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The doomsayers waiting for the economy to crash

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Re: The doomsayers waiting for the economy to crash

#31

Post by FooBarBizBazz »

flappyeagle wrote: post #28
blamestross wrote: post #23

Earlier quoted context omitted.

I don't think any of these things are viable on the lower end of 5 figures. People aren't realizing just how financially tight and desperate poorer people are getting right now

Are you saying people making 5 figures should not follow this advice?

They can't do (1) because they don't have extra to save.

Maybe (2) is doable, but it's hard when you're worrying about next week.

(3) is basically the same as (1).

I'm not sure about (4). Your choice is between throwing money away on rent, and being house-poor, overleveraged on a house.

Again, you can't do (5) when the only asset you have (and can just barely hang on to) is a house. And most people sure as hell don't get equity from their employer.

So, sure, if you're a typical tech worker making $200k+ with some stock options -- which probably does characterize a substantial fraction of people here -- then the advice is very reasonable. Yes, "seven figures" is an overstatement. But a ton of people make nowhere near this.

I think the advice for lower incomes needs to be about (a) increasing skills/qualifications/income (but choosing education wisely), and (b) pooling resources with roommates/family to reduce expenses.

Re: The doomsayers waiting for the economy to crash

#33

Post by heresie-dabord »

jmathai wrote: post #9

If you follow some basic rules, you don’t have to worry about economic fluctuations or crashes. 1) Save diligently. 2) Think in terms of 5 or 10 years. 3) Have sufficient cash accessible for emergencies. 4) Do not over leverage yourself such that a job loss or housing crash will immediately crush you. 5) Diversify your assets sufficiently. Don’t have all your money in your company’s stock.

> 4) Do not over leverage yourself such that a job loss or housing crash will immediately crush you.

I can reasonably assert that an economically significant number people would be in big trouble if they lost their jobs.

As for a housing crash, it depends on your specific meaning. If enough of the value of property were lost, banks would be forced to take action to survive their lending risks. The ramifications of that would be extensive, let us say.

Re: The doomsayers waiting for the economy to crash

#34

Post by throwaway22032 »

heresie-dabord wrote: post #33
jmathai wrote: post #9

If you follow some basic rules, you don’t have to worry about economic fluctuations or crashes. 1) Save diligently. 2) Think in terms of 5 or 10 years. 3) Have sufficient cash accessible for emergencies. 4) Do not over leverage yourself such that a job loss or housing crash will immediately crush you. 5) Diversify your assets sufficiently. Don’t have all your money in your company’s stock.

> 4) Do not over leverage yourself such that a job loss or housing crash will immediately crush you. I can reasonably assert that an economically significant number people would be in big trouble if they lost their jobs. As for a housing crash , it depends on your specific meaning. If enough of the value of property were lost, banks would be forced to take action to survive their lending risks. The ramifications of t…

Yes, but _you_ can protect yourself against this by simply not over leveraging.

Instead of buying the 250k house, buy the 200k house and put 1/4 of the mortgage payments away. After a year you have three months buffer, after four years you have a year.

The key is simply to live slightly below your means.

Re housing crash: the banks are not going to foreclose en masse on people who are paying their mortgage payments regularly simply because they are in negative equity. They are not incentivised to do so.

Re: The doomsayers waiting for the economy to crash

#36

Post by RecycledEle »

heresie-dabord wrote: post #33
jmathai wrote: post #9

If you follow some basic rules, you don’t have to worry about economic fluctuations or crashes. 1) Save diligently. 2) Think in terms of 5 or 10 years. 3) Have sufficient cash accessible for emergencies. 4) Do not over leverage yourself such that a job loss or housing crash will immediately crush you. 5) Diversify your assets sufficiently. Don’t have all your money in your company’s stock.

> 4) Do not over leverage yourself such that a job loss or housing crash will immediately crush you. I can reasonably assert that an economically significant number people would be in big trouble if they lost their jobs. As for a housing crash , it depends on your specific meaning. If enough of the value of property were lost, banks would be forced to take action to survive their lending risks. The ramifications of t…

> If enough of the value of property were lost, banks would be forced to take action to survive their lending risks.

