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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

#361

Post by lotsofpulp »

throwaway894345 wrote: post #347
lotsofpulp wrote: post #147

Earlier quoted context omitted.

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

When hurricane sandy rolled through NJ/NYC area, I remember the power being out for 4+ days, and we used cash to buy groceries and fuel.

I also did not have time to drive 1+ hours for supplies, especially when roads were not necessarily cleared of trees and whatnot, and I had elderly to take care of at home.

Also, gas itself was challenging to get with very long lines so driving an hour was not a guarantee to getting it (since everyone else has the same bright idea, you can’t just shift 10M+ vehicles worth of demand overnight to surrounding areas).

Re: Price shocks in formative years scar consumption for life

#362

Post by SoftTalker »

sangnoir wrote: post #215
ciconia wrote: post #191

Earlier quoted context omitted.

> scars you for life. You could also say being poor in childhood teaches you how to be frugal. I regard this as a healthy habit and better discipline I wish I had with money (coming from a middle-class family). Another way to look at frugality is just an aversion to spending money on whatever it is that society or mass media tell you you have to buy, an important and healthy attitude one can have, IMO.

It goes way beyond frugality - it is usually accompanied by a touch of hoarding (bought a new phone? Let's keep the old one even if it has a cracked screen, just in case ... .) A term I've seen bandied about for the collective symptoms is having a Scarcity mindset and it's based on insecurity/fear of unexpectedly running out of money (which was a frequent event in childhood) John Scalzi's classic "Being Poor" blog po…

With electronics specifically, it's often just more convenient to toss the old device in a drawer. You're not supposed to put them in the trash, and e-waste disposal often incurs a fee. This is why refrigerators end up dumped on the side of a road in a ravine, because municipalities make it harder to dispose of them responsibly than to just dump them.

Re: Price shocks in formative years scar consumption for life

#363

Post by aoeusnth1 »

throwawayarnty wrote: post #249
mabbo wrote: post #206

Earlier quoted context omitted.

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…

How is this not logical or financially wise ? It is common advice to have an emergency fund equal to several months of expenses in cash. What is the alternative ? Having no emergency fund?

Minimum buffer / maximizing investments in ETFs has higher EV and depending on your time horizon and model, may even be lower risk.

Re: Price shocks in formative years scar consumption for life

#364

Post by SoftTalker »

Loic wrote: post #267
stu2b50 wrote: post #199

Earlier quoted context omitted.

There’s a fine line between frugality and being stuck in a local optima. Sometimes, expensive things are better in the long run, because they serve their purpose better and last longer.

My approach is to always buy the first "stuff" cheap and then try to use it the best possible way. If it breaks or I see the limits with the "stuff", then I go for the good and expensive one. This way I know I need it but I can also better assess the quality. This of course after having spent too much on high quality "stuff" with little use.

This is what I do with tools. If it's obviously something I will use again and again, I'll pay for quality. If it's something I might need just once, but not certain, I'll buy a cheap one to get the immediate job done. If I need it again and it breaks, I've now needed it twice so I'll replace it with a good one. (If it doesn't break, it's a better value than I thought).

Re: Price shocks in formative years scar consumption for life

#365

Post by googlryas »

ponow wrote: post #323
oh_sigh wrote: post #286

Earlier quoted context omitted.

In almost all situations, a high school student being dropped off by parents in a fancy car did nothing to help the parents earn the fancy car. In fact, generally kids at that stage are a net negative on parents finances.

The key is that the wealth used to buy the car was earned (unless evidence to the contrary is convincing). The parents elected to buy an expensive car, and maybe they bought their kid more expensive clothing. But can't you see, that having one's child lack want is (one) motivation for making the efforts to earn wealth? Suppose those parents were otherwise identical (in terms of their privileges), but, like you, decid…

I never claimed the wealth was unearned - I said it was unearned by the high school student who is gaining clout from it.

> but, like you, decided that such differential wealth displays were to be shunned. Not needing those displays caused them in part to lose motivation to obtain wealth

I don't think you'll find any evidence to support this. No one decides that since they don't need a Benz to show off, that they would like to live in a hovel and work until they are 75.

> Instead of clipping the knees of the productive, realize that envy can encourage the unproductive to imitate the habits of the productive to themselves become productive

An equally plausible scenario is that the envy leads unproductive people to spend every last penny they can earn on the displays, leaving them in a much worse financial position than someone who eschews the displays and invests their money in productive enterprises.

edit: just realized I posted this from my phone which has a different account signed on...opsec fail, just a heads up googlryas=oh_sigh

Re: Price shocks in formative years scar consumption for life

#366

Post by countvonbalzac »

giarc wrote: post #356

I have a form of this in other areas. Growing up we didn't have a ton of money and batteries were expensive. We never had batteries to replace depleted ones, so once a toy was out of batteries, it was done. We just played without those features. Now, having kids, I'm so conscience of batteries. I have a tester and check each battery when "dead" and put them in a separate box if I think they have enough juice for a lo…

You can get rechargeable batteries.

Re: Price shocks in formative years scar consumption for life

#367

Post by sbf501 »

> Americans Have an Affinity for Driving

Anecdata: I hate driving. I'd much rather take a bus or light rail, but that battle was lost in the 1940's[1], along with asinine city planning that was pro-car, anti-community that still exists today.

[1] https://en.wikipedia.org/wiki/General_Motors_streetcar_consp...

Re: Price shocks in formative years scar consumption for life

#368

Post by sbf501 »

beezle wrote: post #297

I was a kid during both oil shocks of the 1970s. That has absolutely nothing to do with my driving. What does, and not just for driving, is the family taught cultural value of 'don't be wasteful'. So unlike so many people today, I don't make 12 trips a day to stores/friends/whatever when I can just make one or two if I actually think 5 minutes ahead. That applies whether gas is $1 or $5 per gallon. I also try to make…

In the late 1970's Star Wars toys still worked if the batteries died! Can't say that about an iPad.

Re: Price shocks in formative years scar consumption for life

#369

Post by cableshaft »

happyopossum wrote: post #342
cableshaft wrote: post #322

Earlier quoted context omitted.

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.

This year. Meanwhile it would have missed out on 27% in gains the previous year (and its associated dividends), if I kept it in a bank account.

Also that 20% loss will most likely recover in time. Inflation almost never reverses itself, it only slows down.

There's a reason rich people park most of their money in assets, and not in savings accounts. If they got more returns by keeping it in savings accounts, they would do that.

Re: Price shocks in formative years scar consumption for life

#370

Post by sbf501 »

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.

> penny wise and pound foolish

I've seen this in action: e.g., clipping coupons but not paying down debt faster than the schedule.

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