HSBC Bank has reported some interesting facts in a new survey. The results are that many in the income rich category are not saving. (Income rich is considered a household making $250,000 or more per year) From my experience, most Americans put a much higher emphasis on income rather than wealth. People in this country have been conditioned to spend money now and worry about the future latter. Regardless of your income level, you will have a tendency to spend all that you make and then some unless you make some significant changes that goes against the grain. The data from the report suggests that it is not only the middle and lower income people are struggling but it is also the high income people that are spending beyond their means.
As evidence, HSBC reports that people with more than $250,000 in household income, who constitute the top 1.5% of U.S. households, report facing many obstacles when it comes to saving. Indeed when HSBC asked what prevents them from saving more, the top answer was the need to pay everyday bills, with 34% of respondents of those who earn more than $250,000 concurring.
The savings rate in the United States dipped to zero in 2005 and has even fallen into negative territory, the first time since the Great Depression. This is terrible. Yes it is true that many people could not save back then because they did not have any money. But what happens if the economy were to slow down?
When people don’t save, and overspend in addition, a precarious financial circumstance evolves where even the slightest snafu in expenses can send them into defaults and bankruptcy.
Over the past two years, default rates on debt payments and bankruptcy rates have soared. Most recently, mortgage foreclosures have skyrocketed.
It’s sometimes assumed that wealthier people are somewhat sheltered from risk of foreclosure or bankruptcy. But just because the numbers may be bigger doesn’t mean the financial circumstance may be better.
HSBC found that 49% of respondents with at least $250,000 in income aren’t saving more because they simply “want some spending money.” In 28% of the cases for those who earn between $100,000 and $250,000 they do not save more because “something unforeseen always comes up.” And in nearly one in 10 situations, people who earn $250,000 or more say they aren’t even earning “enough to make ends meet as it is.”
The serious case of consumerism in the U.S. — we spend more than twice as much as anyone else in any other country in the world on average per year — may come back to bite if the economy slips and employment slows.
We need to stop the madness and start saving.
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