Which is Better, Saving Money or Borrowing It?

A question mark is superimposed on a stack of dollar bills.
Saving money is the usual goal of personal finance advice. But sometimes your goal is to borrow more.

When it comes to making money, to creating wealth, which would you think is the better strategy: to save your money or to borrow it? I have heard many stories about how people saved their money for years and retired in comfort. I have also heard how some people went into debt and even lived off credit cards while they pursued their dreams and ultimately became rich and successful. The truth is probably somewhere in the middle: that saving money pays off for some folks and borrowing it pays off for others.

But I think most people are getting screwed no matter what they do. Here is why.

If you are like me, you have probably invested in at least one 401(k) retirement plan. And, if you are like me, you have probably been forced to withdraw all your money from that plan long before you were supposed to. As recently as a year ago experts estimated that 15-20% of all 401(k) plans had outstanding loans.

People are trying too hard to save money and finding themselves in a real financial bind. The problem is that our government and banks don’t actually try to help us save money. One angry pundit says they work to keep us in debt because economic growth only occurs when borrowing occurs. Without debt the economy stalls. But these days going into debt is harder than it has been for at least a generation.

Adding more gloomy news to the savings-versus-borrowing picture, new studies suggest that people just don’t have the means to save money any more. Squeazed by too much debt, too little income, and depressed credit worthiness average families are falling farther and farther behind on their savings goals — and on paying off their existing debts.

I can tell you, having been debt-free 2 or 3 times in my life, that while it feels nice to have no debt the reality is that you almost have to live in poverty to stay out of debt. Sooner or later something comes up and even though you have been saving all that money that is no longer servicing loans and credit cards it’s just not enough to take care of the “something”. So you go right back into debt.

Some financial analysts are saying it may be time to get rid of money. After all, we can do almost every transaction electronically now. But the truth is that millions of people cannot get into the electronic economy because they are too poor. About the closest they come is getting a prepaid debit card for a paycheck. That is no way to save money for investing in your retirement.

And though banks are constantly advertising great savings plans and programs to help you plan for the future, the bitter truth is that banks are not there to help you during the hard times. The banks don’t just turn away from you, they make your situation worse. Remember how the government had to force banks to work with consumers to restructure their loans during the Great Recession? Banks will failing by the hundreds every year but the government had to order them to work out payment plans with their customers.

You would think common sense would prevail and the bankers would say, “Hey! We need these guys to keep paying us money! Let’s work out a deal with them.” Instead, the banks kept squeezing until there was nothing left to squeeze out of their customers and then the banks went into default. That is what happens when you let greedy corporate boards make economic policy.

So the next time someone tells me I need to build up my 401(k) plan, I may just ask them to take their 401(k) and put it where the sun don’t shine. The only money you should be putting into a 401(k) plan is money you won’t ever need because you have no way of knowing if it will be there when you retire.

Do I sound bitter and angry? I don’t mean to. It’s just that after reading all those articles I almost feel like buying a piece of land out in the middle of nowhere and spending the rest of my life there. Only I don’t think I could get a loan to buy dry dirt in the desert right now. I guess I’ll have to go back to saving pennies. It will only cost me 8% to convert them into dollar bills.