The Glade 4.0

Hmm, I didn't mean to imply catastrophic events, but rather just the typical problems that crop up in life. Take my family, for instance:

My father worked his whole adult life, making a reasonable, middle class income. He was never particularly savvy with his money, so he made a variety of sub-optimal financial decisions along the way, but he managed to save up enough to retire at 62. But then a number of things happened - his mother developed dementia, which involved years of expense he hadn't counted on, he got prostate cancer and his deductibles and copays really added up, and then his investment portfolio lost about 25% of its value when the market tanked. He's still ok for now, but what should have been a comfortable retirement is now a financially stressful one (and, as he says, he'll be eating cat food if he lives past 90).

My younger brother went to college, then spent a few years trying to make it as an actor in NYC, in the process, adding about $10k in credit card debt to his student loans. Short-sighted, but not completely crazy. Now he's a teacher in a rural high school. Always pays his bills and manages to get by, but if he got canned, he'd be toast.

Then there's me. I went to law school, incurring about $200k in student loans. I get paid a lot at my current firm, but if I got laid off, it wouldn't take long for those loan payments to eat me alive.

Now, I admit that retiring at 62 like my father, taking a shot at the career you want like my brother, or taking student loans to enter a profession like me, are not choices that minimize one's risk exposure, but I don't think they're anywhere near the level of "fiscal incompetence". Yet a serious economic downturn like this one is enough to bring us all to the edge, so I'm very skeptical of claims that anyone who doesn't save 25% of their income and/or have enough of a rainy-day fund to whether long periods of unemployment is necessarily incompetent.

RangerDave:

Well, I'm just going to point out that your family isn't typical; and, if indeed it is typical, then I weep for the fiscal lessons your generation will teach us.

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Is it possible to own anything that costs more than you make in a single pay period?

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Ezekiel 23:19-20 

A responsible person has at LEAST a plan "B", wouldn't you say?

One bad stretch of road and folks are eating dog food doesn't sound like they have a plan "B".

With all due respect, you've not been raised to recognize fiscal responsibility... and by loaning you $200,000 for an education you sure didn't learn it at school. I don't blame you, but that's incredibly short sighted. I was raised by survivors of the depression...

My dad worked as a sheet metal worker, came home every day covered in sweat and dirt, and he too retired at 62. My mom stayed home and raised 5 kids. My dad passed this last year, but my mother's still alive and sitting on about $1.5 M cash, no debt, living in a house that's paid for and her only costs are utilities. She still washes out plastic baggies and dries them after she uses them.

Of my siblings, I'm probably in the middle, financially, and I do fairly well, thanks. Had I not had 2 divorces I'd be doing much better, I'm sure. None of us have gone into debt for an education, then too, none of us has a college degree.

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In time, this too shall pass.

Given the current entrance requirements for law/medical school, taking on obscene debt is the only way you're going to get in, aside from having your parents pay for it. It's simply not realistic for someone to put themselves through undergrad and then medical school.

I actually checked this out a few weeks ago, a "competitive" application for medical school is a 3.9 undergrad GPA, plus 20 hours per week of extracurriculars that show leadership and/or volunteer work in the medical profession. So let's say you take 15 credit hours. That will require say 25 hours a week of studying, you do need a 3.9 GPA after all. Then add your 20 hours of volunteer work and you're already up to 60 hours. Now if we assume you find one of those mythical full time jobs that only requires 40 hours of work per week, (I've never found one of these, I dunno about you guys) and add 10 hours to feed yourself and commute to these three different places and you're at 110 hours per week. 120 hours if you have a more realistic 50 hour/week full time job. Congratulations, you've just devoted 8 years of your life where you don't even have enough time to sleep.

Sure it is, but we've not been talking about saving up money to buy something, we've been talking about saving large amounts of money in case really bad **** happens. That's only going to create "future demand" if **** really does happen, and even then I'm skeptical because once this type of person gets back on their feet they're going to start saving even more to make up for lost time.

Xeq will you consider grabbing the book?

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"...but there exists also in the human heart a depraved taste for equality, which impels the weak to attempt to lower the powerful to their own level and reduces men to prefer equality in slavery to inequality with freedom." - De Tocqueville

All savings are targeted savings. Retirement is a target. A boat is a target. A business is a target. An "investment" is a target.

Do you believe that the money Old Ma' Taskiss (I don't intend that disrespectfully, Taskiss) has saved will never be spent, ever?

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Ezekiel 23:19-20 

I don't believe 20 hours of volunteer work a week is common. I've met quite a few med school students so far and none had near that amount. The volunteer work is used to balance out an application based on everything I've read and been told by med students and doctors.

Grades and MCAT. Once you're IN medical school, you should pretty much assume that you will not be working. Again, every med student and doctor has told me this. You can work over winter/summer breaks but all your time is spent going to class and studying (if you're smart). A sizable chunk of student loans, from what I've seen/heard so far is for living expenses from med school. I have one friend who sold some stock and his house at the market peak to pay for his expenses, but he's told me he's an outlier for his class.

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The Dude abides.

Which one would you recommend? Thomas Sowell seems to have written a lot of books.

This is the third edition:

http://www.amazon.com/Basic-Economics-3 ... 0465002609

It updates with more recent examples and changes the subtitle. Dunno if its out in softcover yet.

