Warren Buffett, the iconic American business magnate who is synonymous with successful investing, once said: “Do not save what is left after spending, but spend what is left after saving.” His personal worth stands at roughly $124 billion so he’s probably someone who’s financial advice we should all heed.
But statistics show that many of us don’t pay attention to that advice.
The United States Bureau of Economic Analysis recently released its annual survey of consumer spending by state. As Georgia continues to grow, and Pickens County right along with it, it’s no surprise that our state saw a 9.8 percent increase in per capita personal consumption expenditures from 2021-22.
Personal consumption expenditures (PCE), also known as consumer spending, is a measure of American’s spending on goods and services. PCE, according to the Bureau of Economic Analysis, accounts for about two-thirds of all domestic spending. Consumer spending, an important factor driving the U.S. economy, also sheds light on buying habits and savings levels – or the lack thereof.
According to the BEA, the average percentage change for consumer spending across the U.S. increased by 9.2%. Georgia was one of nine states with the highest percentage change from 2021 to 2022. Idaho, Nevada and Utah were the three states with the largest increase in spending among their residents at 11.8%, 11.4% and 11.3%, respectively. They were followed by Florida (10.9%), Arizona (10.3%), and Colorado (10.2%) while Georgia (9.8%), and Indiana and Montana (both at 9.7%) rounded out the top of the field. The state with the least personal consumption expenditure (PCE) increase was Louisiana with 6.4 percent.
Across all states and the District of Columbia, according to the BEA, per capita PCE increased to $52,542 in 2022 from $48,318 in 2021.
If the average person is spending $52,542 a year, what’s left over for savings? Not much, apparently.
In 2020 the Federal Reserve reported that only 64% of Americans had enough money on hand to cover a $400 emergency.
And the February 2023 edition of the New Reality Check: The Paycheck-to-Paycheck Report, revealed that 60% of adults live paycheck to paycheck. Of those living paycheck to paycheck, four in 10 are considered high-income earners.
That’s an alarming finding.
While it’s easy to overspend any time of the year, the fall/winter holidays of Thanksgiving and Christmas are upon us and make adhering to our savings goals even more difficult. But it’s well worth it.
Financial advisers tell us to split our monthly income into three-categories – the so-called 50/30/20 rule. Fifty percent of our income should be spent for essentials (think housing, groceries and gas), 30 percent for wants and 20 percent for savings. While that’s not a golden rule, it’s certainly a great place to start.
With housing costs in Pickens at record highs, we recognize there are many who struggle to save anything beyond what we shell out for rent or mortgages. If saving 20 percent of your monthly paycheck isn’t within reach, don’t get discouraged. Any savings is good savings.
So take it from Warren Buffet, a notorious spendthrift despite his vast wealth, put an emphasis on creating financial security. If your finances aren’t where you’d like them to be – and who’s are? – there’s no better time than right now to start making positive changes that improve your financial situation.