Blame Game

Dennis Friedman

I’VE READ A LOT of articles about why Americans aren’t saving enough for retirement. Most of the articles lay the blame on our spending habits and the debts we’re servicing.

For instance, some point the finger at the gourmet coffee we buy each morning. Suze Orman says, “You need to think about it as: You are peeing $1 million down the drain as you are drinking that coffee.”

Similarly, others point out we’re spending too much on unnecessary items like vacations, electronic gadgets, lottery tickets and avocado toast. Another article says it’s the new cars we buy. If only we drove a piece-of-crap car, the argument goes, it would be easier to save money.

Shark Tank celebrity Kevin O’Leary says you need to have all your debts paid off by age 45, including your mortgage, if you want a comfortable retirement. There’s no mention in the article of how you can be debt-free by that age.

The message I get from these articles is that it all comes down to the battle between wants and needs. Is that really the reason Americans aren’t saving enough? Is it simply that we can’t control our desire to piss away our money on items we don’t need? That strikes me as a simplistic answer to a complex issue.

Could the problem, instead, be the high cost of health care, housing and a college education? How about adding stagnant wage growth to that list? According to Pew Research Center, the average wage has about the same purchasing power today as it did 40 years ago.

Indeed, why do these articles blame individuals for being poor savers? Perhaps because it’s easier to blame them than find solutions to these far more vexing economic problems.

The government collects information on consumer spending, so we can get a pretty good idea of how typical Americans spends their money. Are they living the good life by overspending on unnecessary items? Let’s take a look at what the Bureau of Labor Statistics’ 2017 consumer survey found.

According to the BLS, average household spending in 2017 was $60,060. If Americans were irresponsible spenders, the following three items would be a good indicator:

  • Entertainment: $3,203 a year. That works out to just $267 a month, equal to 5% of total spending.
  • Apparel and services: $1,833. That’s $153 per month or 3% of all spending.
  • Eating out: $3,365. That’s $280 per month or almost 6% of total spending.

In other words, these three discretionary items account for only 14% of total spending, or just a third of what’s spent on two of the most critical items: housing (33%) and health care (8%). It doesn’t look like Americans are irresponsibly spending their money on eating out, clothes and expensive distractions (and, remember, we all need food and clothes).

The second biggest budget item, after housing, was transportation at $9,576 a year, or 16% of total spending. This includes purchasing a new or used car at $4,054 (7%) and gasoline at $1,968 (3%). Also included is insurance, maintenance, public transportation and finance charges. Again, it doesn’t look like typical Americans are foolishly spending their money on luxury automobiles.

I understand there’s always room for improvement when it comes to spending. Yes, if we’re to save enough for retirement, we need to live on less than our income—and that means making short-term sacrifices. But a lot of these personal finance articles would lead you to believe the main reason Americans are poor savers is because they’re constantly buying things they don’t need. I’m not buying it.

Dennis Friedman retired from Boeing Satellite Systems after a 30-year career in manufacturing. Born in Ohio, Dennis is a California transplant with a bachelor’s degree in history and an MBA. A self-described “humble investor,” he likes reading historical novels and about personal finance. His previous articles include Not as AdvertisedA Fine Example and Building Wealth. Follow Dennis on Twitter @DMFrie.

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Charlie DeLuca
Charlie DeLuca
3 years ago

I’m 63 years old and grew up in a blue collar, single income, 4 child household. If I lived the way my parents did in that situation, I could have supported three households during my working years. Count up the number of telephones, appliances, televisions, and tv/internet subscriptions in you household and tell me you’re not spending more than you need to.

Walter Abbott
Walter Abbott
3 years ago

Lets think about housing and transportation, 49% of spending. Do you really “need” that big house, or would a plain 3/2 be enough? How about that new Suburban? Wouldn’t a reliable 4 yr old used car get you work just as well?

I suggest that many, if not most, houses and cars are bought to impress neighbors, coworkers, relatives and others, instead of to fulfill the basic requirement.

Bruce Trimble
Bruce Trimble
3 years ago
Reply to  Walter Abbott

At least where I live the only houses being built are big houses.
It is just so much more lucrative for construction companies to
build those than starter homes.

