Friday, May 25, 2018
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Nation of smart people making dumb moves financially

Individually, we're smart, prudent, and financially savvy. Unfortunately, collectively we're pretty dumb, careless, and would flunk Econ 101.

As individuals, we're certainly not dumb enough to give out our Social Security number over the phone, let someone look over our shoulder while we operate an ATM, or throw bank-account information in the trash. So how come 27 million Americans reported they were victims of identity theft in the last five years? How did identity theft become a $50 billion annual problem?

Individually, we know better than to run up our credit-card balances to the max. We know that even though we might carry six, seven, or eight cards, we can't run big balances on each one. So how did consumer debt - for cards, cars, charges, etc. - rise to nearly $2 trillion, or about $19,000 per household?

And for that matter, if we were collectively prudent, how did bankruptcies get out of control, hitting a record of 1.6 million nationally last year?

As taxpayers and workers, we certainly know the value of 401(k) accounts, and we know we must sock away 10-15 percent of our pay in order to ensure there will be some gold in our “golden years.”

So why do 27 percent of eligible workers ignore 401(k) accounts? Can't they do the math? (Admittedly, there are many excuses and possibly even a few good reasons for some people not to contribute to retirement-savings accounts, but even math-challenged taxpayers ought to be able to see the tax savings, plus the tax-deferred accruals.)

Individual investors are way too smart to fall for another dot-com bubble. They know that many (probably most) of the high-tech companies of the late 1990s cranked out phony revenue numbers and pie-in-the sky forecasts. They know that when the Nasdaq index hit 5,000 it was just a house of cards. So who is now buying all those Nasdaq stocks again, pushing the Nasdaq composite up 50 percent last year?

As individuals, we can see through the Internet come-ons, the phony sweepstakes offers, the junk mail, the spam. So where are the suckers who are falling for these con games? They must be out there somewhere - or the spammers and scammers would simply give up.

We're smart enough to know that time is money, and procrastination doesn't pay interest. So how come millions of Americans wait till the very last minute to do their financial planning, estate planning, tax planning, any kind of planning? It's understandable for taxpayers who owe lots of money to wait until April 15 to mail in their returns, but, oddly, millions who know they will get refunds also wait until mid-April.

We are cautious - those of us who have lived through numerous recessions - and we know the value of having some cash tucked away in case of hard times and emergencies. So, exactly how did the national savings rate drop to nearly zero just about the time the new millennium started? Admittedly, the stock-market slide caused the savings rate to jump back up a bit in the last couple of years, but it's still well below the savings rate in a number of other developed nations.

Yes, we're smart, and safe, and pretty smug, too. But we have to look around and be especially wary of those dolts around us who are making some very bad decisions.

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