Why is it So Hard To Save Money Nowadays? The Problem With Thrift

why so hard to save money

Thrift is far more important than is commonly understood, and I will be explaining why in a future dispatch, but first we need to dispel the guilt many of us feel about the topic. There is actually a very good reason why it’s so hard to save money nowadays.

I think most of my readers will recognize the feeling I’m referring to: You read great books on success, such as The Richest Man in Babylon, you understand that saving at least 10% of your paycheck is necessary for success and you go out to do it… but obstacles keep getting in your way.

And then you feel bad. You feel that you have failed. You really don’t want to think about thrift any more.

I’m here to tell you that you were far too hard on yourself. It wasn’t your fault. (Okay, if you were out knocking back brews at a bar four times every week, that was your fault, but I don’t think many readers fall into that category.)

Thrift has been systematically strangled over the past century; it is now just barely possible. You’ve been blaming yourself for the sins of others. And remember, most of those success books were written before thrift was dead.

The Simple Reason it’s so Hard to Save Money in Today’s World…

When analyzing the economics of civilizations, the big question is this: Where does the surplus go?

In Greece, for example, surplus was generated by the labor of slaves, and went to the citizen (property owner), who tended to be a very good judge of where and how to use it best. In Western civilization, surplus was generally left in the hands of the person who earned it, who also tended to be a good judge of how best to use it.

Through the past hundred years of a declining Western civilization, the movement of surplus was radically transformed… it was skimmed away, in thicker and thicker layers, to growing governments in capital cities.

The result of this is the current situation: Essentially all surplus is skimmed away from the producer. This is accomplished with direct taxes, such as income taxes, as well as with the hidden tax of inflation, real estate taxes, sales taxes, and dozens of others. (On your phone bill, electric bill, gasoline, liquor, etc.)

In other words, it’s so hard to save money because the government takes so much of it away.

We are so used to this situation that we fail to remember that it was not always so. And that is why we feel guilty about not being able to save money. And we shouldn’t – a large army of state employees work every day to remove our surplus from our hands. Aside from acting especially stupidly, it really isn’t our fault.

How it was in 1890

If you’re like most of us, you had great-grandparents worked hard, saved their money, and improved their situation in life. It was normal to do so in the later 19th Century, even until the first World War. Great-grandfather got ahead; you work just as hard, but you don’t make much progress. And there is good reason for this: When Great-gramps worked hard, he kept the money.

In Grandpa’s day there was no income tax and no sales tax. (The government survived anyway.) There was no social security tax either, and – believe it or not – the streets were never full of starving old people. Families were able to take care of their own.

We have forgotten that it was once possible for an average person to accumulate money. Mechanics, carpenters, shop owners and people like them filled their bank accounts with gold and silver. It was common for people like bakers and carriage builders to make serious business loans and to retire comfortably, living off of their investments.

Making a Fortune

In those days before mass-taxation and fiat currency, young men would go out to make their fortune. (“Fortune” didn’t mean multiple-billions, it meant enough capital for the rest of your life.) Young men would go to where money was being made, work hard, cooperate with similar young men, learn everything they could from the older men, save, invest, learn how to succeed, then return home as a prosperous adult.

Not every young man went out to build a fortune, and some certainly failed, but these activities were not punished at the time – which made them much easier than they are today. Gathering a fortune was common enough that it was built into the mating strategy of the time. Many women would agree to marriage only after the young man had “made something of himself.” This mating strategy was legislated out of existence, which is too bad, because it was generally a far healthier strategy than what developed in its wake.

Here is a graph depicting the difference between you and your great-grandfather:

why so hard to save money

The top line shows how many years of living expenses your great-grandfather would have accumulated as a hard-working young man. The bottom line shows what you can save.

After working for five years, Great-gramps had seven years of living expenses in the bank. Doing the same things, you’d have less than two.

In the modern world, everyone’s fortune is taxed away as it is being formed, and what is saved is eroded by the creation of currency. Very few of us ever get beyond ‘escape velocity’ to accumulate money. In other words, we work all our lives, just to stay more or less even.
With surplus removed from individuals, all investment capital is forced through institutions. Money is not saved, it is obtained from banks. Finance has been centralized and removed from the hands of individuals.

