http://www.youtube.com/watch?v=CwpdGyIY2fQ
Even after an extension of unemployment benefits to 99 weeks, many of those about to go off the program are in a quandary. Scott Pelley talks to some of them in Silicon Valley.
This is what ERE can save you from
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jacob
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That [$475/week] was the number I latched onto as well. Incredible. It's a strange feeling being in a place knowing how to fix this yet almost nobody is willing to listen until it's too late.
Another comment: What's gonna happen in three months when your money runs out? Answer: I don't want to think about it.
If that was me that would be the _only_ thing I'd think about.
I remember when we bought the RV, one of my comments were that now we could never be homeless.
When I posted about the fall and decline of civilization this is kind of what I meant. Individual decisions are more important than what society does as a whole. For these people, the fall has already begun. They're still surrounded by iPhones, but they can no longer afford them. The next step is that so few people can afford iPhones that they'll simply stop making them, and so on.
Another comment: What's gonna happen in three months when your money runs out? Answer: I don't want to think about it.
If that was me that would be the _only_ thing I'd think about.
I remember when we bought the RV, one of my comments were that now we could never be homeless.
When I posted about the fall and decline of civilization this is kind of what I meant. Individual decisions are more important than what society does as a whole. For these people, the fall has already begun. They're still surrounded by iPhones, but they can no longer afford them. The next step is that so few people can afford iPhones that they'll simply stop making them, and so on.
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RightClawSouth
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Since I don't know what the future will bring, I think in terms of the following 2x2 matrix for scenarios.
(1) On one axis is Economy Weak (meaning I have a harder time finding freelancing work and companies might cut their dividends) versus Economy Strong (meaning maintaining steady cashflow is not a big concern for me).
(2) On the other axis is Markets Down (meaning total return doesn't work well because of compressing P/E ratios) versus Markets Up (meaning a rising market makes every investor look like a genius).
That leaves four possible environments to think about.
(1) Strong Economy, Down Markets -- the best of all possible worlds for building wealth because cashflow from freelancing is secure. Debt can be paid down (or off) and excess money can buy income-producing assets on the cheap to fall back on in the future.
(2) Strong Economy, Up Markets -- still an OK environment (especially for harvesting wealth). Income-producing assets are not as cheap anymore when you are buying, but they are worth more when you are selling.
(3) Weak Economy, Up Markets -- income from total return can carry one through tough times when freelancing work dries up. But markets in general don't continue to go up forever when the economy continues to remain weak for a long period of time.
(4) Weak Economy, Down Markets -- the nightmare scenario. One needs to have cash reserves to get through this environment. Piling up cash is best done during the other three environments to be prepared for this environment. This is not a good time to be selling assets or depending on cashflow from freelancing or dividends (unless one has a large margin of safety). This is a good time to be buying assets if one has more than enough cash reserves to cover living expenses for an extended period of time.
The people in the 60 Minutes episode did what was logical for them to do at the time they did it (e.g., get a good education, become specialists, get a good high-paying job, and play by the rules -- the money will always be there when you need it). But the rules changed big time when the financial crisis hit.
I believe the financial crisis will not be the last crisis we will face. Being a skilled generalist (so that you can adapt quickly to changing conditions) with sufficient financial resources (so that you have staying power while you adapt) will be necessary for survival for the foreseeable future.
(1) On one axis is Economy Weak (meaning I have a harder time finding freelancing work and companies might cut their dividends) versus Economy Strong (meaning maintaining steady cashflow is not a big concern for me).
(2) On the other axis is Markets Down (meaning total return doesn't work well because of compressing P/E ratios) versus Markets Up (meaning a rising market makes every investor look like a genius).
That leaves four possible environments to think about.
(1) Strong Economy, Down Markets -- the best of all possible worlds for building wealth because cashflow from freelancing is secure. Debt can be paid down (or off) and excess money can buy income-producing assets on the cheap to fall back on in the future.
(2) Strong Economy, Up Markets -- still an OK environment (especially for harvesting wealth). Income-producing assets are not as cheap anymore when you are buying, but they are worth more when you are selling.
(3) Weak Economy, Up Markets -- income from total return can carry one through tough times when freelancing work dries up. But markets in general don't continue to go up forever when the economy continues to remain weak for a long period of time.
(4) Weak Economy, Down Markets -- the nightmare scenario. One needs to have cash reserves to get through this environment. Piling up cash is best done during the other three environments to be prepared for this environment. This is not a good time to be selling assets or depending on cashflow from freelancing or dividends (unless one has a large margin of safety). This is a good time to be buying assets if one has more than enough cash reserves to cover living expenses for an extended period of time.
