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Price shocks in formative years scar consumption for life

knowledge.wharton.upenn.edu

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Re: Price shocks in formative years scar consumption for life

#341

Post by happyopossum »

mabbo wrote: post #206
ChuckNorris89 wrote: post #2

Being poor in general, during your childhood, scars you for life. It makes you penny wise and pound foolish, adverse to taking risks in your career and investments, can destroy your confidence in yourself, while always having to look over your shoulder monetarily speaking. Habits that even after you remove poverty from your live, you still feel the the anxiety and triggers in your head.

My wife grew up very close to the poverty line, with her parents always just about to lose the house. And she has this anxiety. (Edit: to be clear, she's a successful civil engineer, considered one of the best in her field locally and makes great money- she has nothing to worry about.) In order to help with it, we have a bank account that our bills come out of that has a little more than 6 months worth of all our bil…

> It's not logical or financially wise

It's absolutely both of those things. It's financially unwise to take any risks at all with your emergency funds and operating expenses, so having 3-6 months worth locked up is absolutely the best thing you can do.

Re: Price shocks in formative years scar consumption for life

#342

Post by happyopossum »

cableshaft wrote: post #322
nomel wrote: post #305

Earlier quoted context omitted.

> we only need a month of backup As someone who went through two recessions, survived multiple layoffs, and had a few medical things, this seems like crazy talk. The general rule of thumb is 6 months of savings. I've known many that didn't follow this rule, and ended up in very bad debt.

Do you need it all sitting in a savings account, though? Inflation ate almost 9% of its value this past year. Granted stocks are down 20% this year, but assuming you don't have to touch it for a while, they should more than recover in a few years (well, assuming no massive global disaster, which seem more and more common lately). We have a decent amount sitting in our savings account, but not six months worth. But I…

> Inflation ate almost 9% of its value this past year. Granted stocks are down 20% this year,

yeah, so you're still ahead of the game if you had it saved.

Re: Price shocks in formative years scar consumption for life

#343

Post by ghaff »

up_o wrote: post #334
bornfreddy wrote: post #299

Earlier quoted context omitted.

Is that the only goal people are supposed to have in life?

if you're a worker, then mostly yes. Ideally, self-fulfilling goals that require those extra 40-60 hours you're giving to a company then can be diverted. Not everyone can work at ChangeTheWorld corp for their day job.

Part of it is that, in general, there aren't great options to spend 10 or 20 hours/week--or, really, 700 or so hours a year doing interesting work for someone else on your schedule getting paid at full-time professional salary levels. You're not available when needed. You're not keeping current probably. Even if I could do some part-time consulting on what I currently work on, I'd become much less interesting to hire pretty quickly.

Re: Price shocks in formative years scar consumption for life

#345

Post by throwaway894345 »

lotsofpulp wrote: post #125
CalRobert wrote: post #101

Earlier quoted context omitted.

We were surprised to discover after her death (in the late 80's) that my great grandmother kept $1,000 in a pouch in her bra. I can understand not trusting the banks and wanting to always have some sort of cash on your person.

I cannot understand not having at least a couple hundred cash on you, and much more at home. What are people’s plans if the power or payment networks go offline? Earthquake, hurricane, ice storm, volcano, etc.

I'd probably just drive somewhere that has power/payment networks (stay with friends, family, or airbnb/hotel/etc), especially since those point-of-sale systems are almost universally electronic anyway.

Re: Price shocks in formative years scar consumption for life

#346

Post by Melatonic »

moffkalast wrote: post #315
Melatonic wrote: post #272

Earlier quoted context omitted.

I prefer a layered approach - some investments take longer than others to cash out. And some are in between but still provide some return. A ton of cash on hand is probably a bad idea

https://www.reddit.com/r/dataisbeautiful/comments/tou7v2/oc_... Even Warren Buffet always keeps at least something like a fifth of his investments in cash. Otherwise how the hell are you going to buy low?

I would imagine though that he is also very often selling / buying so that hes not just sitting on a pile of cash for months at a time?

Re: Price shocks in formative years scar consumption for life

#347

Post by throwaway894345 »

lotsofpulp wrote: post #147
josephcsible wrote: post #142

Earlier quoted context omitted.

Carrying significant accounts of cash on you all the time seems like a good recipe for it to get lost or stolen.

There are always tradeoffs. Based on how much fuel and food costs these days, I would not say a couple hundred dollars is a significant amount of cash. Not even enough to get you a bed at night in case of an emergency.

What kind of emergency would:

1. leave me with cash

2. not affect the ability of shops, hotels, etc to process those cash payments and render goods and services

3. prevent me from driving to the next town, county, etc

Re: Price shocks in formative years scar consumption for life

#348

Post by ackfoobar »

cs137 wrote: post #13
quantified wrote: post #5

Yeah, we don't just burn gas driving everywhere. "Scar consumption" as a phrase assumes that consumption in the American style is a healthy activity to begin with, and this outcome is damaging or ugly. "Permanently reduce consumption" would be more worthy of an academic setting, that title is clickbaity. Perhaps some will overdo avoidance of something because of fear of expense. Better than masses overdoing from buil…

Plus, a lot of that gas consumption is spent commuting, which makes people miserable. Murdering the daily commute is a good thing Covid-19 did, although I don't expect it to last long (WFH-ers will get fewer promotions, despite working harder, and eventually RTO fetishists will rule the roost). Very few people want to "consume gas". They want to be able to live decently and have meaningful jobs. Unfortunately, in tod…

> a lot of that gas consumption is spent commuting, which makes people miserable. Murdering the daily commute is a good thing Covid-19 did

I guess this applies more to those who drive from the suburb.

I lived in a dense city with great transit. I miss the commute, which forces me to walk a bit, starts myself up, and helps me compartmentalize my time.

Re: Price shocks in formative years scar consumption for life

#350

Post by petronio »

moffkalast wrote: post #315
Melatonic wrote: post #272

Earlier quoted context omitted.

I prefer a layered approach - some investments take longer than others to cash out. And some are in between but still provide some return. A ton of cash on hand is probably a bad idea

https://www.reddit.com/r/dataisbeautiful/comments/tou7v2/oc_... Even Warren Buffet always keeps at least something like a fifth of his investments in cash. Otherwise how the hell are you going to buy low?

Should be noted that a significant portion of Berkshire Hathaway's usual cash pile is not for deal making, but as a backstop for their large insurance portfolio.
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