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Americans Are Still Spending Like There’s No Tomorrow

wsj.com

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Re: Americans Are Still Spending Like There’s No Tomorrow

#21

Post by BLKNSLVR »

Interesting anecdotal examples of these people wilfully sacrificing longer term goals for short term satisfaction.

It feels like a semi-predictable outburst of the-need-for-joy following the dour years of Covid lockdowns and travel restrictions and general down-sentiment; a society-wide emotional pressure relief valve.

I can't see it playing out as any kind of long-term pattern because it's unsustainable, but having said that, there are 300 million Americans with different scales of tolerance, and so the relief valve could be steaming along for quite some time. The sustainability being how willing people are to work longer in life to pay off their debts.

What happens when an increasing number of people die with debts? Is this a likely scenario?

Re: Americans Are Still Spending Like There’s No Tomorrow

#22

Post by happytiger »

UncleOxidant wrote: post #7
MuffinFlavored wrote: post #4

I had an interesting thought. I was in the market to buy a house during like... 2019-2021. What "was supposed to be" say... a $450k 3/2 house became $540k during "the COVID pandemic housing gold rush" when rates were 3.25% with everybody bored, willing to have a bidding war (low supply, high demand... how all of these families were able to afford what felt like $200k inflated prices, I guess because of the "funny mon…

> So... the Fed is raising rates to 5% to try and slow inflation. But now I'm earning 5% on a bunch of money to the point that it basically offsets my rent. ... doesn't that contribute to inflation? I don't think your case is all that common. The vast majority of people don't have that much money such that they could earn say $1500+/month with rates at 5%. Offsetting you are a whole lot of people who only have a few…

Don’t be overwhelmed by this response. I recently learned that the 1000 bucks thing is mostly based on Bankrates annual survey and it’s not actually true that they don’t have access to 1k, so this is a little bit an exploration.

> American households, on average, have $41,600 in savings, according to data last collected by the Federal Reserve in 2019.

And that’s before the free money era and the explosion of wealth from rising interest rates. Of course it’s also true that inflation could be taking a bite out of household wealth.

https://time.com/personal-finance/article/average-american-s....

People may not have enough saved for retirement, but that’s a separate issue.

The surveys of people not having cash on hand to handle a 1000 emergency or whatnot? That really has to do with your phase of life and economic conditions, and interestingly has been a relatively stable number even as inflation has increased.

It’s also really important to understand that they are based on unverified phone surveys about how people feel they are doing. Consider that they are asking people whether they could cover a one time expense, a month of expenses or three months of expenses. But they don’t ask whether people have access to money. The survey reports that “More than 2 in 3 Americans *would be worried* about having enough emergency savings to cover a month’s worth of living expenses,” so something to bear in mind.

https://www.bankrate.com/banking/savings/emergency-savings-r...

Re: Americans Are Still Spending Like There’s No Tomorrow

#23

Post by [deleted] »

MuffinFlavored wrote: post #4

I had an interesting thought. I was in the market to buy a house during like... 2019-2021. What "was supposed to be" say... a $450k 3/2 house became $540k during "the COVID pandemic housing gold rush" when rates were 3.25% with everybody bored, willing to have a bidding war (low supply, high demand... how all of these families were able to afford what felt like $200k inflated prices, I guess because of the "funny mon…

[deleted]

Re: Americans Are Still Spending Like There’s No Tomorrow

#24

Post by happytoexplain »

ruined wrote: post #16

there is no tomorrow

I know this is curt, but it's the first thing that came to my mind as well. There's a threshold of what I can only describe as mundane misery past which it is very difficult psychologically and logistically to plan long-term, and tons of people are past that line. It is not a financial line.

The majority instinct is to blame those people as personally irresponsible. But that is always unrealistic at scale. This problem in particular has progressed beyond easy answers at this point.

Re: Americans Are Still Spending Like There’s No Tomorrow

#25

Post by TerrifiedMouse »

BLKNSLVR wrote: post #21

Interesting anecdotal examples of these people wilfully sacrificing longer term goals for short term satisfaction. It feels like a semi-predictable outburst of the-need-for-joy following the dour years of Covid lockdowns and travel restrictions and general down-sentiment; a society-wide emotional pressure relief valve. I can't see it playing out as any kind of long-term pattern because it's unsustainable, but having…

> It feels like a semi-predictable outburst of the-need-for-joy following the dour years of Covid lockdowns and travel restrictions and general down-sentiment; a society-wide emotional pressure relief valve.

According to the article, it seem more like the onset of a doomer mentality.

