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Many don't have $2,000 for a rainy day

money.cnn.com

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Re: Many don't have $2,000 for a rainy day

#151

Post by btilly »

timsally wrote: post #140
btilly wrote: post #128

Earlier quoted context omitted.

I know a lot of poor people who work hard and manage their money well. I also know a lot who could save themselves a ton of money with obvious (if not easy) steps like quitting smoking.

Quitting smoking may seem obvious, but it's important to consider the context. Middle class people grow up in homes that are very anti-smoking. In the rare case that a middle class family isn't anti-smoking, middle class schools certainly are. Hell, I was indoctrinated with anti-smoking feelings starting from age 10 in school. Whereas a lot of poor people are probably being given cigarettes at age 10. Combine this wi…

I wasn't claiming that quitting smoking is a reasonable money management strategy. But a pack a day is something like $1500/year straight to your bottom line. No matter what your feelings about tobacco, it is an obvious luxury that you can live without and save a lot of money.

This relates to a very important distinction between being working poor and impoverished. And it isn't money. It is whether you've given up.

Someone who is working poor may objectively have it hard, but they feel in control of their lives. They can and do plan for the future. They save up for things. They anticipate what can be anticipated and make plans. I've seen people like this calculate the cost of smoking, and choose not to because they can't afford it.

Someone who is impoverished believes that their life is hopeless. Bad things are going to happen to them. They might have some influence over which bad things, but it is going to be bad. So why bother? Live for the moment and tomorrow can go hang. Smoke another cigarette, hope for some cheap booze (or other substance) tonight, it is all hopeless anyway.

Someone in the latter frame of mind knows that payday loans are stupid, but doesn't care. Because it is bad in that nebulous future that they already know is going to suck, and how much worse is it really going to get?

Anyone who talks about the poor being good with money who does not understand this critical difference between being working poor and impoverished is missing a very important point.

Re: Many don't have $2,000 for a rainy day

#152

Post by ChuckMcM »

meric wrote: post #145
ChuckMcM wrote: post #33

Earlier quoted context omitted.

I wish I could double raise this. When raising our kids we often talked about money and "kinds" of money. When you're young you can go for long stretches with "no" money, as you get older you get introduced to the notion of a "cash flow" and a steady stream of expenses that need to be paid. The single biggest point we try to impress on them was that if you were not able to 'save' (put aside) some money every month (c…

>>Acquiring it through a credit instrument didn't pass the test, since you just moved the obligation forward in time, and if you couldn't come up with it now then why do you think you can come up with even more later? What about stocks? I need three days for a sale of stocks to settle and take the money out. If I have an emergency I can use my credit card. (and pay it back at the end of the month).

Stock absolutely counts, but it has an interesting caveat. If you read the article they included the caveat "...within 30 days." Which covers the 'you pay it now with a credit card and you pay it off when the CC bill arrives' scenario.

Back in the 80's when I was trying to buy a house, part of the down payment was going to be funded by the sale of stock (I had worked for Intel and had vested a few shares). How much of the down payment was flipping all over the map as Intel's price went up and down and up and down. On the one hand I wanted to hold it as long as possible (the trend was upward) but I didn't want to get caught in a dip either. My wife and I picked a number we felt was "reasonable" and put that in as a 'limit' order. When that fired, we picked the best choice of the three houses we had as candidates and made an offer on the house.

The stock was up an additional 5% by the time we closed but had been down at least 5% between the sale and the close. Very stressful if we had been under contract and the price was falling.

Flash forward to the dot-com days, a good friend bought a house beyond their means and was making payments by selling stock. When the bubble popped they had to sell the house. Not ideal but it didn't leave them permanently stuck.

Re: Many don't have $2,000 for a rainy day

#154

Post by 2arrs2ells »

meric wrote: post #145
ChuckMcM wrote: post #33

Earlier quoted context omitted.

I wish I could double raise this. When raising our kids we often talked about money and "kinds" of money. When you're young you can go for long stretches with "no" money, as you get older you get introduced to the notion of a "cash flow" and a steady stream of expenses that need to be paid. The single biggest point we try to impress on them was that if you were not able to 'save' (put aside) some money every month (c…

>>Acquiring it through a credit instrument didn't pass the test, since you just moved the obligation forward in time, and if you couldn't come up with it now then why do you think you can come up with even more later? What about stocks? I need three days for a sale of stocks to settle and take the money out. If I have an emergency I can use my credit card. (and pay it back at the end of the month).

Stock (plus a credit card while you wait for settlement) is certainly fine, but be careful...

The times that you are more likely to need liquidity (loss of job, economic crisis) are also the times that the stock market is likely to be incredibly low.

You might end up like many hedge funds who (as a result of some toxic assets) ended up having to sell good assets at firesale prices during the recent recession.

Re: Many don't have $2,000 for a rainy day

#155

Post by stretchwithme »

djcapelis wrote: post #112
hugh3 wrote: post #50

Earlier quoted context omitted.

