This should bring up some interesting conversation here:
http://www.nytimes.com/2013/01/13/opini ... .html?_r=1&
Personally, I fully agree with the writer, but I expect most on this forum won't.
Can't Save? Here's Why
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George the original one
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Spartan_Warrior
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I do agree with much of this. Inflation in the cost of non-luxuries has increased while average income has decreased. This has been happening for much longer than cited in the article.
The only way you could disagree would be over the definition of "non-luxuries", but really, who wants to tell a family of four to find a cheap apartment with roommates to reduce their housing costs? Some of us here could accept that, but most people would see it as a move from a middle class lifestyle to a poor one--which is exactly the direction the U.S. population is heading, IMO.
The only way you could disagree would be over the definition of "non-luxuries", but really, who wants to tell a family of four to find a cheap apartment with roommates to reduce their housing costs? Some of us here could accept that, but most people would see it as a move from a middle class lifestyle to a poor one--which is exactly the direction the U.S. population is heading, IMO.
Quote: "But deciding to take your lunch to work or to cancel your cable television won’t help nearly as much as you’d think. For all the attention we pay to overspending, we struggle with our personal finances not because we spend too much money on small luxuries but because salaries have stagnated at the same time as the costs of nonluxuries have gone up."
I agree that salaries have not kept pace with nonluxuries but that doesn't change the fact that the devil is in the details. It isn't the reason people are not saving.
Every day I pick the New York Times out of the recycle bin at our complex. It is put there by a guy who subscribes to it at a cost of $837.20 a year (I just checked) but is constantly worried that his rent check will bounce.
The New York Times home delivery is the definition of a small luxury, as are many of their advertisers. I suspect that might explain their desire to keep readers from cutting out small luxuries.
I agree that salaries have not kept pace with nonluxuries but that doesn't change the fact that the devil is in the details. It isn't the reason people are not saving.
Every day I pick the New York Times out of the recycle bin at our complex. It is put there by a guy who subscribes to it at a cost of $837.20 a year (I just checked) but is constantly worried that his rent check will bounce.
The New York Times home delivery is the definition of a small luxury, as are many of their advertisers. I suspect that might explain their desire to keep readers from cutting out small luxuries.
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My_Brain_Gets_Itchy
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Hmm,
This article insinuates that people in general do not have a spending problem, and only an income problem. That we just need to make more money.
In particular the author notes:
"For all the attention we pay to overspending, we struggle with our personal finances not because we spend too much money on small luxuries but because salaries have stagnated at the same time as the costs of nonluxuries have gone up."
So then, if one looks at people who do not have an income issue, IE. high earning individuals, ie. pro athletes, celebrities and high finance types for example, what portion of these people have a high savings rate? I'm singling out probably the biggest offenders, but its just an example how income is not everything.
While I certainly agree salaries and opportunities are down on the whole, to blame peoples savings rate entirely on income, is not looking at the bigger issue, masking issues such as discipline, long term planning and financial education.
This article insinuates that people in general do not have a spending problem, and only an income problem. That we just need to make more money.
In particular the author notes:
"For all the attention we pay to overspending, we struggle with our personal finances not because we spend too much money on small luxuries but because salaries have stagnated at the same time as the costs of nonluxuries have gone up."
So then, if one looks at people who do not have an income issue, IE. high earning individuals, ie. pro athletes, celebrities and high finance types for example, what portion of these people have a high savings rate? I'm singling out probably the biggest offenders, but its just an example how income is not everything.
While I certainly agree salaries and opportunities are down on the whole, to blame peoples savings rate entirely on income, is not looking at the bigger issue, masking issues such as discipline, long term planning and financial education.
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My_Brain_Gets_Itchy
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The only expense I've had that has increased a significant dollar amount in the last 4 years is various taxes... But I think my skill has increased greatly during this time, hiding the rising costs.
I think people like articles like this because it tells them it's not their fault, lulls them into their doing what's most desirable: not even trying.
As wages go down and costs go up ERE will definitely require more skill to attain.
I think people like articles like this because it tells them it's not their fault, lulls them into their doing what's most desirable: not even trying.
As wages go down and costs go up ERE will definitely require more skill to attain.
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jennypenny
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>>we struggle with our personal finances not because we spend too much money on small luxuries but because salaries have stagnated at the same time as the costs of nonluxuries have gone up.
Those aren't the only two possible reasons. As Jacob has pointed out several times (including in the book), it's because people spend too much money on the big items--housing, food, and transporation--not the small luxuries. You can't compensate for a huge mortgage and two car payments by skipping your daily Starbucks. The author sets up their argument by presenting only two of the options.
>>One of the main reasons we need to borrow money is college loans. (emphasis mine)
Again, the author is presenting this like it's the only option.
In fairness to the author, I think those statements reflect the feelings of most people.
