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Nine Ways That Americans Rob Themselves

Personal finance blogs are some of the most popular, but when I look at the statistics of American spending and saving behavior, I have to wonder whether the readers of those blogs are applying any of the information provided on those blogs to their own lives. Or are they just reading the posts wistfully, thinking, “I wish I could do that.” Or, “That’s too hard.” Even, “What, is she crazy?”

The truth is, most Americans are robbing themselves blind. Many spend thirty dollars a month or more on security systems to keep burglars from stealing their computers, jewelry, and stereos, but they don’t see that they are their own thieves.

They are robbing themselves of time freedom. They are robbing themselves of the ability to achieve their dreams. They are robbing themselves of a comfortable lifestyle once they hit their winter years. They are doing it in a myriad of ways, and here’s the sad thing: the mainstream culture teaches that every one of these ways is “normal.”

If you struggle to make ends meet, if you are approaching middle age with a frighteningly small amount in your retirement nest egg, there are things you can do to make your financial life easier.

The first thing is to stop robbing yourself. What follows is a list of the nine major ways that Americans rob themselves financially.

1. They spend more than they earn.


When you spend more than you earn, you rob yourself of savings. This savings could one day pay for your children’s college, pay off unexpected medical bills in short order, or even enable you to retire at age forty-five instead of age sixty-five.

When you spend more than you earn, you rob yourself of freedom. When you spend more than you earn, you have to get the money from somewhere other than your paycheck, so you end up borrowing it.

The borrower is slave to the lender. If you owe anybody a single penny, you are a slave. You do not own yourself.

Start living beneath your means. I explain a good method to learn how to do so in the video that follows. (Be sure to keep reading about the other ways Americans mess up their personal finances after the video!)

Stop robbing yourself, and get your spending under control.

2. Most Americans are either afraid of investing, or don’t invest nearly enough to support themselves when they quit working.

Forty percent of working Americans are not saving for retirement. Only 18% are confident about having enough money for retirement. And 25% have no savings at all. All that added to the debt statistics as shown above, and you can see that Americans are in scary financial shape.

Now, before I go on I want to recognize the very small minority that may read this post, and declare that they are just going to keep working until they die; that’s the way life was meant to be.

I get that. And if that’s your plan, as long as you have a large emergency fund in place to take care of major unexpected expenses, I’m cool with that.

Right now, I am addressing the majority who don’t like their work and get depressed at the thought of having to wait until age seventy to retire.

My mom has lamented to me more than once the fact that my dad was a lousy saver. And both were afraid of the stock market – and I think she still is.

Long story short, my mother worked well into her sixties and could only retire when she married my stepdad – who, by the way, faithfully investing in mutual funds from his twenties until he retired.

I had heard that most Americans were way behind in their nest egg investing, but I didn’t realize how bad until I read a recent post on the Bible Money Matters blog. Sixty percent of workers have less than $25,000 saved in retirement. And 60% of people over the age of 55 have less than $100K saved? I had even done better than that with the pathetic annuities I used to have, that were built up from a very moderate amount taken out of my monthly teacher’s salary.

And I quit working at age thirty-six!

The best time to start investing is as soon as you hit the age of eighteen and are working a job or business. The next best time is yesterday. But if either of those two times is too late for you, start today.

Stop robbing yourself, and just do it.

3. Those who do invest put their money into risky investment types.


Day trading is extremely dangerous. Ask my friend whose husband used to do this until the crash of 2008. But investing in individual stocks, or even in stock mutual funds, is not much safer. Not for the average investor who doesn’t want to spend all his free time playing with numbers. This is why many people, like my parents, shy away from investing. They believe it’s all a big gamble, and at any moment they could lose all their money forever.

On the other hand, you don’t want to put all your money into Treasury Bonds (which are bringing a very small return right now) or into certificates of deposit (which are returning even less).

The middle ground is to invest using either the Permanent Portfolio strategy or the Ivy Portfolio strategy. I detail them both in my book Hatching The Nest Egg.

Actually, it’s not fair to call these strategies “middle ground”. Both have an average return over the past thirty years close to that of the S&P 500, if not the Dow (9% and nearly 12%, respectively). So the return is much better than government bonds or CD’s, and much safer than mutual funds.

Word to the wise: I recently found out that there is actually a mutual fund based on the Permanent Portfolio strategy, and it is called – drumroll, please – the Permanent Portfolio fund. Do not invest in it. It has not done well the past couple of years, and will never do as well as you portioning out your money yourself into the four kinds of funds Craig Rowland discusses in his book on the subject.

Stop robbing yourself, and start investing wisely.

4. Americans buy stuff they don’t need.

A recent blog post over at Becoming Minimalist quoted a statistic that the average American household contains 300,000 items. What on earth does anybody need with 300,000 things, unless they have adopted a hundred children?

I recorded the following video when we were decluttering our house the few months before we moved out of our 2149 square foot home in the ‘burbs.

That was only the beginning. We had done the standard American thing and bought furniture we didn’t need in order to fill up the space in the house. All the extra we were not going to need in our new, much smaller home, we either sold on craigslist or gave to the Salvation Army. Worst of all, we probably threw away two pickup truckloads of stuff!

So understand that even frugal ol’ me has fallen into the “stuff” trap. It’s hard not to do when you live in the United States and make a decent income.

However, over a lifetime it can cost you tens, even hundreds, of thousands of dollars to buy stuff you don’t need. If you’re like most people, you probably know that, but do it anyway? Why?

