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Table of Contents
What Is Dissaving?
Understanding Dissaving
If the government decides to not
Reasons for Dissaving
Real World Example of Dissaving
Personal Finance Budgeting and Savings
Dissaving Definition
By Maya Dollarhide
Updated September 19 2022
Review by Ebony Howard
Facts checked by Jared Ecker
What’s the difference between saving and dissaving?
Dissaving is spending money beyond the income available. It can be done by tapping into a savings account, taking cash advances with a credit card, or borrowing against the future earnings through a payday loan.
Understanding Dissaving
To put it simply to put it simply, dissaving means living above one’s means. Negative savings is yet another term that refers to dissaving.
Important Takeaways
Dissaving is the reverse of saving.
It means to spend above one’s earnings by drawing from savings, purchasing on credit or borrowing funds.
Dissavers can be found in government also.
If this practice is not regulated and the dissaving process continues, it could spiral into a downward spiral until an individual’s savings and credit is exhausted.
It should be noted that not all dissaving comes with a negative connotation. For instance, a retired person who has saved over many years of working could have a comfortable life while dissipating. A person earns a fixed income, however they spend more every month, taking a dip into savings to cover the difference. This could be referred to as planned dissaving.
When Governments Dissave
Dissaving could be evident at an individual or macroeconomic scale. When dissaving occurs on the macroeconomic level, it suggests that the whole public or government entity is spending all available funds, is not saving or investing, and is borrowing to stay the ship afloat. Eventually, even the installment debts are no longer manageable.
Dissaving can hit an extreme point in the wake of natural disasters like the occurrence of a hurricane, earthquake, or wildfire. Other causes may include conflict, political turmoil or civil unrest, as well as hyperinflation. In the absence of money to fall back on individuals or their governments resort to borrowing to provide their essential needs.
Reasons for Dissaving
Dissaving may be a habit due to poor judgement or an unavoidable response to a crisis. Unemployment, an unexpected illness, and accidents are all situations beyond an individual’s control that can exhaust savings and trigger a cash crisis.
A habit of dissaving could begin with a string of relatively low expenses made with credit cards. In time, this could create a huge credit card debt and income that is compromised due to regular payments that carry the highest rate of interest. Savings on a regular basis decrease or cease while the individual juggles with debt repayments. A sudden event could cause financial trouble for the person.
Real World Example of Dissaving
The United States endured a government shutdown that lasted over a month between the end of December 2018 to January 2019. Many federal employees and contractors were furloughed or forced to take unpaid leave. The U.S. Bureau of Economic Analysis (BEA) estimated that about 340,000 federal employees were furloughed. Another 460,000 had to work even though they would not receive a pay check until the government’s funding resumed.1 Without regular paychecks, many of these people were forced to save to live and pay their financial obligations for the month.
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