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I completely agree that real wages have gone down, inflation is much higher than reported, and retirements that used to be guaranteed by pensions and SSI are doubtful for most people. BUT, it might make more sense for people to spend less, save more, and plan better, instead of maintaining spending levels (especially through debt) and complaining about their financial situation.
Those aren't the only two possible reasons. As Jacob has pointed out several times (including in the book), it's because people spend too much money on the big items--housing, food, and transporation--not the small luxuries. You can't compensate for a huge mortgage and two car payments by skipping your daily Starbucks. The author sets up their argument by presenting only two of the options.
>>One of the main reasons we need to borrow money is college loans. (emphasis mine)
Again, the author is presenting this like it's the only option.
In fairness to the author, I think those statements reflect the feelings of most people.
***********
I completely agree that real wages have gone down, inflation is much higher than reported, and retirements that used to be guaranteed by pensions and SSI are doubtful for most people. BUT, it might make more sense for people to spend less, save more, and plan better, instead of maintaining spending levels (especially through debt) and complaining about their financial situation.
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Spartan_Warrior
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There is a difference between spending and costs. My spending has also decreased but that's because I'm using less and, quite honestly, making sacrifices. To conflate the two is the same fallacy that the U.S. uses to propagate its low-inflation lie. It's easy to say grocery costs haven't increased when you substitute the cost of chicken for the cost of lentils.
Obviously I don't disagree that the average person has a poor financial education and stupid, frivolous spending habits; and I don't disagree that increasing skills can decrease spending without the need for serious sacrifices (although, that depends how you define sacrifice; spending time learning and maintaining skills is also a sacrifice). But this other side of the equation--the increased costs and decreased income--is also very problematic in terms of saving rates. You can't save money that's going to pay for food, gas, housing, etc.
@jennypenny: "it's because people spend too much money on the big items--housing, food, and transporation--not the small luxuries."
Yes. And these are exactly the costs that have seen out of control inflation. Personal choice only accounts for so much. People need to eat, sleep, and get to work. Compare these costs to what they were 10, 20, 30 years ago. Even the cheapest, most frugal options have (ridiculously) outpaced income.
Obviously I don't disagree that the average person has a poor financial education and stupid, frivolous spending habits; and I don't disagree that increasing skills can decrease spending without the need for serious sacrifices (although, that depends how you define sacrifice; spending time learning and maintaining skills is also a sacrifice). But this other side of the equation--the increased costs and decreased income--is also very problematic in terms of saving rates. You can't save money that's going to pay for food, gas, housing, etc.
@jennypenny: "it's because people spend too much money on the big items--housing, food, and transporation--not the small luxuries."
Yes. And these are exactly the costs that have seen out of control inflation. Personal choice only accounts for so much. People need to eat, sleep, and get to work. Compare these costs to what they were 10, 20, 30 years ago. Even the cheapest, most frugal options have (ridiculously) outpaced income.
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jennypenny
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@Spartan--I agree that the cost of food has gone up considerably, and it's a cost that can't be avoided. Fuel prices have also gone up depending on where you live and what type of fuel is common.
I would argue that the cost of housing has gone up in large part because of easy credit, not normal pricing pressure. Easy and cheap financing drove up housing prices. If more people hadn't taken the bait, housing prices wouldn't have risen so much. The first question people always asked when looking at houses was "How much can I borrow?"
I feel the same way about college tuition. If students hadn't been able to borrow so much, and parents hadn't been in a position to easily tap home equity, tuition wouldn't have gone up so much. Only now that families are completely tapped out are colleges freezing, and in some cases, lowering tuition.
So, I blame Fed policies but I also blame people for taking as much as banks were willing to give them without doing their due diligence.
I would argue that the cost of housing has gone up in large part because of easy credit, not normal pricing pressure. Easy and cheap financing drove up housing prices. If more people hadn't taken the bait, housing prices wouldn't have risen so much. The first question people always asked when looking at houses was "How much can I borrow?"
I feel the same way about college tuition. If students hadn't been able to borrow so much, and parents hadn't been in a position to easily tap home equity, tuition wouldn't have gone up so much. Only now that families are completely tapped out are colleges freezing, and in some cases, lowering tuition.
So, I blame Fed policies but I also blame people for taking as much as banks were willing to give them without doing their due diligence.
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Spartan_Warrior
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Christopherjart
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I think the problem here is that many try to put everyone in the same group. Someone with a low income is mostly limited by income. Someone with an average to above average income in wealthy countries (like the USA) is probably more limited by excessive spending. Both spending and income are important. No one is forcing middle to upper income people to not have roommates, buy big houses and buy all the igadgets they can find.
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My_Brain_Gets_Itchy
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lol, okay this will be my final rant (Promise!):
When an author titles a piece "can't save? Here's why" and then goes on to point the cause wholly on an external locus of control, most definitely, savings rates will be even worse. The individual is held powerless to their circumstances.
