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An Interesting Question: What if EVERYONE Was Financially Savvy?
By JLP | August 25, 2008
From Liz Pulliam Weston:
We personal-finance types constantly nag readers about spending too much and saving too little.
But what would happen if everybody suddenly took our advice? What if every household in America:
• Paid off credit cards in full every month and carried no high-rate debt?
• Had an emergency fund equal to at least three months’ worth of expenses?
• Saved at least 10% of earnings for retirement?
• Paid off cars before trading them in?
• Bought only as much house as it could afford?
Read the rest here.
I have often wondered this myself.
I found this quote from the article interesting:
“Right now, you want people to be spending, not cutting back,” said economist Jared Bernstein, director of the living standards program for the Economic Policy Institute and author of the book “Crunch: Why Do I Feel So Squeezed? (And Other Unsolved Economic Mysteries).”
My question is: who’s supposed to be doing this spending? Lots of people simply can’t spend any more money.
Imagine the effect of everyone saving 10% of their income. I have a hard time wrapping my brain around this one. On the one hand, I would think it would be good for the stock market. On the other hand, that money has to come from somewhere, which means someone would be hurting. Most likely it would be the retail sector.
If everyone paid off their cars before trading them in, there would be a lot less used inventory for the frugal buyers to choose from (especially those who like to buy 2-year old used cars).
Liz’s article is an interesting read.
Topics: Budgeting, Economics, Miscellaneous |