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62% of Americans Have Under $1,000 in Savings, Survey Finds

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Re: 62% of Americans Have Under $1,000 in Savings, Survey Finds

#201

Post by OrwellianChild »

Artistry121 wrote: post #162
abritinthebay wrote: post #121

And people wonder why they say Tech is out of touch. Reading the comments here is a great demonstration. Examples: > who uses savings accounts anymore? > Cash on hand or it's invested in stocks, bonds and my home. > The truth is you're losing more money by not having any of it generating higher potential yields. > the total net worth of my wife and me is many orders of magnitude greater than what our savings account…

This doesn't parse. You just said the median household income is $51,939. That's a ton of money. I and many spend far less than that. http://www.mrmoneymustache.com/2015/01/16/exposed-the-mmm-fa... Even throwing on a mortgage payment a couple can easily afford this - and this is a lot of luxury.

Aggressive MMM savings strategies aside, $52k isn't a ton of money... Your profile says you are in Kansas City, so lets run some numbers really quick...

$52k means take-home (after tax) is about $38.5k.

This site [1] says monthly rent is about $1.4k plus $150 in utilities. One car payment on modest transportation will be about $200/month and insurance and gas might cost $200 more.

We're up to about $2k/month in expenses for what is a relatively normal cost structure. That monthly take-home on $38.5k annually? $3.2k.

We're down to $1.2k remaining cash each month and haven't considered heathcare, food, student loans, retirement, savings. And there aren't any kids in this equation yet, which causes another pile of problems if we assume the 1.8/family rate from the CIA Factbook.

These are just ball-park, but then, so is that household income. It is very easy to eat up income without living an extravagant lifestyle full of smartphones, laptops, and luxury vehicles.

[1] https://www.expatistan.com/cost-of-living/kansas-city

Re: 62% of Americans Have Under $1,000 in Savings, Survey Finds

#202

Post by branchless »

a_c_s wrote: post #194
branchless wrote: post #146

Earlier quoted context omitted.

How many rental properties does he have? Think he just survives on being frugal and dollar cost averaging? Think again.

He publishes his family's spending every year: http://www.mrmoneymustache.com/2015/01/16/exposed-the-mmm-fa...

That's not his income. I see his mortgage / rent is zero. So if we all had no mortgage/rent to pay MMM would see his income fall as he has rental properties.

I'm sure many families renting would love to "build stuff out of wood" but most have to have both parents working to pay the rent and bills. If only they had no mortgage. Still it's tough what with all the speculators in the market feeding off basic human needs so back to work for them.

Re: 62% of Americans Have Under $1,000 in Savings, Survey Finds

#203

Post by mywittyname »

ansible wrote: post #160
joeyo wrote: post #78

Earlier quoted context omitted.

Even 1% is still abysmal. Some of that 100k should be in cash, because liquidity is useful, but long-term returns on capital should be much closer to 5%.

Yes, 1% is bad. The "official" rate of inflation is low, but I think that it is bogus. Maybe pizza and cars haven't gone up in price much in the last decade, but other big things (such as education and health care) have.

The official rate of inflation is intended to be a measure an increase in the overall money supply; it's an average.

The increased cost in certain segments is offset by deflation in other segments. While the healthcare market is booming, the energy sector has been decimated. In other words, life sucks if you're a sick oil worker, it's awesome if you're in medicine or production.

Re: 62% of Americans Have Under $1,000 in Savings, Survey Finds

#204

Post by KirinDave »

abritinthebay wrote: post #121

And people wonder why they say Tech is out of touch. Reading the comments here is a great demonstration. Examples: > who uses savings accounts anymore? > Cash on hand or it's invested in stocks, bonds and my home. > The truth is you're losing more money by not having any of it generating higher potential yields. > the total net worth of my wife and me is many orders of magnitude greater than what our savings account…

Hi. I agree most people here are out of touch. While I am no longer in such a desperate situation, I was once in a few of them. I resolved to, and ultimate worked for and sold a financial product to help people with many of the problems they now face (sort of not making enough money or being in a debt spiral, but give me a few years to amass capital and I can try that too). I assure you, I have excellent data we use to help understand what features our customers need and which features customers do not need.

I share your frustration, but would like to provide some alternative narrative around this story for the benefit of the audience here.

Consumers avoid savings accounts across the board of income. They do this because financial advisors, both public on TV and private, tell them to. Many lack liquidity at the scale of 4 figures, but even those that have that avoid them. They do this for a lot of reasons, but it's incorrect to imply that the only reason they do so is because they don't have a cash buffer.

In fact, our data suggests a surprising number of people keep a cash buffer when they'd be much better served paying down credit card debt with that money (and of course, better still served by converting a large revolving debt to a more attractive fixed loan). Again, many reasons (e.g., protection from credit-related cash seizure) exist to justify this approach at all income levels.

Stories like this exist to belittle younger generations and further the narrative that our nations financial decline is somehow tied to the imprudence of its younger and more vulnerable citizens. This could not be further from the case; the real story is one of outrageous wealth extraction from the young to the old without a hint of remorse or self-reflection. That story spans many financial domains and also places like property tax law and policies around public health care.

Stories like this also exist to push the burden of innovation off of banks, who say, "No one uses these savings products so we should focus on spending products." The point, "Your savings tools are terrible" is seldom offered. Stories like this are solicited carefully, by highly paid people, to help avoid painful discussions like, "Should the savings account rate be locked to at least the rate of inflation?" that many people (including people at the CFPB) have raised.

Just sayin', this article is not only a pile of garbage, but it's a meticulously crafted pile of garbage designed to tell a toxic narrative.

Re: 62% of Americans Have Under $1,000 in Savings, Survey Finds

#205

Post by manigandham »

jellicle wrote: post #49
manigandham wrote: post #31

Earlier quoted context omitted.