The people in the 60 Minutes episode did what was logical for them to do at the time they did it (e.g., get a good education, become specialists, get a good high-paying job, and play by the rules -- the money will always be there when you need it). But the rules changed big time when the financial crisis hit.
I believe the financial crisis will not be the last crisis we will face. Being a skilled generalist (so that you can adapt quickly to changing conditions) with sufficient financial resources (so that you have staying power while you adapt) will be necessary for survival for the foreseeable future.
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jacob
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The people in the 60 minutes were fully reactive. They only had one of those scenarios in mind. When the scenario changed, they no longer had control.
If you can't predict the future exactly, it's best to arrange oneself so the the statistical outcome is the best possible adjusted for risk of ruin. That's what I was trying to convey in yesterday's post.
If you can't predict the future exactly, it's best to arrange oneself so the the statistical outcome is the best possible adjusted for risk of ruin. That's what I was trying to convey in yesterday's post.
I'm becoming more and more convinced that ERE isn't just a fringe way of earning and consuming, but it is (should be) the only way.
All of their troubles could have been avoided. They had jobs, they could have saved.
I like how one woman confessed how she was a shopaholic. And now she's picking cans. Good grief.
And around $2000 a month? Can't you get by on that? That's $500 a person in their family which should be just right. I guess they have that big ol' house..
All of their troubles could have been avoided. They had jobs, they could have saved.
I like how one woman confessed how she was a shopaholic. And now she's picking cans. Good grief.
And around $2000 a month? Can't you get by on that? That's $500 a person in their family which should be just right. I guess they have that big ol' house..
If you look closely at the way Warren Buffett has lived his entire life, you can see signs of ERE behavior. (My knowledge of Buffett's life comes from the book Buffett: the making of an American capitalist.)
My parents have one thing in common with Buffett -- they are about the same age and developed that same skinflint attitude of not spending money from growing up during the hardscrabble years of The Great Depression. Buffett, for example, refuses to split the Class A shares of Berkshire because he can't see any economic benefit to spending the money to do so (and he is right), even though it costs someone $120K to buy one of those shares today.
But my parents, like many other people, saw stocks as lottery tickets rather than ownership interests in businesses, so they never developed the passive income side of the ERE equation. They were afraid of the stock market because when they were growing up, they saw too many people lose their life savings from speculating. Buffett's father, on the other hand, was a stock broker and so Buffett developed a positive attitude toward stocks.
Many middle class people today never had to live during hard times before, so they never developed the extreme saving habits that The Great Depression babies were forced to develop. This financial crisis will be a painful paradigm shift for them.
My parents have one thing in common with Buffett -- they are about the same age and developed that same skinflint attitude of not spending money from growing up during the hardscrabble years of The Great Depression. Buffett, for example, refuses to split the Class A shares of Berkshire because he can't see any economic benefit to spending the money to do so (and he is right), even though it costs someone $120K to buy one of those shares today.
But my parents, like many other people, saw stocks as lottery tickets rather than ownership interests in businesses, so they never developed the passive income side of the ERE equation. They were afraid of the stock market because when they were growing up, they saw too many people lose their life savings from speculating. Buffett's father, on the other hand, was a stock broker and so Buffett developed a positive attitude toward stocks.
Many middle class people today never had to live during hard times before, so they never developed the extreme saving habits that The Great Depression babies were forced to develop. This financial crisis will be a painful paradigm shift for them.
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AlexOliver
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jeremymday
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This is just hard for me to watch. My feelings are in conflict here because hard times do hit everyone eventually, but it's not like these people are starving.
And oh... the weird things people do in these times... recycle bottles and buy duct cleaning trucks...
This is why I continue to learn and continue to educate people. Without some good financial education people will continue to make bad choices in these situations...
And oh... the weird things people do in these times... recycle bottles and buy duct cleaning trucks...
This is why I continue to learn and continue to educate people. Without some good financial education people will continue to make bad choices in these situations...
No, $475.00 a week, after must-have's is not going to support a McMansion payment. Some of these people are delusional, have no clue. Where are/were their "fall back plans?" Did they think Joe Corporate would pick up the slack forever?
I do feel sorry for those in the video, but they just had no idea that the S could HTF. It did.
To their personal credits, I will say they had no idea it could happen to them. Most are middle aged, must have skipped US History in skool. (If skool even teaches the depression era these days.)
I do feel sorry for those in the video, but they just had no idea that the S could HTF. It did.
To their personal credits, I will say they had no idea it could happen to them. Most are middle aged, must have skipped US History in skool. (If skool even teaches the depression era these days.)
Many people do not have a Plan B or Plan C. Then the SHTF, which serves as a wake-up call, and people are forced to make changes for their own good. This is the story of my life.