Unfortunately, most of these people are also deep in debt and have already made such cuts. Sometimes I wonder about this. How many poor folks are wasting their limited budget on frivolous crap? One reality show I really would like to see would be about a sensible financial advice type who parachutes into the lives of low-income, deeply-in-debt people and shows them how to budget properly.

One reality show I would really like to see would be about sending entitled people into low income neighborhoods so we can all watch them realize just how hard working some people are and just how well most people manage their money. Maybe then they'd stop saying misinformed stuff like "all that person really needs is someone to help them with a budget." A budget helps you cut excess spending. There's not a lot of sp…

Why is someone able to provide sensible financial advice considered entitled?

There are plenty of people who started with nothing and who, by being sensible, worked and saved and became financially successful.

hugh3 probably had such a person in mind, not someone with a trust fund who has learned to stay within their allowance.

Re: Many don't have $2,000 for a rainy day

#156

Post by mattw »

noodle wrote: post #100
mattw wrote: post #87

Earlier quoted context omitted.

Everybody says this, but I've obtained three different mortgages in my lifetime and never had a credit card. In lieu of credit history, the bank has just asked for other evidence that I pay my bills, like statements from the utility company. Maybe I'm just lucky, but in my opinion, wanting a good credit score is a pretty bad reason to get a credit card.

how long ago were the mortgages and how old were you when you tried to obtain them? i think the climate is different now. i have a friend who is reasonably fresh out of school and tried to buy a place, but got turned down for mortgages due to lack of credit history (and presumably a lack of "other evidence" as well).

First one was in 2002 and I was 20. Last one was about 21 months ago.

I've heard that a lot of rules have changed as well, but I don't know how much changed after I got the last one. Some changes definitely affected me at that time, but the hassle in my case was related to the fact that I was buying another house before selling the current one so I need to hold two mortgages simultaneously. Required more documentation of cash in the bank due to debt/income ratio.

Ironically, once around 2007 while trying to take advantage of a 10% off deal from a home improvement store on a big purchase, I got turned down for their line of credit due to lack of history. (Glad it happened that way in retrospect.) But mortgage companies have never given me trouble.

Maybe I'm lucky. (I'm not independently wealthy.) Mortgage companies are inscrutable. :)

Re: Many don't have $2,000 for a rainy day

#157

Post by [deleted] »

hugh3 wrote: post #146
getsat wrote: post #111

Earlier quoted context omitted.

> I'm also polishing up the resume to begin sending out June 1. Why are you reading HN instead of doing this? Close your browser, finish your resume, and apply for ten jobs online before you go to bed tonight. Apply for ten more tomorrow. Repeat until you're employed. Good things come to those who hustle.

I gotta agree with this. There's no darn way that "polishing up" your resume can possibly take a full week. That sounds way too much like procrastinating.

[deleted]

Re: Many don't have $2,000 for a rainy day

#158

Post by robflynn »

hugh3 wrote: post #146
getsat wrote: post #111

Earlier quoted context omitted.

> I'm also polishing up the resume to begin sending out June 1. Why are you reading HN instead of doing this? Close your browser, finish your resume, and apply for ten jobs online before you go to bed tonight. Apply for ten more tomorrow. Repeat until you're employed. Good things come to those who hustle.

I gotta agree with this. There's no darn way that "polishing up" your resume can possibly take a full week. That sounds way too much like procrastinating.

Alright, alright, I'll make time for it tonight.

Re: Many don't have $2,000 for a rainy day

#159

Post by nopassrecover »

sunchild wrote: post #149
pyre wrote: post #118

Earlier quoted context omitted.

> Depression = failure Just to clarify, depression (mostly) leads to failure. Depression doesn't define you as a failure.

Hmm. Not interested in getting into a debate about whether depression is an illness or whatever, so I'll just say "OK".

I think depression, as distinct from unhappiness, is something you dismiss as unhappiness (i.e. circumstance driven) until you experience it and realise it is an illness.

The clearest example I can imagine is, take someone who is down on their luck, unemployed, in debt, medical problems etc. and fly them to the best doctors in the world, then give them a great new job with a million dollar signing bonus - I think they'll typically be pretty happy. Do this to a depressed person and they'll probably try and kill themselves because they consider themselves unworthy.

Re: Many don't have $2,000 for a rainy day

#160

Post by nopassrecover »

Duff wrote: post #62
anonymouser wrote: post #43

I have a question for HN hackers. I make over 6 figure a year. My wife doesn't work. She keeps telling me that we are not middle class, and that I should earn more if I want to afford us a middle class lifestyle, because everything is very expensive now. She also thinks that I'm a bit of an underachiever, professionally, for earning only 120K a year. Am I an underachiever or is she out of touch with Midwestern Americ…

It depends on where you live. Where I am, a 4 bedroom house in the city (mediocre school district) is $180k. So $120k is a good chunk of change, and you can comfortably live on a single income. If her vision of a "middle class lifestyle" is buying lots of shiny things, you're screwed.

Wow, 180k for a 4BR house!? Houses in the poorer suburbs of my city (the poorest capital in Australia) are still $400-500k +. Rent for a 4BR is about 450+ a week.
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