I am writing this while flying home from Chengdu China. Chengdu is an interesting place, up and coming with consumption and investment everywhere. It’s a boom town that was a poor empty space ten years ago. Nowadays the taxi drivers still drive broken down jalopies and don’t speak English, but the skyscrapers reach to the sky and the technology employed for simple things exceeds the US. It all makes me contemplate the nature of consumption.
China Consumption is Growing Exponentially
I cannot speak for anyone’s specific situation, not my coworkers or those I crossed on the street. But I can point out in an area where food costs next to nothing I encountered million dollar cars, people that seem to go out for 4-dollar star bucks every day, parking lots employing advanced technology to track car presence, and a vehicle with more techno gadgets then a Tesla. Consumption in Western China is alive and well.
Good Times in Chengdu China Depend on Consumption
It’s even officially acknowledged. In general China realizes if growth drops below a certain percentage the country will be in trouble. Why? Well it goes back to that consumption. China’s in an interesting position where for the time being they have the consumption to support their growth and their people demand they keep their growth levels constant. But one day, just like an individual, their economy will have issues. So, what happens to the individual when we get there? It’s all too easy to spend everything you have while things are going well without preparing for future financial issues. Which brings us to the point of today’s post
Grasshopper and the Ant: a Warning on Consumption.
When I was a kid my favorite Fairy Tale was the Grasshopper and the Ant. The idea was simple, the grasshopper frittered away during the abundant summer never putting away for the winter. When winter came he was caught out with nothing. If not for the compassion of the ant he would have starved to death. Well the same applies to your personal situation.
Today is the Summer, but Winter is Inevitable
In fact, one can make a very well-informed argument that today is one of the best times in recent memory. Sure, we still have a decent number of under employed individuals, but we do have salaries starting to climb, the stock market recently at all time highs, and at least a low rate of unemployment. By most definitions for most people these are the good times. It’s inevitable though that a down time will happen in the future, in fact some may argue it’s going to happen soon. Now is the time to prepare.
The Average American is not Saving
And yet most Americans do not seem to be doing so. Recent studies have indicated that the average American retirement savings is just 84K. This doesn’t seem to indicate people are saving for winter. Hopefully if you are reading this you are not one of these people.
Balance Consumption and Savings
Finances are a balancing act. You need to live for today because tomorrow may never come. In addition, life is a journey, so getting to a point later in life is not the point. Enjoying the journey is the point . You do need to enjoy yourself now.
But you also need to save for tomorrow because you want each next day to be as good as the last. You do not want to be the grasshopper, dependent on someone to bail you out. You also don’t want to get into a trap like the Chinese Government where you must ever grow for happiness. Avoid the lifestyle inflation trap!
Are you the grasshopper or the ant?