"As individuals people save too little and borrow too much":
Essay:
As individuals people save too little and borrow too much. I tend to agree with this statement and would like to present my ideas and beliefs based on the scenarios that I have heard and seen in the real world.
First we need to consider why we should save money. As an individual there are so many reasons that asks for you to save money. for example retirement is a big deal in a country like United States. The health care costs and the daily expenditure is huge and the government provided social security and medicare benefits are not sufficient to cover this. It is considered that you need at least 60% of your current income to cover your retirement expenses. Furthermore individuals need to consider about their families who depend on them. They need to save enough money to cover the expenses in case of unforeseen instances such as disability and death.
Consider the example of housing industry in United States. People borrowed more money than they could afford. They put in all their savings to buy the dream house which they wanted. When the market went bad and people realized that they did not have enough money saved to pay for their mortgages in bad times, they resorted to foreclosures and bankruptcy. As a result today we see the highest number of foreclosures in united states.Today the unemployment rate in United State is 8%. The last time we saw a number like that was 1997.
Furthermore consider the example of organizations doing the same mistakes of borrowing more and saving less. For example a company like Nortel Networks recently filed for bankruptcy due to their bad management of money. They borrowed a lot of money from investors and did not save enough for bad times. When the economy went bad the company could not sustain itself and had to fail. On the contrary consider the example of Cisco which is in the same field as Nortel, they managed money really well by saving enough cash for bad times and borrowed less. Today Cisco is one of a leading company in the field of Telecommunications.
Lastly consider the example of Google which has billions of dollars in cash to withstand an economy such as the one we are in. They saved enough money to get through these rough times. GM on the contrary has filed for bankruptcy couple times. Even after getting billions of dollars from the bailout money they are again on the verge of failing.
Essay:
As individuals people save too little and borrow too much. I tend to agree with this statement and would like to present my ideas and beliefs based on the scenarios that I have heard and seen in the real world.
First we need to consider why we should save money. As an individual there are so many reasons that asks for you to save money. for example retirement is a big deal in a country like United States. The health care costs and the daily expenditure is huge and the government provided social security and medicare benefits are not sufficient to cover this. It is considered that you need at least 60% of your current income to cover your retirement expenses. Furthermore individuals need to consider about their families who depend on them. They need to save enough money to cover the expenses in case of unforeseen instances such as disability and death.
Consider the example of housing industry in United States. People borrowed more money than they could afford. They put in all their savings to buy the dream house which they wanted. When the market went bad and people realized that they did not have enough money saved to pay for their mortgages in bad times, they resorted to foreclosures and bankruptcy. As a result today we see the highest number of foreclosures in united states.Today the unemployment rate in United State is 8%. The last time we saw a number like that was 1997.
Furthermore consider the example of organizations doing the same mistakes of borrowing more and saving less. For example a company like Nortel Networks recently filed for bankruptcy due to their bad management of money. They borrowed a lot of money from investors and did not save enough for bad times. When the economy went bad the company could not sustain itself and had to fail. On the contrary consider the example of Cisco which is in the same field as Nortel, they managed money really well by saving enough cash for bad times and borrowed less. Today Cisco is one of a leading company in the field of Telecommunications.
Lastly consider the example of Google which has billions of dollars in cash to withstand an economy such as the one we are in. They saved enough money to get through these rough times. GM on the contrary has filed for bankruptcy couple times. Even after getting billions of dollars from the bailout money they are again on the verge of failing.
