How the Other Half Saves: Financial Planning on $2 a Day

[jeffrey]

American families forgot how to save in the 2000s. So how do families living on $2 a day put away enough money to pay for thousand-dollar weddings, funerals, and unforeseen tragedies...

In 2005, something remarkable happened in the United States that hadn't occurred in 70 years. Americans spent all of our money.

The personal savings rate that year dipped below zero for the first time since the early 1930s. For every $100 the Americans made, we spent $100.50, reaching into our savings or taking on more debt to buy expensive items like homes (this was the tip of the housing bubble) and cars.

Exploring the cost of everything See full coverageNot saving felt perfectly natural to Americans in 2005, the annus bubblicious of the 2000s. But in the sweep of history, it seems positively insane. The richest nation in the history of the world, in its richest year on record, couldn't afford to put away a little money for a rainy day -- or for this, our rainy decade...

How the Other Half Saves: Financial Planning on $2 a Day - Derek Thompson - Business - The Atlantic

[GREENBACK]

My take from this is that you learn to be very creative and very resourceful when there aren't a bunch of safety nets around.

[asmom]

How sad it is for these people who already live in the direst poverty of not knowing the relative security of even a small safety net. It must be awful to know that if one were to become sick or a family member were to die you run the risk of losing everything even when you have less than nothing such as the case of the people profiled in this story.

[disneysteve]

A couple of thoughts...

The whole negative savings rate thing wasn't really true. If you research that, it didn't include things like 401k contributions, so if you earned 50K, put 7.5K (15%) into a 401k and spent everything else, you showed up as having a zero savings rate.

As for those living on extremely low incomes, they live in ways that most Americans aren't willing to live, like sharing a bathroom with 8 other families. It wasn't that long ago that things like that were commonplace right here in the US. I clearly remember vacationing with my family in Atlantic City when I was a kid. We stayed in a very well known hotel on the Boardwalk that didn't have private bathrooms in each guest room. The bathroom was down the hall. I'm not talking about ancient history. I'm talking about the late 60s or early 70s. When was the last time you stayed in a hotel like that?

Fast forward 20 years. When I was in medical school in 1990, I did a 1-month rotation in Reading, PA. The hospital didn't provide student housing so I rented a room in a nearby boarding house. It was just that - a room with a bed and minimal furniture. No fridge - I used a cooler that I refilled with ice every day. No bathroom - it was down the hall and shared with several others. But it was what I could afford at the time. How many people do you know who live like that?

We are spoiled as a society. We want to have a car for every driver, a bedroom for every family member, a laptop for each kid, TVs in every room. The amount of food that we waste and throw away is a disgrace and would feed thousands of people in 3rd world countries who are starving to death. When resources are scarce, you conserve out of necessity. Waste not, want not. When resources are available in abundance, you lose that mindset. We surround ourselves with closets overflowing with clothing we hardly ever wear, pantries bulging with food, houses filled to the brim with stuff that we really don't need. Then we wonder why we are having trouble making ends meet even though we earn plenty of money.

[Ochayebeers]

If you want to see where all this is heading, have a look at Greece!

Hairdressers were retiring at age 50 as this was held to be an "arduous" profession or some such.

Now more than 50% of under 25's are unemployed and the European Commission/IMF are insisting on 20% budget cuts in return for bailouts. How does a government enact such swingeing cuts bearing in mind that a "government department is the closest thing to eternal life we will see on this earth".