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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

#301

Post by markyc »

Avshalom wrote: post #273
beambot wrote: post #256

Earlier quoted context omitted.

I get that he earns a lot from rent. But I still don't understand the animosity. Would you be equally up in arms if he just invested in municipal bonds -- the bonds that pay for your parks, roads, fire stations, police upgrades, and schools? There are reasonable tax-free bond funds (eg. PMF) that pay >6% annually. I've read most of his posts. He harps on things like biking instead of buying a new car. Or "why spend $…

The animosity isn't specifically at MMM. People who think "have you tried spending less" is insight, thats what who we hate. Believe me poor people are way ahead of you on the spending less money idea.

poor people are way ahead of you on the spending less money idea

not always true.. I know quite a few who still smoke, own a car even if they don't really need it, buy the extra expensive, small can of coke, and generally follow convenience over financial planning.

these things do add up. will they help them buy 3 houses and live on the passive income? don't think so, but it definitely would help them pay for their home faster

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

#302

Post by lmm »

arbitrage wrote: post #85
vvpan wrote: post #38

I wonder how many of those people are paying off mortgage with what would be their savings.

You should be able to pay off your mortgage and still maintain & increase savings. If you can't, you have too much mortgage.

I've been overpaying on my mortgage by 150% all year; that's the money that I would otherwise have saved. Savings account would give me 3% tops; stocks would give me more but not risk-adjusted more. Paying my mortgage off early is 4.2%, risk-free.

Am I being dumb? It's quite possible there's something I've missed.

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

#303

Post by OrwellianChild »

t2015_08_25 wrote: post #236
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.

I like the cut of your jib. I've been considering buying rental properties to supplement my income, but something deep inside somewhere, based on living close to people well below my income level as one of a 4-unit building, prevented me from doing it. When I tried to compute how much rent I would charge, I realized I would be profiting simply by taking money from them because they have been unable to accumulate capi…

I'm really confused... The thing of value you are providing as a landlord is housing. How is it skimming? Putting money towards a house/condo instead of investing it in business has an opportunity cost. You lose out on the profits from dividends/interest/cap gains. That has to be replaced. If you charge too much rent, other people will under-cut you. The price is set by available housing. Where is the deceit?

Do you feel you would owe people the freedom to use your property free-of-charge? What about the mortgage payments you endure? The maintenance/upkeep (roofs, siding, carpet, plumbing, electrical, all amortized over the life of the building)? Should this be a loss you take in order to let someone else sleep in your house?

Disclosure of bias: In Seattle where I live, the cost of real estate is higher than the prevailing rents, when you factor mortgage payments, maintenance, utilities, HOA, etc. This makes it a little easier for me to see the equity in pricing between rentals and owned homes. It may be different in your parts of the world.

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

#304

Post by lmm »

TallGuyShort wrote: post #197
rozap wrote: post #70

So 38% of Americans are have more than $1000 sitting around becoming less valuable everyday? That may be a more interesting conversation to have.

Only 38% of Americans are capable of being self-reliant in the event they miss a paycheck or two. edit: Why the downvotes? Is there a problem with being moderately self-reliant?

Savings accounts aren't the only way to achieve that.

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

#305

Post by coryfklein »

It actually surprises me how many people keep >$10,000 of cash in their savings account. That would make sense to me if you have a large expense coming up like a house or a car, but if it were me then most of that money would just be sitting there and I'd rather have it somewhere that it's making more money for me.

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

#306

Post by OrwellianChild »

Avshalom wrote: post #239
a_c_s wrote: post #194

Earlier quoted context omitted.

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

right 25 grand--no house or car payment because he was in the right jobs at the right time and could afford to buy most families' largest expenses outright (over 50% of income between the two)--and he still managed to spend the entire pre-tax income of about 30% of american households.

I can't tell anymore whether it's okay by you for people to make money, buy property, or otherwise be better off than anyone else...

The man worked, earned money, and bought things with it. Not everyone has these opportunities, true. He got lucky. None of this comes to bear on his present situation. Regardless of whether he has rental income, MMM's managed to whittle his spending down to a level affordable by the median household income in the U.S. On that merit alone, I consider his advice worth listening to (if not taken with a grain of salt to my own personal circumstances).

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

#307

Post by lmm »

OrwellianChild wrote: post #201
Artistry121 wrote: post #162

Earlier quoted context omitted.

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 expen…

$1.4k is way too much for somewhere that you're still driving to work from. I think a lot of people overestimate the value of a big house. You just end up filling it with junk.

