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My new year's resolution? To kick my savings habit

January 25, 2013: 5:00 AM ET

With interest rates in the basement, why keep squirreling all that money away? Let's take out some loans and rack up some debt!

By Sheila Bair, contributor

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Piggy Bank and HammeFORTUNE -- It's well into the new year. Have you made your resolutions yet? No? Well, I have a suggestion. This just could be the year the economy comes roaring back. The housing market is up; unemployment is down. But we all need to do our part to juice it up.

So folks, get with the program: Stop saving and start borrowing. The government is showing zero tolerance for savers, keeping interest rates near zero while targeting inflation north of 2%. Every penny saved in your 0.0005% bank accounts is a penny fast losing value. You need to go out there and spend.

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I know that for many of you it will be tough kicking the savings habit. I have been a savings addict for years. When I was young, I was normal. I had six credit cards and kept to a strict regimen of maxing out my credit limits and racking up interest charges by making the minimum payments. For years I stayed straight and didn't save a nickel.

Then it happened: individual retirement accounts. Not the milquetoast IRAs they have now, but ones that provided a real, sweet savings high. Full tax deductibility up to $2,000, and no tax on the investment returns until the money was pulled out. My grandma got me started. Darn her. She gave me a check for $2,000, which I took straight to the bank. Back then you could actually get interest of 6% to 8% on your deposits, with low inflation providing a real return above 4%. Every quarter I could see my IRA balance growing. That gave me a bigger buzz than eating dark chocolate with a double espresso.

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After that, I was hooked. It was a slow descent into savings lotus land. I got a good-paying job, and my employer offered something called a 401(k) savings account. If I put money into it, my company would actually put in an equal amount. Yes, it was enabling my addiction. The stock market was going gangbusters, and my 401(k) account grew like crazy. My hands would shake when the account statement arrived in the mail.

I started doing wacky things. I sold my car and rode the subway. I cut up all my credit cards except one. I shopped at T.J. Maxx (TJX). I'd even buy washable dresses to avoid dry-cleaning bills. I'd go out with my girlfriends and swap made-up stories about avoiding the bill collectors and paying full price at Neiman Marcus, but I knew I wasn't fooling them. They could see me in wash-and-wear polyester and taking the subway home. They would slip American Express (AXP) credit card applications and Hammacher Schlemmer catalogues into my purse when I wasn't looking. They were trying to help me, but it was no good.

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I got married, started a family, and kept putting the maximum into my IRA and 401(k), but nothing more. Then disaster hit. It was called a 529 account. I could save as much as I wanted for my kids' college education, with tax-free returns until the money was withdrawn. I knew I might be starting my kids down the same road to savings addiction, since with all that 529 money to pay for their college they could start their careers debt-free. But I didn't care. And I'm ashamed to say that I corrupted my parents by asking them to put money into 529s for their grandkids too.

I've tried to change. I refinanced my mortgage three times, but then I saved the extra money instead of spending it. At last I think I've found a way to kick the habit -- a 5,500-square-foot McMansion on Realtors.com. It's on sale for $300,000, marked down from $2 million. There are some disadvantages. It's a two-hour commute from my job, and the utility bills are $2,000 a month. But if I buy before the Federal Housing Administration goes bankrupt, I can get a government-backed mortgage for only 3.5% down.

After nearly 30 years I'm tempted to cash in Grandma's IRA for the down payment.

It would make my government proud.

Sheila Bair is the former Chairman of the FDIC and wants readers to know that this is satire.  She continues to be an avid saver, though she no longer likes looking at her bank statements. 

This story is from the February 4, 2013 issue of Fortune.

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About This Author
Sheila Bair
Sheila Bair
Contributor, Fortune

Sheila Bair is a Fortune contributor, and a former chair of the FDIC, and former member of the Basel Committee. She is also the author of the New York Times bestseller Bull by the Horns, Fighting to Save Main Street from Wall Street and Wall Street from Itself.

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