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Old 04 February 2013, 06:18 AM
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Icon22 44% of U.S. families live week-to-week

About 44 percent of U.S. households have almost no savings to cushion a job loss, health crisis or other income-depleting emergency, a non-profit group says.

http://www.upi.com/Business_News/201...7851359954392/
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  #2  
Old 04 February 2013, 11:57 AM
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Yo!

Not by design, certainly, but a confluence of circumstances led us to deplete our savings, cash in our investments, and even close out our retirement accounts just to make ends meet. We're hoping that the refinance we're attempting goes through so that we can get back on a healthier financial track.
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Old 04 February 2013, 01:25 PM
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Exactly ^. I doubt most people plan to live paycheque to paycheque. Sometimes crap happens and you end up that way.
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Old 04 February 2013, 02:45 PM
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Originally Posted by Sue View Post
Exactly ^. I doubt most people plan to live paycheque to paycheque. Sometimes crap happens and you end up that way.
Sometimes crap happens, definitely, and most people spend a few years when they are just getting established in work or a business where they are just scraping by. However, an awful lot of people never form any sort of saving habit, and lose things they have acquired when they have the slightest downturn in their situation - reduced hours at work, a necessary new expense, etc.
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Old 04 February 2013, 02:56 PM
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Some people/couples start their adult/partnered lives with the intention of developing a savings habit as their income increases and/or they become more established in their careers, and then the hoped-for improvement in their fortunes never comes. That may be due to things within their control, or to things outside their control -- a co-parent who doesn't pay child support, for example, or a family member unexpectedly becoming disabled or requiring expensive medical care.

Pretending that nothing in our lives is outside our control is just as foolish and unrealistic as pretending that nothing in our lives is within our control. The trick is to identify which is which and respond accordingly.
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Old 04 February 2013, 05:28 PM
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Quote:
Originally Posted by A Turtle Named Mack View Post
Sometimes crap happens, definitely, and most people spend a few years when they are just getting established in work or a business where they are just scraping by. However, an awful lot of people never form any sort of saving habit, and lose things they have acquired when they have the slightest downturn in their situation - reduced hours at work, a necessary new expense, etc.
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Originally Posted by Lainie View Post
Some people/couples start their adult/partnered lives with the intention of developing a savings habit as their income increases and/or they become more established in their careers, and then the hoped-for improvement in their fortunes never comes. That may be due to things within their control, or to things outside their control -- a co-parent who doesn't pay child support, for example, or a family member unexpectedly becoming disabled or requiring expensive medical care.
I think both are right.

Lots of times, people end up with no savings because they're in a hole financially because of factors out of their control. There was a piece just last night on the NPR station last night, in fact, on the "working poor," with interviews with some individuals in that category, who by and large didn't get into that situation because of reckless spending.

But, *of those who have a choice,* some are either savers or spenders by choice. It's a choice whether to spend money on this or that you need (or want) right away or to put something into the three-month (six-month) emergency fund or the retirement fund. One friend of mine, a spender, used to say that he's entitled to have a few "treats" in life while he's young enough to enjoy them.

I make no judgment on whether it's better to be a saver or spender; it's their choice.

Thanks.

Bill
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Old 04 February 2013, 07:43 PM
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One thing out of your control is inflation. When I first opened my savings account, at the age of 8, I got around 3% interest. Later, I managed to get a money market account earning closer to 7% interest. It was great. Saving meant my money didn't lose value (the way it would if I put all my money in a box under my bed.)

But now the highest rate of interest I can get anywhere is less than 1%. Inflation is considerably more than that; in general I was taught that you need at least 5% returns in order to outpace inflation. I still save, but I know that what used to be my 6 month fund is slowly losing "time."

Whether it is better to be a saver or a spender depends, rather a lot, on external factors. When inflation goes up, it retroactively was better to be a spender. You can't predict it.
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Old 04 February 2013, 08:02 PM
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Having money put aside for an emergency is entirely different from an investment.
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  #9  
Old 04 February 2013, 08:32 PM
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This is addressing people who could save, but don't.

I think there's an emotional aspect to it. I'm a pretty good saver and I like to think I have a reasonable budget that covers everything while allowing room for fun, but sometimes that feeling of resentment creeps in, where it's tempting to spend more. I know logically that we're living within our means, but compared to others around or below our income level, it feels artificially low. It's hard to fight that, especially when it feels like that money is just being thrown away.

The emergency fund is still a work in progress, but we have a full month's rent and bills put away. I round up my rent payment to the nearest hundred when I transfer it over to the rent account, and that's turned into a decent little cushion without feeling like it costs too much. I think I'd have a hard time putting the money aside if I didn't mentally bundle it in with the housing costs.