If you get a smaller house - say $1k/month - suddenly you can afford to live very comfortably, and save some as well. $52k is absolutely a lot of money; of course there's always more things to spend it on, and I won't pretend more money isn't very nice, but $52k really should be plenty. Putting it another way: if $52k isn't enough to make you happy, $100k probably won't be either.

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

#308

Post by morgante »

kamaal wrote: post #293
morgante wrote: post #174

Earlier quoted context omitted.

> You're exactly the kind of person this article is pointing out, because your ability to be wiped away by the market is a precarious position to be in. Any scenario where the stock market declines by 99% ($100k to $1k) would basically mean the collapse of the entire financial system. I doubt your bank savings account would be very useful in that scenario. Moreover, I don't think this article is actually talking abou…

>>Any scenario where the stock market declines by 99% ($100k to $1k) would basically mean the collapse of the entire financial system. Yet if you owned real estate[Land, Houses], they stand exactly as they are. While the numbers in the bank database turn to 0 after the collapse and companies go bankrupt and never recover. If you owned real estate, your money will recover in the very next turn.

Agreed, but that's kind of off topic.

Real estate is yet another asset class which should be included in a diversified investment strategy, but my point was that there's no evidence that money should be kept in a bank savings account.

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

#309

Post by t2015_08_25 »

OrwellianChild wrote: post #303
t2015_08_25 wrote: post #236

Earlier quoted context omitted.

I like the cut of your jib. I've been considering buying rental properties to supplement my income, but something deep inside somewhere, based on living close to people well below my income level as one of a 4-unit building, prevented me from doing it. When I tried to compute how much rent I would charge, I realized I would be profiting simply by taking money from them because they have been unable to accumulate capi…

I'm really confused... The thing of value you are providing as a landlord is housing . How is it skimming? Putting money towards a house/condo instead of investing it in business has an opportunity cost. You lose out on the profits from dividends/interest/cap gains. That has to be replaced. If you charge too much rent, other people will under-cut you. The price is set by available housing. Where is the deceit? Do you…

It's got nothing to do with deceit or skimming, it's power. There is no fraud, it would be simply taking advantage of people beyond the amount of value that I would be interesting in providing.

Your allusion to a market that would correct the price doesn't account for a market which no tenants can enter because none of them can afford the entrance (a 20% down payment).

They'll get the benefit of housing no matter how much I would charge, but if I charge more than the value of the maintenance and accounting them I would be exploiting them, taking advantage of their inability to produce capital in the time it's taken me to produce it. And everyone else who is in the position I am could exploit them just as easily so the market doesn't help there.

It's like gas prices: if so many gas stations can compete, how come they prices aren't driven down to nothing? Because of the entrance cost to the market. You can't start a well and refinery, so you have to go to one of the established ones.

For luxury items like phones, art, fancy cars, etc., I don't care about charging people a lot of money. But for water, air, food, medical and housing, which people have no choice to acquire or consume I'm not going to gouge them.

This is not some rational choice about what a person or market theory can or should do, this is my personal code of ethics.

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

#310

Post by OrwellianChild »

lmm wrote: post #307
OrwellianChild wrote: post #201

Earlier quoted context omitted.

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 expen…

$1.4k is way too much for somewhere that you're still driving to work from. I think a lot of people overestimate the value of a big house. You just end up filling it with junk. If you get a smaller house - say $1k/month - suddenly you can afford to live very comfortably, and save some as well. $52k is absolutely a lot of money; of course there's always more things to spend it on, and I won't pretend more money isn't…

I appreciate the critique - I'm not from the KC area, so I don't have local intuition. Seattle rents in the city are about $1.2k to $1.6k for a single-bedroom apartment, and a 2-bedroom (as would befit a couple or small family) are north of $2k, so I don't have local context.

Can I ask what you mean by "really should be plenty"? I left out costs which, in my part of the country, would vastly exceed the remaining $1.2k in our little exercise. I guess I should have been explicit about this assumption. I am better off than the average American by far, but even so, student loans from my grad school (an extravagance, I know) hurt to the tune of $1k/month. I don't have kids, but feeding/clothing/sheltering them would take a pretty penny too, nevermind the costs to time, commute, etc.

Any one of the un-accounted-for expenses could vary wildly person to person, and could easily swallow up all that excess. I'm all for frugality and feel like folks have a lot to learn in that regard. Still, $52k for a household doesn't seem to math out without a whole lot of scrimping and luck.

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