However, this ERE forum, has proven otherwise. There is up and down the socio-economic ladder, evidence of people -young and old, low income and high income- who continue to increase their savings rates, year after year, despite the universal variables of inflation and decreasing wage that are holding others 'powerless'. What makes these people different? Are they the chosen ones? Are they exceptions, gifted in some way?
Savings is a function of having an internal locus of control, about believing you have an effect on your environment. Yes, sacrifice is involved, savings is always deferred spending in good times or bad.
Certainly inflation and lower wages effects us all, but to point to this as the reason why people are saving less, is just wrong.
People tend to forget people saved even less in the good times.
When an author titles a piece "can't save? Here's why" and then goes on to point the cause wholly on an external locus of control, most definitely, savings rates will be even worse. The individual is held powerless to their circumstances.
However, this ERE forum, has proven otherwise. There is up and down the socio-economic ladder, evidence of people -young and old, low income and high income- who continue to increase their savings rates, year after year, despite the universal variables of inflation and decreasing wage that are holding others 'powerless'. What makes these people different? Are they the chosen ones? Are they exceptions, gifted in some way?
Savings is a function of having an internal locus of control, about believing you have an effect on your environment. Yes, sacrifice is involved, savings is always deferred spending in good times or bad.
Certainly inflation and lower wages effects us all, but to point to this as the reason why people are saving less, is just wrong.
People tend to forget people saved even less in the good times.
Employers are treating employees terribly right now... There is mumbling in my office about lack of raises and COLAs for 4-6 years. But virtually everyone NEEDS the paycheck or they'll be desperate.
Living paycheck to paycheck has left the American worker in no position to barter. So they accept the "same" pay despite 10-25% inflation and 25% higher taxes... I do not envy their prospects.
Living paycheck to paycheck has left the American worker in no position to barter. So they accept the "same" pay despite 10-25% inflation and 25% higher taxes... I do not envy their prospects.
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My_Brain_Gets_Itchy
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secretwealth
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"There is up and down the socio-economic ladder, evidence of people -young and old, low income and high income- who continue to increase their savings rates, year after year, despite the universal variables of inflation and decreasing wage that are holding others 'powerless'. What makes these people different? Are they the chosen ones? Are they exceptions, gifted in some way?"
I always worry when I see self-aggrandizement on this forum--it's unbecoming, but it happens occasionally (fortunately, much more rarely than most other sites).
But the answer to your question is simple: we make more sacrifices. We choose not to live the middle class lifestyle. I, for instance, live in the ghetto. Others on this forum have roommates. Others still live in the hinterland--to call it rural would be too cosmopolitan a description. We have a thread on how to warm your hands in a cold room, for fuck's sake.
I don't think it should be expected of most Americans to make these choices. And the fact that we make these choices doesn't make us any better than them. We're just taking a different life path because we privilege financial independence more than comfort. That doesn't make us better or them worse. They are powerless to maintain their middle class lifestyle and save just like some on this forum are powerless to retire in 3 years (instead, they need 5). That doesn't make them bad, wasteful, evil, or others superior ubermensch. We all have different comfort levels and lifestyle goals, and we should respect that. And we should create a system where everyone can choose whatever option they want.
I always worry when I see self-aggrandizement on this forum--it's unbecoming, but it happens occasionally (fortunately, much more rarely than most other sites).
But the answer to your question is simple: we make more sacrifices. We choose not to live the middle class lifestyle. I, for instance, live in the ghetto. Others on this forum have roommates. Others still live in the hinterland--to call it rural would be too cosmopolitan a description. We have a thread on how to warm your hands in a cold room, for fuck's sake.
I don't think it should be expected of most Americans to make these choices. And the fact that we make these choices doesn't make us any better than them. We're just taking a different life path because we privilege financial independence more than comfort. That doesn't make us better or them worse. They are powerless to maintain their middle class lifestyle and save just like some on this forum are powerless to retire in 3 years (instead, they need 5). That doesn't make them bad, wasteful, evil, or others superior ubermensch. We all have different comfort levels and lifestyle goals, and we should respect that. And we should create a system where everyone can choose whatever option they want.
SW, the title of the article and the post uses the word "Can't". Can't is a strong word. It is a definite word. Impossible. Insurmountable. Not doable.
By using the word can't they are saying that the confines of our current system do not allow saving.
We know it is doable. You acknowledge that it comes down to choices but you feel the average person should not have to make them.
It is not "can't", it is a choice. It is not self-aggrandizing to point out that fact.
By using the word can't they are saying that the confines of our current system do not allow saving.
We know it is doable. You acknowledge that it comes down to choices but you feel the average person should not have to make them.
It is not "can't", it is a choice. It is not self-aggrandizing to point out that fact.
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Spartan_Warrior
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