”  Five months ago a similar survey from reported that about 63 percent would be unable to deal with a $500 car repair or a $1,000 emergency room bill.  Surely this doesn’t mean one-third of Americans don’t have emergencies.  Rather it’s more evidence that Americans have a problem with discipline in their spending habits.

The CBS piece points out that the number who have enough stashed away for at least six months has risen from 22% to 28% in the last year, but it’s still not good news for the non-savers or for the rest of us who may be affected if they begin defaulting on bills. 

Of course a natural reaction when someone is accused of weak discipline is to find an excuse.  (Weak discipline often goes hand in hand with weak responsibility.)  Here CBS comes to the rescue with “11 Tricks Retailers Use to Get More of Your Money.” 

These tricks can be condensed into a few categories.  Some have to do with offering prepared foods:  precut or prewashed or heat-and-serve.  It would be cheaper to do the washing and cutting and preparation at home, but buying prepared foods should be the result of a conscious decision to trade your money for free time rather than an automatic decision.  Another category covers bargain displays, soothing music and confusing store layouts to delay shoppers, getting them to spend more time (and money) in the store.  Finally, constant sales and promotions try to make almost everything look like a bargain, even when a product rarely sells for the full price.  Most of these tricks can be defeated by the age-old advice of shopping with a list and sticking to it.  (I’m surprised the writer left out the common trick of pushing an extended warrantee to get you to buy breakdown insurance on a brand new item.)

I wrote last time about how going after false advertising and other fraudulent activities keeps the FTC very busy.  They can hardly be expected to protect us from these little “tricks” too.  Americans need to take some responsibility.

Finally, some people attempt to control their spending by eliminating credit cards.  This strategy has some significant hidden implications and costs.  Not using a credit card (responsibly) affects your credit score, which in turn can make it more difficult to buy a house, a car or other big-ticket item.  Lower credit scores increase the cost of insurance and travel and may reflect poorly on you when applying for a job.  In addition, credit card companies become your ally when you face cases of fraud or have a dispute with a seller.  You also benefit from any cash-back program, have a complete record of spending and don’t have to carry a large amount of cash, especially for emergencies.  When used properly, credit cards have many benefits.

Even though the trend is in the right direction, a large proportion of Americans still have inadequate savings.  It’s futile to blame it on retailers’ tricks or to try to fool yourself by cutting up credit cards.  The right answer, the real solution, is to know it’s up to you, and only discipline will do.  It is hard to imagine that a large percentage of those without savings and living from paycheck to paycheck can’t find at least one small sacrifice or habitual extra outlay to cut as a source for a small savings plan.  It may seem to hurt at first, but it’s a lot healthier than living with the constant stress of dreading the arrival of the next unexpected bill or emergency.

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