Why save for a tomorrow that you might not live to see? What if all your sacrifice and planning is for naught? Better to experience life now when you are healthy as you might not be in the future (e.g. long covid, dead, ...) and can no longer do so.

I think everyone subconsciously does a risk-benefit analysis. The more uncertain things are, i.e. higher risk, the more ROI you demand from your investments. If investments aren't giving you the returns you want for a certain level of risk ... you just don't invest - which is what this is about; uncertainty has reduced the attractiveness of long term investment for people and making (less risky) short term investments comparatively more attractive.

Re: Americans Are Still Spending Like There’s No Tomorrow

#26

Post by great_psy »

westcort wrote: post #17
MuffinFlavored wrote: post #4

I had an interesting thought. I was in the market to buy a house during like... 2019-2021. What "was supposed to be" say... a $450k 3/2 house became $540k during "the COVID pandemic housing gold rush" when rates were 3.25% with everybody bored, willing to have a bidding war (low supply, high demand... how all of these families were able to afford what felt like $200k inflated prices, I guess because of the "funny mon…

Companies are buying houses at inflated rates with the expectation that cash will lose value due to further inflation. To me, this is the only explanation for mass-buying of homes at a premium price even when interest rates are high.

Well the other explanation is that you are better of buying than renting.

If rent prices go up faster than house prices, then you might as well buy at any price. Of course this assumes you can afford it.

Re: Americans Are Still Spending Like There’s No Tomorrow

#27

Post by lotsofpulp »

MuffinFlavored wrote: post #4

I had an interesting thought. I was in the market to buy a house during like... 2019-2021. What "was supposed to be" say... a $450k 3/2 house became $540k during "the COVID pandemic housing gold rush" when rates were 3.25% with everybody bored, willing to have a bidding war (low supply, high demand... how all of these families were able to afford what felt like $200k inflated prices, I guess because of the "funny mon…

> Unrelated but Zillow says at 7.5% interest rates that house is now $750k+, weird... makes no sense... counter-intuitive, except for how tight the supply/demand situation must be)

I highly doubt this estimate is true, outside of very specific locales. Always ignore Zillow/Redfin estimates, and just look at comparable sales in the recent past.

Re: Americans Are Still Spending Like There’s No Tomorrow

#28

Post by wenc »

pimlottc wrote: post #11
UncleOxidant wrote: post #7

Earlier quoted context omitted.

> So... the Fed is raising rates to 5% to try and slow inflation. But now I'm earning 5% on a bunch of money to the point that it basically offsets my rent. ... doesn't that contribute to inflation? I don't think your case is all that common. The vast majority of people don't have that much money such that they could earn say $1500+/month with rates at 5%. Offsetting you are a whole lot of people who only have a few…

I’m not a finance expert but don’t you need something like $350000 in the bank to make $1500/mo in interest? https://www.calculator.net/interest-calculator.html?cstartin...

Wouldn't most people with $350k and long investment horizon rather invest that in stocks? (actually asking, I have not idea, just a notion). $350k seems like a lot of money to leave in a money market account as opposed to in a diversified portfolio of stocks/bonds in a tax advantaged account. I'm thinking long term growth.

Inflation rates go up and down (i-bonds were not attractive until recently) and so do interest rates. The current 5% rate may not last for long.

Re: Americans Are Still Spending Like There’s No Tomorrow

#29

Post by pcurve »

Summary: Americans are spending a lot of money on vacations and fun experiences that they might've otherwise put off, because they are prioritizing to enjoy life now than later.

Inflated housing prices made savings almost pointless and COVID crisis taught them about fragility of life.

Re: Americans Are Still Spending Like There’s No Tomorrow

#30

Post by great_psy »

BLKNSLVR wrote: post #21

Interesting anecdotal examples of these people wilfully sacrificing longer term goals for short term satisfaction. It feels like a semi-predictable outburst of the-need-for-joy following the dour years of Covid lockdowns and travel restrictions and general down-sentiment; a society-wide emotional pressure relief valve. I can't see it playing out as any kind of long-term pattern because it's unsustainable, but having…

Presumably banks don’t give out loans to older people without any property.

If you are going to sell your house to go on vacations… I don’t think too many people will do that. Say you sell at 40 … well you still have a lot of mortgage left so the bank gets their part and maybe you get like 50k profit which is not debt.

If you sell your home when you’re older, it’s your money so no debt either.

Banks only give out so much credit card debt without collateral. Presumably somebody did the math with how much they are willing to lose.

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