Saving the Opposite of Debt

Some of you might have found the title of my last post obscure, or even confusing. I hope not, but just in case, here's the deal. In economics, debt is negative savings (and savings are negative debt). This makes perfect sense is you think back to Mr. Micawber, who pointed out that if your income exceeds your outgo, you have a happy situation, but if your outgo exceeds your income, you will be in misery.

So, if you started out with neither debt nor savings, and you make $100 per week more than you spend, you will save $100 per week. If you make $100 per week less than you spend, you're going to have to borrow $100 from somewhere.

Where it gets a little tricky is if you already have some debt. Suppose you have a mortgage in the amount of $150,000. All other things being equal, if you reduce that mortage by $10,000 per year, this is the equivalent of saving $10,000 per year. So, when people pay down their credit cards, pay off their car loans, and accelerate their mortgage payments, they are increasing their saving just as if they were pouring that money into a savings account.