So if someone wants a house, they have to buy the bigger house
that they may not want. Or wait for a smaller house to come on
the market that someone already owns. Which may never happen.

Al Hilditch
Al Hilditch
3 years ago

the consumption percentages are acceptable, except the auto. Not until post WWII did even most families own an auto. In most European, countries an auto is a luxury.

Public transportation needs become more of the go to method and will greatly enhance an individuals disposable cash flow and savings.

3 years ago

Interesting analysis Dennis. My research into this topic seems to indicate that the current generations(Millennials, Gen X) are saving at comparable rates as their predecessors (Boomers, Silent gen). However, because of far less generous Social Security benefits, pensions that have disappeared, depressed investment returns, and other factors beyond their control, the amount that they have saved will not go nearly as far as it did for those previous generations. And for this, the current generations are berated as “spoiled” and “undisciplined” by the very generations that voted for policies that caused most of these changes in the first place.
This strikes me as somewhat disingenuous, and more than a shade hypocritical. And like you, I’m not buying it. Nice post.

3 years ago
Reply to  wtfwjtd

My Grandparents put money into 20 year CD’s in the 1980’s at 18% interest. Those made them a killing. What would a “good” CD get someone today? 2%? We have some money in a bank moneymarket account for our disabled son because we might need to access it. The returns are pathetic. When I got my first checking account, it paid 7.5% interest, etc, etc. The plain fact seems to be that there aren’t a lot of incentives to “save” in the traditional ways, and a lot of people don’t really trust wall street to look out for their interests.,

3 years ago

Thumbs down on this article. From the HumbleDollar’s own “About” page, “We advocate a relentless focus on the things you can control.” How did a political article slip through the cracks?

Personal finance is 20% head knowledge, 80% (it’s been said). So all those articles on our own behavior you’re not buying, but it’s all the government/system’s fault? Got it.

Nevermind the fact that the average household size has continued to decrease while the average HOME size has steadily increased – that’s because of the system made them buy that bigger house.

Nevermind the fact that a record 7 million American’s are > 3 mo. behind on their auto loan – that’s because of the system.

Nevermind the fact that cars are more durable and lasting longer than ever – the system made us upgrade our historically smaller family into that SUV.

This whole article assumes it’s not the individuals fault for having their budget upside down? The average #s are often grounded by extreme outliers – of which I am. We spend more than “average” during the course of the year, and our numbers are nowhere near those cited for eating out (we budget $80), entertainment (what’s that?), or clothing ($50-$80). To assume the avg. American “needs” (which the author does) $1800 worth of new clothing and apparel/Yr and $3300 in restaurant food is…reckless? Presumptuous? Entitled? Blind? Backward?

Next, the BLS does NOT have even a line item for “saving” – maybe “All Other Expenditures”? Every major line item totaled together = $60,060. If savings is a priority, which no one would argue, then your opinion that they’re not “irresponsibly overspending” on “luxury vehicles” (which, @ $60,060/Yr, you don’t need a luxury vehicle, it shouldn’t be assumed you deserve one, and you likely are overextended on whatever car payment you have as it is.) is patently debunked by the very same survey.

IF there is no “savings” line, but all these other “needs” are covered… isn’t that a decision they’ve made to spend their $ on over saving? Now wouldn’t that be the definition of irresponsible?

Finally, it’s important to use perspective of the whole situation – let’s see what jumps out. This same study reveals:

– 5% ($2,749) increase (from ’16 to ’17) in overall expenditures (let’s assume this is after tax/take home pay – it seems they are.
– 11.6% ($420) increase in vehicle purchases
– 10% ($290) increase in entertainment
– 10.4% ($652) increase in owned dwellings
– 12.2% ($162) increase in education
– 7.8% ($55) increase in personal care products

– 8% ($254) increase in health insurance
– 7.8% ($211) increase in eating out
– (-10%) (-$208) DECREASE in cash contributions (assuming charitable donations)
– 6% ($113) other expenditures (saving? Maybe, meh.)

The bolded line items are 100% personal spending decisions and amount for 72% of the total increase disposable income increase – close to the 80% behavior number noted earlier.

