After taxes, little money left to save

Freedom New Mexico

America Saves Week passed a couple of weeks ago. It was intended to raise awareness of the importance of putting a little money away for emergencies.

The week went by with little notice, and it’s not surprising. Few people are saving money, and most say they aren’t able to. January’s personal savings rate was 3.3 percent, down from 4.2 percent in December, the Commerce Department reported. It’s the lowest savings rate in a year and a half.

Even so, a recent Gallup poll found that more than 60 percent of Americans say they’d rather save money than spend it. That’s more than 10 percent above a similar poll taken in 2006.

So if people say they want to save more money, why aren’t they?

It isn’t necessarily a matter of choice.

Logic suggests that if people aren’t saving money, they must be spending it. But is that true?

The Commerce Department reports consumer spending has risen the past four months, but by nearly inconsequential amounts. Spending rose by 0.5 percent in January, and by 0.3 percent in December. That kind of increase doesn’t even maintain current factory output.

The Institute for Supply Management’s index of national factory activity was 56.5 for February, down from a January index of 58.4.

Simply put, factories are producing fewer products — that usually means demand isn’t even high enough to reduce existing inventories.

OK, we’re not saving money and we’re not spending it. Are we using it to pay down existing debt?

People are trying, although it appears they aren’t doing it with excess funds.

MarketWatch recently reported an alarming number of Americans are skipping mortgage payments and using the money to pay down credit card debt.

Some people feel they have no choice. Credit card companies, prompted by new laws that went into effect last month, have canceled many cards and called in the balances. Many accounts left open were hit with sudden interest rate increases, also caused by the new laws.

In response many people are choosing to miss mortgage payments, which usually have lower interest rates, in order to pay down credit card balances that suddenly are incurring interest approaching 30 percent a year.

Where else could our money be going? About the only place left is into the hands of the taxman. And indeed, taxes have gone up, as has the cost of complying with the ever-growing list of regulations we must deal with daily.

It’s worth a thought. In his State of the Union speech President Obama said he’d lowered taxes for 97 percent of Americans. As we shuffle through our financial papers and prepare our tax returns, how many of us have seen evidence that we’re among that 97 percent?

Truth be told, about the only people we know who have seen their tax bill go down are those who earned less income on which to pay taxes.

And who wants to be on that list?