I always thought being part of Corporate America was the way to go. But little by little over the years, I've discovered that I'm not corporate material. I've been forced to evolve as a result (e.g., employment --> contracting --> financial freedom --> freelancing).
I've learned that survival is a moving target. Whatever my Plans A/B/C are right now, I know from experience they will be something else five years from now. I just hope I make the right decisions as I go along so that I stay afloat.
I consider myself the captain of my own ship and my challenge is to sail to my next series of destinations without being sunk by a sudden storm or some other calamity.
I always thought being part of Corporate America was the way to go. But little by little over the years, I've discovered that I'm not corporate material. I've been forced to evolve as a result (e.g., employment --> contracting --> financial freedom --> freelancing).
I've learned that survival is a moving target. Whatever my Plans A/B/C are right now, I know from experience they will be something else five years from now. I just hope I make the right decisions as I go along so that I stay afloat.
I consider myself the captain of my own ship and my challenge is to sail to my next series of destinations without being sunk by a sudden storm or some other calamity.
Folks my age (65) grew up hearing stories about people who lived in dirt floor garages during the depression, and ate raw potatoes if they could not find a way to cook them. They wore the same set of clothes for months on end. Eating meat was very seldom.
Somewhere along the line, my generation failed to pass it on to our own children.
I remember as a child, lying in bed, hearing my parents talk about no longer affording gasoline to drive their car. However, we did not have things half as bad as many did.
There is a definite disconnect on information about that time, and as time went on, frugality died on the vine. So that is why I say it's not "all" their fault.
Somewhere along the line, my generation failed to pass it on to our own children.
I remember as a child, lying in bed, hearing my parents talk about no longer affording gasoline to drive their car. However, we did not have things half as bad as many did.
There is a definite disconnect on information about that time, and as time went on, frugality died on the vine. So that is why I say it's not "all" their fault.
Sad, but like Jeremy said these people are not starving. I was especially floored by the lady that said she lived in her house since 1982. Let's do the math - that's 28 years - even with a 30 year mortgage she should be about done by now. Where is the savings, where is the equity?
On the other hand, I think what if it happened to me? At what point would I cut bait, sell the house, sell everything, and implement the bare minimum budget? I certainly wouldn't wait 2 years, more like 3-4 months. And I have about 2.5 times the median net worth for people my age (not trying to brag).
On the other hand, I think what if it happened to me? At what point would I cut bait, sell the house, sell everything, and implement the bare minimum budget? I certainly wouldn't wait 2 years, more like 3-4 months. And I have about 2.5 times the median net worth for people my age (not trying to brag).
My wife and I saw this show when it aired. We had many of the same thoughts expressed above.
That's the nicest duct cleaning truck I've ever seen, and perhaps where he lives duct cleaning is an essential expense, but where I live many people just live with dirty ducts, or they go to home depot and buy duct cleaning equipment, sans truck-- way to go business master...
Also, the part where the guy laments the job at Target was remarkable: in an hour you'll earn more than 80% of the world earns in a day, and that's some sort of tragedy? Here's the truth: if you're dependent on someone else to pay your salary, you'll earn what they're willing to pay.
That's the nicest duct cleaning truck I've ever seen, and perhaps where he lives duct cleaning is an essential expense, but where I live many people just live with dirty ducts, or they go to home depot and buy duct cleaning equipment, sans truck-- way to go business master...
Also, the part where the guy laments the job at Target was remarkable: in an hour you'll earn more than 80% of the world earns in a day, and that's some sort of tragedy? Here's the truth: if you're dependent on someone else to pay your salary, you'll earn what they're willing to pay.
"Also, the part where the guy laments the job at Target was remarkable: in an hour you'll earn more than 80% of the world earns in a day, and that's some sort of tragedy?"
I don't think that's really a fair criticism and by that measure even people in extreme poverty in the US couldn't complain. His new jobs pay is around the poverty level (depending on family size) and in silicon valley it won't go far.
When I go to job sites, there are literally thousands of jobs available in silicon valley (indeed.com lists something like 90k). Even if half of the jobs are stale, that's still a lot. However, I do think a lot of these job seekers may be facing age discrimination which is making their job search worse.
I don't think that's really a fair criticism and by that measure even people in extreme poverty in the US couldn't complain. His new jobs pay is around the poverty level (depending on family size) and in silicon valley it won't go far.
When I go to job sites, there are literally thousands of jobs available in silicon valley (indeed.com lists something like 90k). Even if half of the jobs are stale, that's still a lot. However, I do think a lot of these job seekers may be facing age discrimination which is making their job search worse.