I do not believe so.

Banks are predatory. They want power and will do anything to het it.

Re: The doomsayers waiting for the economy to crash

#37

Post by throwaway22032 »

The thing is that the economy in the West hasn't actually "crashed" in any meaningful way in my lifetime. Maybe during Covid, kind of, when we had supply chain issues for a bit? A lot of that was self inflicted too.

A crash to me is like, I wake up, £1 is worth 50p and in one fell swoop I'm significantly net negative every month. Or like, the supermarkets start closing down, there's no fuel left in the petrol stations, etc.

A crash is not - things cost 5%, 10% more over a period of months, and it's a bit harder to find a job.

I grew up without even getting pocket money, I have a "reverse inheritance" e.g. I pay my parents on occasion, the memetic idea that everyone who isn't underwater comes from Big Money(tm) just seems like self destructive behaviour to me.

I just don't identify with the mindset. My feeling is that most people prioritise other things over their financial wellbeing because they think that's "normal" or whatever.

All you need to do to almost completely immunise yourself against this stuff is to spend, say, 70-80% of what you earn, less if that's viable. There is someone out there already, in your town, who earns about 70-80% of what you do, so just live like them.

Re: The doomsayers waiting for the economy to crash

#38

Post by constantcrying »

jmathai wrote: post #9

If you follow some basic rules, you don’t have to worry about economic fluctuations or crashes. 1) Save diligently. 2) Think in terms of 5 or 10 years. 3) Have sufficient cash accessible for emergencies. 4) Do not over leverage yourself such that a job loss or housing crash will immediately crush you. 5) Diversify your assets sufficiently. Don’t have all your money in your company’s stock.

Total nonsense. None of that is of any help if you are facing a real economic crisis. The economic disasters in the last decades all have been mild, some people lost their jobs, some companies went under, some lost everything in the stock market.

During some historical economical disasters, people lost all their saving, their jobs and all safety they thought they possessed. None of your suggestions would have helped, many, many people who were well off, saved diligently, spent cautiously and never borrowed too much were suddenly destitute and had to make serious efforts to find calories.

The reality of economic disasters is that no one is safe, regardless of what you do or don't do.

Re: The doomsayers waiting for the economy to crash

#39

Post by constantcrying »

throwaway22032 wrote: post #34
heresie-dabord wrote: post #33

Earlier quoted context omitted.

> 4) Do not over leverage yourself such that a job loss or housing crash will immediately crush you. I can reasonably assert that an economically significant number people would be in big trouble if they lost their jobs. As for a housing crash , it depends on your specific meaning. If enough of the value of property were lost, banks would be forced to take action to survive their lending risks. The ramifications of t…

Yes, but _you_ can protect yourself against this by simply not over leveraging. Instead of buying the 250k house, buy the 200k house and put 1/4 of the mortgage payments away. After a year you have three months buffer, after four years you have a year. The key is simply to live slightly below your means. Re housing crash: the banks are not going to foreclose en masse on people who are paying their mortgage payments r…

But doing that is very expensive, the moment your interest starts rising you are paying hundreds of dollars/euros/etc. each month just so that you have the money available in your account, constantly depreciating. That is obviously something you need to be able to afford.

Re: The doomsayers waiting for the economy to crash

#40

Post by throwaway22032 »

constantcrying wrote: post #39
throwaway22032 wrote: post #34

Earlier quoted context omitted.

Yes, but _you_ can protect yourself against this by simply not over leveraging. Instead of buying the 250k house, buy the 200k house and put 1/4 of the mortgage payments away. After a year you have three months buffer, after four years you have a year. The key is simply to live slightly below your means. Re housing crash: the banks are not going to foreclose en masse on people who are paying their mortgage payments r…

But doing that is very expensive, the moment your interest starts rising you are paying hundreds of dollars/euros/etc. each month just so that you have the money available in your account, constantly depreciating. That is obviously something you need to be able to afford.

I don't understand what you are saying.

If you can afford a 250k house then you can afford a 200k house + 25% saved per month. It's exactly the same amount of money.

You then have a buffer. It's the opposite of expensive.

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