What Is Dissaving?

Dissaving is spending money beyond one's available income. This may be accomplished by tapping into a savings account, taking cash advances on a credit card, or borrowing against future income via a payday loan.

Understanding Dissaving

To state it concisely, dissaving is living beyond one's means. Negative savings is another term associated with dissaving. If the practice is unchecked, dissaving may continue in a downward spiral until an individual's savings and available credit are exhausted. It should be noted that not all dissaving has a negative connotation. For example, a retired person who has saved over a lifetime of work may live comfortably while dissaving. The person has a certain fixed income but spends more every month, dipping into savings to make up the difference. This might be called planned dissaving.

When Governments Dissave

Dissaving may be seen on an individual or a macroeconomic level. When dissaving occurs on the macroeconomic scale, it indicates that an entire population or government is spending all available funds, is not investing or saving, and is borrowing to keep afloat. Eventually, even the installment debt repayments become unmanageable.

Dissaving may reach a tipping point in the wake of a natural disaster such as an earthquake, hurricane, or wildfire. Other causes may include political upheaval, war, civil disorder, and hyperinflation. Without funds to fall back upon, people or their government resort to borrowing to provide for their basic needs.

Reasons for Dissaving

Dissaving may be a habit caused by poor judgment or an unavoidable response to a crisis. Unemployment, an unexpected illness, and accidents are all events outside of an individual's control that can exhaust savings and cause a cash crunch.  A habit of dissaving can begin with a series of relatively small credit card expenditures. Over time, this can result in a hefty credit card balance and an income that is compromised by regular payments at a high rate of interest. Regular savings slow down or stop as the person juggles debt payments. An unexpected event can now be a personal financial disaster.

Real World Example of Dissaving

The United States endured a government shutdown for more than a month from late December 2018 to late 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, while another 460,000 were required to work even though they wouldn't receive a paycheck until government funding resumed. Without regular paychecks, many of these people became forced into dissaving just to survive and to pay their monthly financial obligations.