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"...but there exists also in the human heart a depraved taste for equality, which impels the weak to attempt to lower the powerful to their own level and reduces men to prefer equality in slavery to inequality with freedom." - De Tocqueville

Putting the money into a bank account is not an investment, so I'm not sure why you consider it such, or even suggest that conservative "ideals" suggest it to be. At least, it is not an investment for the owner of the account. The money may be used by the bank to invest in companies/ideas to create new wealth. But that's why the money put into savings isn't removed from the economy.


You don't necessarily start "saving more" to make up for lost time, you keep saving to replenish your reserves. But again, you claims of large amounts of money are relative, and I'm going to guess based upon the concept of suggestions that everyone should have X months of living expenses in the bank. Of course, most people assume that means X months of living expenses based up on your current, over extended lifestyle.

None taken.

I've told her I'm spending my share of the inheritance on wine, women and song, just to try to goad her into spending some on herself. She's of the opinion that "it better be a damn good party, that's all I have to say" hard as they worked to save it.

And, X? As long as the paper isn't burned, it'll get spent some time, or passed along to the next generation to spend after inflation eats at the edges of it (which uses it up too). Even now it's in the bank, and they're loaning it out to others... it's in the system, moving around and hopefully doing something useful.

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In time, this too shall pass.

168 - 120 = 48 / 7 = 7.14 hours of sleep per night.

Hmmmmmms....

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...

Well, not to nitpick, but 48/7 is actually 6.85, but still. Eight years of doing nothing but work every waking moment, and having so much of it that you never get enough sleep? I'd find a cliff to jump off of after one.

You get used to it after a while. You save lots of money because you never have time to spend it.

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"...but there exists also in the human heart a depraved taste for equality, which impels the weak to attempt to lower the powerful to their own level and reduces men to prefer equality in slavery to inequality with freedom." - De Tocqueville

It all comes down to your tolerance and desire X.

First year of my graduate program, I averaged 6 hours of sleep a night, including the spring semester (4 months) where I averaged 4 hours a night (including getting a shower in the morning... in bed at 4:30am, back in studio at 7:30pm)

It is in the sense that you're risking the money in exchange for some kind of benefit (convenience in the case of a checking account) because under conservative ideals if the bank fails, all your money is gone.

So yes Xeq?

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"...but there exists also in the human heart a depraved taste for equality, which impels the weak to attempt to lower the powerful to their own level and reduces men to prefer equality in slavery to inequality with freedom." - De Tocqueville

Yeah, curse my math and thinking 50 for some reason.

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Your math is now -6 to all saves.

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"...but there exists also in the human heart a depraved taste for equality, which impels the weak to attempt to lower the powerful to their own level and reduces men to prefer equality in slavery to inequality with freedom." - De Tocqueville

Yes it will be spent, but under the "always save 50%" assumption it will always get perpetually delayed into the future. Unless the act of saving causes the economy to grow substantially faster than "normal" it's always going to be much smaller than it would be if people did not save. Whoever inherits the $1.5 million will save $750k under this assumption. If they retire with $5 million, their heirs will then save $2.5 million, and so on. Half of the money earned is never directly put into the economy. I don't see how the economy can possibly be larger than if that $1.5 million were all spent right away.

Not that it's a bad idea for this family to save money in this fashion, each generation will have exponentially more wealth than the previous one. But if everyone in the country suddenly becomes happy with one income while saving all of the second income, then there won't be enough demand to provide employment for two people per family, only one.

/sigh

Which is just more future demand, all targeted for eventual spending or investment. And this is assuming that Mrs. Taskiss doesn't spend anything in the here and now.

Not to mention the fact that spending it all now doesn't actually grow the economy. It gives the illusion of growth by spurring massive amounts of malinvestment which are confused with real demand. When real demand rears it's ugly head, all that growth you thought you had disappears, and leaves you with a glut of wasted labor and destoyed capital; and no future demand to brace yourself against.

Sound familiar?

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Ezekiel 23:19-20 

You're jsut strawmanning what people are saying by taking it excessively literally. When they say "always save X%" what they mean is, at any time where you don't have an expense that demands the use of that money, and don't incur so much ongoing expense that there's always a demand for it.

This "but the economy would grow slower!" stuff is nonsense. Clearly, if everyone saved all the time, no matter what and literally never spent it for any conceivablle reason that would be a problem. No one is advocating that, nor stuffing it in coffee cans or mattresses. You're just coming up with this crap because you don't like the implications of it: that people might not be able to buy as much cool **** if they did that, and because if a significant number of people did do that there'd be a lot less need for government help.

This fantasy world where people endlessly shove money in mattresses and don't spend it no matter how dire the emergency is silly. It's like people who used to ***** about how if piercers didn't go automatically to rogues then a warrior might beat out 10 rogues by saving DKP up; never mind that the guild only had 4 rogues and only 3 of them came to raids, and none of the warriors wanted to spend DKP on piercers anyhow. It was just people getting offended that others might have an equal shot at their dream items; you're doing the same thing, getting offended at the idea of people saving money and not needing government help.

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"Hysterical children shrieking about right-wing anything need to go sit in the corner and be quiet while the adults are talking."