In the 19th Century, productive people made loans; in the 20th Century, their children shuffled into banks and begged for loans.

Grandpa wasn’t really better than you.

The Worst Part

And the worst part of this was mass demoralization: People began to feel morally weak, which generally happened in the name of compassion.

Here’s how the trick worked:

  1. Your money is taken from you before it can accumulate, leaving you with barely enough to live a reasonable life.
  2. You have nothing left to help those who suffer unjustly; not because you don’t work, but because your surplus is continuously skimmed away.
  3. Politicians imply that you are a bad person for not wanting to help the poor.

Not only do the cultural elite make it almost impossible for you to give, but they insult you for it. Then, of course, they spend the money they skimmed from you on armies of government employees, who deliver a small fraction of your money to the poor.

Your great-grandparents were proud to help their friends and neighbors. They felt good about themselves, they felt compassion for others, and they were proud to make the world a better place. Being robbed of this heritage was far worse than the loss of surplus.

So, the question of why money is so hard to save has been answered. Now if only the steps from here were so simple.

Paul Rosenberg

Featured image courtesy of Joyous!, wikipedia.org

11 thoughts on “Why is it So Hard To Save Money Nowadays? The Problem With Thrift”

  1. This articule is so true for me I worked all my life building a business and the Government Changed the Rules and Killed my business. Nothing I could do about it even though I have written multiple letters to the Government and Newspapers with no results.

  2. It’s time to vote with our feet, just like many of our immigrant ancestors did. Stop wasting your time banging your head against a brick wall. We can’t change the system (at least not anytime soon) as that entails re-educating 300+ million people. There are lots of greener pastures, places where the governments don’t rob so much and where productive people are appreciated, not demonized.

  3. Hi Paul,

    You say that “this mating strategy was legislated out of existence”. Not a perspective I’m familiar with (although I’ve long since come to the conclusion that the State has absolutely no business in marriage). I was wondering if you might elaborate.

    1. First, by making it difficult to commonly earn enough for the strategy to exist. Second, by making it more profitable to live, unmarried, on welfare.

  4. I’m sorry but I disagree. It’s just as possible to save now as it has ever been. The same age-old principles apply. Anyone can save 10% of their after-tax income. The secret of paying yourself first (at least 10%) is just as effective as ever. We all earn different amounts and yet if we are to believe this article none of us can afford to save anything at all. That is a cop-out. It’s all about discipline. Our grandfathers didn’t get into debt on credit cards and they saved for what they wanted. Still works today.

    1. I know that u r wrong, you cant pay yourself first if u r
      taxed before you get what u earn, u r wrong. U have just confirmed what the
      article was addressing. So based on what u r disagreeing to would mean that if
      a person today is making minimum wage they can save just as much as a surgeon
      can. Realistically it simply takes more money to live in this society just to
      overcome all the taxes.

      People always want to use credit card spending to claim the inability of being
      able to save money. Its a shame that u cant realize what the article said. I
      dont have any children and I live in a van because I refuse to pay for an
      apartment or mortgage and I have never been able to save as much in my whole
      working life. Its not something I want to do permanently, but living this way
      lets me know that the article is dead on.

      I dont mind paying taxes but anything more than 10% is too much, and how much
      of this money is spent on NASA’s fascination with space exploration. I have
      done the numbers, lets take take a minimum wage of $7.50 an hour at 40 hrs a
      week, is $300 a week times 25% taxed = $225 left, based on the lowest apartment
      of $450 a month. $225 x 4 weeks = $900 a month – 10% as u stated is $90 a month
      leaves $810 – $450 = $360 left for basic needs, food clothes and shelter. Based on EBT benefits
      pays $200 a month to a single person for food, so minus $200 from $360 = $160 + $90 = $250 a month to save if u do absolutely nothing else

      Now, if I factor in all the other expenses like utilities, car maintenance and
      gas in order to save you basically cant do anything else but sit at home
      without a TV, radio or Computer. We all need a surplus of money like we have a
      surplus of air to function. The whole point of having money is to enjoy (not
      all) the products and services available.

      I have lived in a van for a year now and I am able to save 90% of my checks, I
      know have over $19,000 saved, I know for a fact that if I had a apartment I
      would not have this as a surplus. U r wrong, LIVE IN A VAN FOR A YEAR AND THEN
      YOU CAN TALK. I am able to help out my friends when they need help because they
      are still living the way the article said.

