20 years of spending saps savings

To find out, I calculated what the per capita savings investment would have to be if individuals had saved 10 percent per year over the past 20 years, as well as if they were to save that much over the next 20 years. I assumed an 8 percent after-tax return and 3 percent wage growth.

To accumulate this amount, a person who had saved at the paltry "average" savings rate of the past 20 years would have to save 23 percent of disposable income annually over the next 20 years!

There has been only one time in our history where the average person has saved at that rate. That was during World War II.

During that time, every capable person was either working or in the military. You could only buy necessities, and often precious few of those were available because of rationed gas, meat, butter and sugar. People grew their own food in "victory" gardens.

You couldn't buy automobiles, radios or even silk or nylon stockings because those industries were supporting the troops with tanks, communication equipment, silk parachutes and nylon for tires.

There wasn't any way to spend much money, so you saved. Besides, it was popular to support the war effort by buying savings bonds. Children would buy 25-cent savings stamps and paste them in a book until they had enough to get an $18.50 savings bond.

That's the kind of environment it took to save 23 percent of disposable income per capita.

Break the spending cycle 
Today, the environment is very different and encourages us to spend whether or not we have the money to pay for our splurges. There are several ways to tell if you are caught in the consumerism trap. The most obvious is if you have more debt (excluding a home mortgage) than savings.

It's surprising how many ways there are to save more. Simply reducing spending on daily lunches and eating out may save $50 a week. You can also save by resisting the temptation to get the latest electronic device, software, music or a more expensive car.

Other ways to save include thinking long and hard before purchasing that cute pet, borrowing or renting tools instead of buying them, skipping pricey entertainment expenses, and so on.

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