CHAPTER 6 Media Article
Saving is painless and it pays off,
The Telegram, January 21, 2007
This article stresses the importance of saving money. People are not realizing that even saving a few dollars from every pay cheque can make a real difference in one‘s financial health. In Canada, “personal debt . . . [is at] a record high” and it consumes 109 per cent of a person’s disposable income. Starting small in the amount to save and then spending only what you have saved, and nothing, more is key. A little can go a long way in regaining financial control. People who need help can seek advice from financial planners or even from non profit agencies such as the Credit Counseling Society of B.C. Saving for long term goals and short term goals are different, yet equally vital.
Connection to Chapter 6- dissaving, disposable income, (expenditure) multiplier
This article is related to chapter 6 through the topics of dissaving, disposable income, and to a lesser extent the expenditure multiplier. This article informs us that a lot of people need to start saving in Canada. This leads to the topic of dissaving. People in Canada spend so much that “personal debt has hit a record high.” Canadians are spending way more than they can afford. Consequently, their disposable income is being eaten away through debt repayments. However, from what I learned in Chapter 6 all this economic activity caused by so much spending will have multiplied effect on our GDP, and the expenditure multiplier calculates the effect of changes in spending on the economy. Thus, by dissaving Canadians are getting into a lot of debt that‘s consuming almost all, if not all, of their disposable income; consequently, their spending like any spending has a multiplier effect on our economy.
Personal Reflection
Living a "paycheque-to-paycheque lifestyle" is not a good idea. By not saving money these Canadians are only hurting their own financial well being; however, at the same time they are helping our economy by spending. If the opposite were to happen it would be detrimental to us all as the Paradox of Thrift might come into play. When people do not spend, businesses receive make less revenue and since they always aim to make as much profit as possible they will begin to cut expenses and people will get laid off. Consequently, if we want our economy to flourish, like now, does it mean that these people need to remain living on debt? What will happen when a majority of these people smarten up? Can our economy remain stable or will it cause a downturn?
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posted by Jocelyn at 7:55 PM
3 Comments:
I agree that saving money is a very important issue and everyone should save an amount of money each month for his or her own financial health. In a best-selling book, The Wealthy Barber, David Chilton wrote that, if you start saving money (even only 10%) of your paychecks at an early age, it WOULD pay off in the future. Jocelyn, you mentioned about the 'living a paycheck by paycheck lifestyle ’; it is definitely not a good lifestyle to live in. If an unexpected accident or an emergency happened in your life or someone you care about, you won't have the money to pay for it.
I agree with you Jocelyn, Canadians should start saving. Since the more income we earn, we tend to spend more than we can afford. As you mention, “the disposable income is being eaten away through debt repayments.” is actually very true. The economy activity and GDP are caused by the amount that is being spent by people. If people do not spend, our economy will be affect. This will increase the unemployment rate when people do not spend money in the economy. I believed that the more we spend, the better the economy will be. The Canadians who are saving will not get into a lot of debt unlike the other dissaving Canadians.
S.To
I think that it is unlikely that people will "smarten up" in the near future because they do not see the big picture. People tend to save more money because they think it will benefit them in the long term and do not realize the harm that it actually causes in the economy. They generally see spending money as taking money out of their own pockets, and do not see the direct beneficial effects to themselves; therefore they are hesitant and end up saving their money instead. Most people either are really careful with their money and save it, or live paycheque-to-paycheque, as you mentioned; there is not much balance for the majority of people.
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