Putting money towards the down payment is emotionally easy, because it's going toward a concrete goal. Putting money in the emergency fund is harder, because I try to pretend it doesn't even exist. When I'm feeling financially frustrated, I picture it padding the down payment a little more, or buying some things we really want (I was going to say 'need', but even that's not accurate). There's a cultural push to spend as much as you can afford without acknowledging that you don't have to go into debt to be spending beyond your means. I don't think it's uncommon to feel that way, especially if you've genuinely lived pay cheque to pay cheque in the past. A few years ago, I got a major career upgrade. I didn't upgrade my standard of living with it - I'm still spending as much on housing, don't own a car, don't travel much or eat out often. The difference is that I can actually afford it now. There's still that voice that says more money should mean more stuff instead of admitting I was living far beyond my means before.

Society in general doesn't help with this. I found it pretty shocking when I went to the bank to ask about mortgages and they started talking about giving us half a million dollars. I see people my age and income level taking those offers and struggling to afford weekly necessities. While we could technically cover the payments, it would be a pretty uncomfortable lifestyle, where we'd be one sneeze away from serious financial hardship.

Last edited by quink; 04 February 2013 at 08:53 PM.
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Old 04 February 2013, 08:46 PM
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And it is so booooring being all save-y. We've finally gotten to the point where we can pay off stuff that we've been avoiding (like student loans) and start saving some money but it means not going to do fun stuff every weekend when it feels like we should be able to afford to.
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  #11  
Old 05 February 2013, 02:57 PM
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Following up:

http://www.denverpost.com/askamy/ci_...ng-passion-2-5

Today in the "Ask Amy" column a reader writes that she is going to receive a large sum of money from her parents for her 50th birthday and is wondering whether to save it or to use it to fulfill her dream of a trip to India before her health "slows her down."

This also reminds me of the article in the "oddball" job interview question thread, about what the applicant would so if they won $20 million. Some employers might want a practical type who'd save it; others might want someone who'd spend it.

Thanks.

Bill
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  #12  
Old 05 February 2013, 03:29 PM
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But of course, being a saver does not mean you have to be a miser in famine mode. Put away some to enjoy later, spend some now for comforts and pleasures now. The failure to have reasonable reserves, though, can lead to losses and miseries far beyond any pleasure you might get through current spending, if you have any leeway after seeing to a healthy diet, an appropriate wardrobe, heat and cooling, etc.
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Old 06 February 2013, 03:42 AM
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Yea, I mean you may live to 100 or you may die tomorrow, it's important to try to meet in the middle in terms of saving; you want to have money put away in case of emergency and to save for the future but at the same time you need to enjoy the present.

Fortunately a mix of good fortune, smart choices and extremely hard work has left my wife and I in a good position that is getting better by the day, and by this time next year both of us will be working in professions that pay far more than the ones we are in now and both will be working full time (we both had to go part time to go back to school, not to mention we won't have school bills to pay).

We had to save for all this time because we had lots of bills and little income but we still made sure to allow ourselves enjoyment out of life lest things be miserable.

ETA:

My wife (an accountant) volunteers at a group that helps people organize their budget in a sensible way to help with debt and things like that. She works with a lot of people who for one reason or another (mostly outside factors) are in the hole money wise and helps get a plan together both for the here and now and to save for the future. She can contend that the basic concept of making a budget is foreign to many people and feels we'd be better off if it were taught under some general 'life skills' class in high school .
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Old 06 February 2013, 12:41 PM
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I think that went out with Home Economics and Shop classes, but I agree that American schools would benefit from a return to very practical classes. It all got sacrificed for college prep, but as we're learning that preparing everyone for college without preparing anyone for other aspects of life (or for other vocations) is actually causing us lots of problems, maybe all that will return someday.
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Old 06 February 2013, 02:07 PM
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It's such a neglected skill. I've heard people say that they don't look at budget and spending at all, and that always shocks me. Back when I was in high school in the 90's, we had to take a mandatory business ed course that covered this and other financial matters, and I found it really useful. Even with that, I made my share of mistakes figuring things out in my 20's - my biggest was budgeting myself too tight; I left no room for error at all, which meant most months I was dipping into the credit card to take care of that last grocery trip. Well, that and settling for a really crappy, low paying job. I still remember thinking $21,000 was a salary that would be comfortable in a city where the cheapest one bedroom apartment I could find was going for $800 a month.