We’ll complain about the cost of healthcare and education and ignore the fact that $ spent on eating out almost = $ spent on healthcare (is there a direct correlation here or are we all eating the most healthiest of choices when we go out?) Like wise, what we spend annually on vehicle purchases, eating out, entertainment, and clothes ($12,455) =

– 3.5X what we spend on health insurance.
– 8.3X what we spend on education.
– 6.6X what we contribute to charity.
– About 1:1 what we spend on shelter.

To point and say this is a system problem, WOW. Do better HumbleDollar.

First things first. Problem solved, or… “We advocate a relentless focus on the things you can control – vehicle purchases, eating out, entertainment, and clothes. If you can’t, it’s not the system’s fault.”


Langston Holland
Langston Holland
3 years ago
Reply to  Greg

Very good content in your post, but it misses the mark of humility per the “About” page.

Though I lean toward your side on this, it is true that individuals operate within a system and financial outcomes will rely on a combination of the two assuming legal behavior. It is also reasonable even within the constraint of “things you can control” to consider changes in the system that make retirement more challenging. The effect may not be as immediate, but as famously said “elections have consequences” is correct and materially changes and/or redistributes costs and incentives.

This was a great article largely because it cut across the grain of many of us.

David Baese
David Baese
3 years ago

Thank you for this excellent article. I highly value it because I disagree with you. Of course I believe that the disabled and most vulnerable people in our society ought to be supported by public funds, and I am pleased to pay the necessary taxes to give them comfort and dignity. Have you read Paulette Perhatch’s essay “The Story of an FO Fund,” or Adam Shepard’s book “Scratch Beginnings?” I highly value the human dignity and independence that comes from financial autonomy and I like the optimism that says it’s possible and doable. If you will affirm this optimism it will greatly lessen the disagreement I have with you.
Thank You,

Phil Dawson
Phil Dawson
3 years ago

Interesting ideas Dennis. Just as no drop of rain believes it is responsible for the flood, there are a host of obstacles to saving. Healthcare, housing and education costs are indeed obscene, although the root causes of these costs are not well understood. I would offer two counterpoints. First, we are assaulted by a culture that drives us toward high discretionary spending. We deserve it, after all. Small changes in this behavior, especially early in life, can indeed creates large differences in outcomes. Second, we must always give agency to the individual lest we breed victimhood and attendant hopelessness. That is not a path forward. There are people who are succeeding in the current morass. Let’s figure out how.

Nice job driving the comments!

3 years ago

Let me tell you – healthcare was a HUGE cost issue 30-40 years ago. Not if you worked for employers. But my dad was a small business owner and my mom had a debilitating auto immune disease for most of her life. They were turned down by every insurance company but blue cross – and BC rates were ridiculously high for pitiful coverage with a ton of exclusions. He had to make many sacrifices to afford even this sad policy – but he made sure the family was covered – and still managed to save – even on a small income. We lived very simply but I had everything I needed.

Education? It sounds harsh, but I have ZERO empathy for people with big student loans. So many of these kids had to go to the hottest “in” state university, one out of state or a private university. I went to a cheap community college and took the SAME prerequisites – but I paid 1/3 the cost. I transferred with my AA and graduated with honors as a bachelor’s grad – not a cent in debt, No one needs a big name school to build a good career.

Why is college the be all and end all anyway? The country is desperate for skilled tradespeople – plumbers, electricians, mechanics…these people make good money – more in many cases than college grads – and it’s not work that can be outsourced. Why aren’t we encouraging more of that? Snobbery maybe? Do parents still look down on those who work with their hands – “my kid deserves better!”

Some people have rose colored glasses about “the good old days”. Many of today’s problems were challenging then. My mortgage in the early ’90s was 8.5% and people were predicting the end of home ownership for all but the rich.

Frankly, every generation has advantages & challenges previous ones didn’t. FIRE folks and I know many others are trying their best/making good choices. And sometimes, it’s just crap luck – I know that too. You do your best to live healthy and take care of yourself, yet get cancer. You work hard, then get dumped due to ageism or outsourcing.

But I truly see many people I know, including family and friends, in the situation they’re in because of poor choices: poor diet choices. Poor spending choices. Poor priorities. Then they refuse to own any of the choices they made.

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