How does not including other vehicles help give an accurate picture of "savings"?

The vast majority of the population is not saying "I have nothing in savings" because all their money is tied up in yachts and Manhattan real estate; it's because they have no money.

But... how do we know by leaving out the retirement/investment accounts?

Re: 62% of Americans Have Under $1,000 in Savings, Survey Finds

#206

Post by KirinDave »

Nadya wrote: post #58
deckard1 wrote: post #43

Earlier quoted context omitted.

I don't think that's the case here at all. You're talking about people that are both savvy enough to have a savings account and familiar enough with investments to know that a savings account is bad compared to other investments. On top of also knowing another place to put their money (many people completely fear the stock market and all index products). The average American is just not sophisticated at all here. We'…

This is the situation I am in. I'm not savvy enough to make investments that have meaningful or significant returns - so it all goes into a savings account. I have 1 years' expenses saved and it just slowly accumulates because I don't know how to make a safe return on it. I don't want to invest say, 3 months savings only to lose it... Definitely the "play to not lose" mentality rather than a "play to win" mentality b…

Compare your savings interest rate to the rate of inflation.

You're literally better off with credit card rewards and paying down the debt monthly, in many cases. That's how bad most savings accounts are.

Re: 62% of Americans Have Under $1,000 in Savings, Survey Finds

#207

Post by runako »

misiti3780 wrote: post #82
runako wrote: post #45

Earlier quoted context omitted.

I think you're implicitly doing an asset allocation for the poster. > Cash on hand or it's invested in stocks, bonds and my home. That could be $100k on hand in checking, $600k in stocks/bonds, and $200k in home equity, with $0 in a savings account. Asset allocations that don't use savings accounts are not necessarily 'precarious'. Also, it's worth noting that most financial advisors do not recommend that you keep a…

everytime someone says that, I always think of a great quote by Nouriel Roubini: "asked whether he invests in stocks, he replied, "Not as much these days. I used to have a lot in equities—about 75%—but over the past three years, I’ve had about 95% in cash and 5% in equities. You’re not getting much from savings these days but earning 0% is better than losing 50%." [1] https://en.wikipedia.org/wiki/Nouriel_Roubini

Other commenters weigh in with excellent counters. However, the OP (and I) didn't split between equities and cash.

It would have been very rare for one to have -- while trying to be prudent -- constructed a portfolio of assets across checking accounts, equities, bonds, and primary residence that saw anything like a 50% loss from peak to 2008-crisis trough.

Note that the checking account loss was 0%; bonds did not perform as badly as equities; and in the vast majority of the US, residential RE did not fall 50%. Also note that if one did not choose the absolute generational bottom to liquidate the entire portfolio, the actual losses would have been lesser still. In other words, allocating across a diverse set of assets would have protected from the worst of the downside (while letting you participate in the historic run in equities since).

Irrational fear of volatility is going to have a lot of people retiring much later than they would like, with less money than they would like.

Re: 62% of Americans Have Under $1,000 in Savings, Survey Finds

#208

Post by runako »

nommm-nommm wrote: post #163
runako wrote: post #45

Earlier quoted context omitted.

I think you're implicitly doing an asset allocation for the poster. > Cash on hand or it's invested in stocks, bonds and my home. That could be $100k on hand in checking, $600k in stocks/bonds, and $200k in home equity, with $0 in a savings account. Asset allocations that don't use savings accounts are not necessarily 'precarious'. Also, it's worth noting that most financial advisors do not recommend that you keep a…

>most financial advisors do not recommend that you keep a significant portion of your assets in savings accounts. This, of course, depends entirely on the individual and their circumstances.

Obviously, if you're planning on using 85% of your assets in the very near future, that's an exception.

But in general, if your financial advisor suggests going 95% cash for the long haul, you should probably get someone else.

Re: 62% of Americans Have Under $1,000 in Savings, Survey Finds

#209

Post by KirinDave »

david927 wrote: post #19

A lot of people here think this is about you parse "savings". It's not: 47% of Americans say they lack the cash to pay a surprise $400 bill http://www.politifact.com/punditfact/statements/2015/jun/09/...

This study was SPECIFICALLY about savings; and that's why it's a deliberately misleading thing.

So called "cash buffer" problems are actually a separate problem for many people. For many americans, maintaining a cash buffer is an inappropriate strategy because of their revolving credit balances.

Re: 62% of Americans Have Under $1,000 in Savings, Survey Finds

#210

Post by kdamken »

branchless wrote: post #167
ghaff wrote: post #159

Earlier quoted context omitted.

I think you're being a bit unfair. I have no doubt he is pretty frugal. That said, I'm not a huge fan of his schtick but recognize that there are people who probably benefit from the over-the-top exhortations to avoid spending money. A lot of people fritter away a lot on things that they don't need and may not even especially enjoy. Which has been my main takeaway on those occasions when I've skimmed his site. Whatev…

The frugal stuff is rubbish. He can be frugal because the main outgoing for any family is rent. He's taking in two rents. The rest is just a cheap show. The reason why we are all suffering is because of rentiers. It's not because we have slightly expensive data plans on our phone. Rentiers are using this to explain away the real problem. This guy is along for the ride for the web-clicks. Go on his site and ask a ques…

Except that it's not rubbish. Most people do spend large amounts of their paycheck on things they don't need. Just because he makes good money doesn't mean his concepts of saving a large percentage of what you earn aren't sound. They apply to all income levels, even more so for the lower ones.

Following his advice and sticking to a budget has gotten me from saving nothing every month to saving at least half of my take home on the same salary. Most people spend their money without thinking and then look for external sources to blame when they run out.

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