      Most people are simply doing the best they can, I have heard asshole people
      say you don’t need money to start business, if this were so then I can start my
      own printing company without a dime, it does not matter whether I make a dime
      or not, its just starting a business with no money.

      1. On the contrary. I believe you have proved my point. You saved not 10 percent of your income but 80 percent – $19000 – in just one year by reducing your costs and effectively paying yourself first. Well done! So if 80% savings is possible for someone on a low income by living in a van (pretty extreme tactic I must admit!) then 10 percent is perfectly achievable with a few more minor lifestyle adjustments. What the OP doesn’t mention is that our great grandparents didn’t own cars or have expensive mobile phone and internet plans. They lived lives of frugality. They saved for big purchases and borrowing was a dirty wors. You are proof it is NOT “impossible to save” (your words.) You contradicted yourself and proved the very point you sought to challenge – that it’s still possible to save a percentage of your income if you follow the correct strategies.

        1. I guess u did not get it, the only way i was able to save this money was because I live in a van, not a normal life in America. I should not have to live in a van to be able to SURPLUS MONEY.
          Costco pays a minimum wage of $11.50 and a average wage of $21 hr. I have over 25 years of Digital printing experience yet I just got a job with RR Donnelly starting $12 hr. RR Donnelly made 1 billion gross and $695 million cash flow, sure they can afford to pay me what I’m worth.

          I know that if I did not live in a van I would not have what I have. Can you HONESTLY SAY U HAVE $19,000 SAVED? HONESTLY?
          I did not contradict myself, people should be paid a living wage and not have to live in a extreme way to SURPLUS MONEY. Read the article again more carefully and stop blaming people for not being able to SURPLUS OF MONEY as the article pointed out.

          10% based on what a person earns and expenses will not amount to SURPLUS.

  5. I think we are at cross purposes here.
    I agree that wages in the USA are ridiculously low.
    I agree that people should be paid a living wage and shouldn’t have to take extreme measures such as living in a van in ordero have a surplus.

    I also stand by my view that it is nonetheless still possible to save a small portion such as 10 percent even of a small income. Of course this means a little less money to spend on othe things, but what happens is that when you transfer 10% first to separate account you don’t touch it forces you to libe on the rest. You automatically adjust your lifestyle to the amount you have left over. Maybe a few less cigarettes smoked, taking the train instead of the car to work a few times a week, a few less beers at the weekend. It quickly adds up to 10 percent and more.

    And yes I can honestly say I have saved much more than $19000 without living in a van and on an average income. Previously I used to spend all my income and thought the same as you until I read a book called Te Richesr Man in Babylon. I got a room mate to share rent, started taking the train instead of driving to work, I stopped drinking beer and quit cigarettes. My health has improved also.

    There are several separate issues here 1. Is the USA a low wage economy? Answer yes. 2. Do people deserve a ‘living wage’ where it is possible to save money without making lifestyle sacrifices? A. Yes. 3. Is it, despite these difficulties and injustices, still POSSIBLE to save money by followung a plan and making lifestyle adjustments? A. Yes!

    Therefore everything you said about the injustice of low wages and how you shouldn’t in a perfect world have to live in a van to save money is all true bit it’s not relevant to whether or not it is POSSIBLE to save money.

    The fact is that it is also true that it is POSSIBLE to save money on a low income. Plenty of people are doing it. You said it was impossible to save on a low income and then proceeded to tell us how you managed to pull off this “impossible” feat through extreme lifestyle changes. I think what you meant to say was that it would be impossible for you to have saved that money without making sacrifices. That is the whole point of “paying yourself first” by putting aside at least 10 percent before you spend it. It forces you to make scrifices to save money. Once you make savings a priority it is still possible even on a low income. The problem is that people’s wants tend to exceed their incomes and plan is necesaary to counteract this tendency. Read ‘Thee Richest Man in Babylon’ – it’s available as a free download. It changed my life and attitude to saving money and it can do the same for others here too. You can’t live the lifestyle of the rich and famous on a low income but with the right plan anyone can save a small portion of their money.

Comments are closed.