After being that broke, it's easy to develop an all or nothing mentality. You're used to spending every cent you have and neglecting both the fun side of things and the practical savings. That's where I think it's easy to either fall in the trap of either bumping up your spending and lifestyle expenses to the point where you're still paycheque to paycheque even with a higher income, or to go the other way and save ever dime without giving yourself some breathing room or fun. I've come up against the second one - I had no problem settling into saving (I was determined to never get myself in that position again if I could help it), but it took a while to get used to adding in certain lifestyle expenses. After losing a bunch of weight a couple years ago, I had to replace almost my entire wardrobe. I still only have about a week's worth of clothes (and they're not expensive), because I have a hard time allowing myself to go shopping. This year, I took some of the extra money freed up by paying off my student loan and actually wrote clothing into my budget. If I stick to that, I'm going to end up spending more on clothes this year than I have in the previous ten, but I need it. Living with someone has helped a bit, too. My husband and I make sure we go on dates and do some fun things together. I didn't go out much by myself when I was single, because it was hard to justify the cost.
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Old 06 February 2013, 02:15 PM
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Having a little breathing room can allow you to be more economical and still enjoy. For instance, when my kids were young, we would by annual family passes to things we enjoyed, like the Tennessee Aquarium and the Atlanta Zoo. Two visits over the course of a year more than justifies the extra expense, and there are usually additional benefits, like accelerated admission. $100 for a family of 5 to have unlimited admission for a year to a facility they get such good recreation out of is money-saving, but a family that scrapes $ together to afford even one trip out cannot spring for that annual membership.
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Old 06 February 2013, 02:46 PM
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Quote:
Originally Posted by Avril View Post
I think that went out with Home Economics and Shop classes, but I agree that American schools would benefit from a return to very practical classes. ....
I agree. I think there should a class which covers all the basic financial stuff: budgeting, account reconciliation, credit, loans including mortgages, and all the basic types of insurance. Even the very basic costs of running a household can be obscured to the average student.

When my daughters started looking at their first apartment one of the things we talked about were the 'standard' bills the one has to consider. When I list out the monthly bills for my house, the list is often much longer than one might expect: Gas, electric, water, trash removal, cable, internet, phone.

*ETA: I guess I forgot the mortgage, taxes and insurance.
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Old 06 February 2013, 02:59 PM
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How many people have no "savings" or "emergency fund" because they've already spent it and haven't had a chance to rebuilt it?

We should ask the question of those who are living week-to-week, exactly how long have they been doing it. If a person is 30 and lived week-to-week all of their working life, then that identifies a real problem.

ETA: What Beachlife said. And when making that budget, don't forget about other non-house aspects that will still remain - car payment, car maintenance, car insurance, car registration, gas, cell phone, and any other "regular" costs like a gym membership or magazine subscription. When one of my co-workers bought her first house last year, it prompted me to work out my budget. The strange thing about it is that while I did average things out for each month, but not everything is paid each month. I pay the HOA fee and sewage quarterly. Car insurance is twice a year. Home warranty is once a year. Some of these "regular" costs - like car registration - are large lump sums paid once a year (or even every other year) - so they may get lost in a monthly budget. The important thing is to ensure that the cost of all expenses - on average - is saved each month. If not each month, then perhaps look at it quarterly and re-allocate money from savings to cover these costs.

And don't forget other house expenses too like, say...

- pest control
- home warranty
- HOA fees
- maintenance such as condo fees
- alarm system monitoring

Last edited by Hero_Mike; 06 February 2013 at 03:05 PM. Reason: Beachlife's Post
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Old 06 February 2013, 03:11 PM
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Quote:
Originally Posted by Hero_Mike View Post
How many people have no "savings" or "emergency fund" because they've already spent it and haven't had a chance to rebuilt it?

We should ask the question of those who are living week-to-week, exactly how long have they been doing it. If a person is 30 and lived week-to-week all of their working life, then that identifies a real problem.

ETA: What Beachlife said. And when making that budget, don't forget about other non-house aspects that will still remain - car payment, car maintenance, car insurance, car registration, gas, cell phone, and any other "regular" costs like a gym membership or magazine subscription. When one of my co-workers bought her first house last year, it prompted me to work out my budget. The strange thing about it is that while I did average things out for each month, but not everything is paid each month. I pay the HOA fee and sewage quarterly. Car insurance is twice a year. Home warranty is once a year. Some of these "regular" costs - like car registration - are large lump sums paid once a year (or even every other year) - so they may get lost in a monthly budget. The important thing is to ensure that the cost of all expenses - on average - is saved each month. If not each month, then perhaps look at it quarterly and re-allocate money from savings to cover these costs.

And don't forget other house expenses too like, say...

- pest control
- home warranty
- HOA fees
- maintenance such as condo fees
- alarm system monitoring
And included in "maintenance," for homeowners, some other things that don't get paid "by the month" but have to be taken care of every few years (the new roof, the heating unit, the oil tank, painting or siding, home repairs), and these things are enormous.

I wasn't fully aware how much these things cost until I had to start paying for them.

Thanks.

Bill
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Old 06 February 2013, 03:26 PM
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Good point regarding owning a car, which is a whole other set of bills and responsibilities like remembering to get the oil changed on a regular basis. The annual registration is one that stung me the first time and again after I bough my Jaguar since in Michigan registration cost is based on the new purchase price of the car. I pay more annually for that car then I do for my other two cars combined.

Back to home ownership, the need for constant maintenance is so easily overlooked. Just the work involved in what is legally required in my city is easily a few hours a week most weeks of the year. I also pay for annual furnace inspection/cleaning and my line to the sewer needs to be cleared of root every 9-15 months to think of a couple things right off the top of my head.
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