  • You want to impress somebody.
  • You want to comfort yourself.
  • You’re bored.

Let’s take care of each bullet point at a time.

“Somebody” is not financing your dream or your retirement, so what they think doesn’t matter.

Comfort yourself with the thought that not buying that non-necessity is going to make you the wealthiest person on the block in a decade or two.

Alleviate your boredom by going to the Money Chimp compound interest calculator and figure out how much you could have saved in the next twenty years if you decide to live frugally.

Stop robbing yourself, and cultivate a frugal mindset.

5. They buy bigger houses than they need.

I’ve heard that the average house size per person back in the 1950’s was around 300 square feet. Check out this graph, and see how things have changed since 1973.


The average family size has decreased by half, and the average home size has increased by fifty percent since the 1950’s. What gives? If you don’t want to be around your spouse and children, why did you get married and have kids?

When I was growing up in the 1970’s, I shared a bedroom with one of my sisters. This was normal. But today, parents won’t buy a house if there aren’t enough bedrooms for everyone to have their own (usually, but not always, excluding the parents).

Mortgages are the worst kind of debt. Most people never really pay one off. And the big reason is that they bought at least twice as much house as they needed.

When we first made concrete plans to move to our rural property and build a house (or have a house built, as it has turned out), we were going to have it be 1200 square feet.

Then I started watching videos on YouTube about tiny houses. Jerry can witness – I used up probably a dozen pieces of scratch paper as I continued to rearrange furniture on paper (and, in my head, eliminate some of it) until I finally figured out how we could happily live in 600 square feet.

Smaller homes cost less, whether you’re buying one or having one built. They cost a lot less to maintain and repair.

And when you pay off a mortgage, you can build your nest egg that much faster because you are paying yourself the interest that you were previously paying the lender.

Stop robbing yourself, and figure out what size home you really, truly need.

6. Americans don’t shop around for insurance.


How to people decide on who is going to insure their car, home, health, whatever? T.V. advertising may be the biggest factor. Also, a friend or family member may rave about thus-and-such insurance company, and because a person is too lazy to do the legwork himself, he just goes with that company.

You can find insurance companies that provide equivalent benefits, and that both have a good reputation for making good on insurance claims, that charge vastly differing rates.

Stop robbing yourself, and call at least five different companies before you settle on one to insure your stuff.

7. They eat out a lot.

Americans spend an average of around $600 a month eating at restaurants. Some never eat at restaurants; others eat out twice a day.

If a diner-out started eating all her meals at home, she would save at least $300 a month. Over 20 yrs, if she faithfully invested this monthly savings into an investment portfolio that averaged a nine percent annual return, in twenty years the money would have grown to $200,752.31

Stop robbing yourself, and learn to cook your own meals. They will be healthier as well as cheaper.

8. Americans are addicted to drugs.


Okay, not everybody is addicted to a drug, legal or not. But those who are, are shooting themselves in the foot when it comes to their financial situation.

Americans who use alcohol who make an average income spend between 350 and $500 per year on alcohol – and this number increases as income does. (Hmm, making more money equals more stress equals higher need for a depressant?) Those who use tobacco spend between $200 and $400 a year.

Wait just a second. Some of my readers are thinking, “So, what’s the big deal? I make $50K a year and I spend $700 on cigarettes and beer?” Other than the fact that you are slowly destroying your health, that might not seem such a big deal. But let’s look at it long term. Over the space of twenty years, you will have spent $14,000 on cigarettes and alcohol. I can think of a lot better things to spend $14,000 on than booze and nicotine, can’t you?

Besides, many people who smoke and drink make a much lower than average income. Their habits are killing them financially as well as physically. I know a lot of people in the area where we moved to whose lives would be changed if they could scrounge up an extra $50-$100 per month. They don’t see that the solution is as easy as getting help to get rid of their addiction.

Nationally, people addicted to illicit drugs spend $40 to $60 billion on their habit every year. Hardcore addicts spend $100-$500 per week on drugs.

How much are they losing? Let’s take the lower amount, $400 per month. If they invest it in a portfolio that returns nine percent annually, after twenty years they will each have a nest egg of $267,669.75.

How about those who spent $500 a week? That’s $2,000/month, and investing it at nine percent for twenty years will yield $1,338,348.73.

Gee, I think that rehab center is looking awfully good, don’t you?

“But they steal the money they need to buy drugs!”

Yep. And stealing from themselves the opportunity to make a nice, legal income that would allow them to save that much.

Stop robbing yourself of your health and potential wealth by continuing to make excuses for your addiction.

9. They don’t have an emergency fund.

Only 38% of Americans have an emergency fund. That means, when an emergency happens, the other 62% either have to deplete what little savings they have, and/or borrow money to pay for the emergency (taking ten years to pay off a single medical bill is the same thing as borrowing money).

Stop robbing yourself, and start working today to build up an emergency fund of three to six months of basic expenses so when the s**t hits the fan in your personal world, it won’t come splattering down all over you.

Stop robbing yourself, period. Instead, get your personal finances in order and start paying yourself. You deserve a raise today.

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  • I agree wholeheartedly with all of these! Americans are spending so much and living with so much debt that they have no contingency plan, if difficulties do arise. Paring down and living a simpler lifestyle (not even “extreme” minimalism or anything close to it), can be so beneficial, as a way to reduce stress.

    • Emily May 19, 2015, 8:50 am

      Yes, and reducing a LOT of stress. Thanks for the added insight. 🙂