Debtors better savers

**Scanner** · 03-21-2008, 05:14 AM

Not sure why the link isn't working. . .go to yahoo's front page today.

**simpleyme** · 03-21-2008, 06:55 AM

off to find it

sound interesting

**noppenbd** · 03-21-2008, 07:01 AM

Interesting, but it sounds like there is a lot of doubt in the numbers since it is all self-reported. Aside from this message board, what fraction of the general population knows how much they save each year as a percentage of income off the top of their heads? I know WE all know it because we are math geeks, but most people probably don't even know how much is going in their 401ks, let alone total savings.

**cptacek** · 03-21-2008, 07:02 AM

I think the difference is if you use the debt to bettor yourself or to buy trinkets. Debt has a useful place in our society. It allows someone with ideas and drive to start a business and get ahead. Dave Ramsey is SO against debt that he wants everyone to save up and pay for everything with cash. But I'm sorry, if the thing you are buying is going to eventually pay for itself, then it makes sense to buy it with a loan.

**Broken Arrow** · 03-21-2008, 07:03 AM

The link is working for me.

Anyway, I think you're preaching to the choir on this one (not that that's a bad thing or anything). Debt's just a tool. Hazardous when it is not used correctly, but useful when it is.

**simpleyme** · 03-21-2008, 07:12 AM

hmmm okay
people who pay interest save more than people who do not pay interest I guess I did not follow that all too well

this must be the sponsored by a car company " just think what you can do with all the money you save by buying this car"

all I know is the less I pay in interest the more money I have available to spend or save , owing money on cars would not up my savings rate

I think high net worth is something that comes with wise planning

**jIM_Ohio** · 03-21-2008, 07:30 AM

Originally posted by simpleyme View Post

hmmm okay
people who pay interest save more than people who do not pay interest I guess I did not follow that all too well

this must be the sponsored by a car company " just think what you can do with all the money you save by buying this car"

all I know is the less I pay in interest the more money I have available to spend or save , owing money on cars would not up my savings rate

I think high net worth is something that comes with wise planning

You have more money available, but you may not have more money. That is the point.

Paying off mortgage early is:

a) a cash flow decision
b) a debt decision

it is not a
a) higher net worth decision
b) have a larger savings decision

If a person can pay off their mortgage aggressively (in less than 10 years) those are the only times I see paying off coming out ahead on net worth side. Meaning the extra mortgage payments need to be 2X the original payment, 3X the original to make paying off make the most sense both debt wise, investing wise, and net worth wise.

**simpleyme** · 03-21-2008, 07:39 AM

if I read it right the debt the article talked about excluded mortgage and was referring to other debts

talking about mortgage before ten years is the standard for what worthwhile? I find that interesting as if you over pay a 15 year mortgage it is almost impossible not to pay it off in 10 years

**noppenbd** · 03-21-2008, 07:50 AM

Originally posted by Scanner View Post

http://finance.yahoo.com/banking-budgeting/article/104680/America's-Savings-a-Sign-of-the-Times

You know, this kind of correlates with my family. My sister carries no debt - no credit card, no mortgage (lives in an apt.). . .she lives very frugally picking up jobs here and there. . .yet, she only has saved about $90,000, with a 60K EF and 30K in retirement (yes, I know. . .I am working on flipping that).

Contrast that with us. . .we have business debt and a mortgage and our total net worth with our house is 350K.

Tell Dave Ramsey to stick that in his pipe and smoke it, LOL.

Your example of your sister is not necessarily exemplary. Even though her net worth is not that high, depending on her income she could be considered to be a prodigious accumulator of wealth according to the Millionaire Next Door formula (Net Worth > Age*Income/10). And what is her net worth as a percentage of her expenses? It is probably quite a few times her annual expenses, so not as bad as you are making out.

It's possible that the people claiming to save "10-20%" of their income are offsetting the savings at least partially by incurring greater debt each year (the amount of which the study does not consider).

**jIM_Ohio** · 03-21-2008, 08:20 AM

Originally posted by simpleyme View Post

if I read it right the debt the article talked about excluded mortgage and was referring to other debts

talking about mortgage before ten years is the standard for what worthwhile? I find that interesting as if you over pay a 15 year mortgage it is almost impossible not to pay it off in 10 years

America's-Savings-a-Sign-of-the-Times: Personal Finance News from Yahoo! Finance
Overall, I thought the article was poorly written. Some excerpts:

Our survey shows that income is a big factor in Americans' ability to save. Some 29 percent of those earning less than $50,000 say they aren't able to save any of their salary, compared to only 5 percent of those earning $50,000 or more. Nearly all those earning $50,000 or more are able to save at least part of their salary (92 percent).

This makes sense.

"Nearly half (47 percent) of consumers are saving either nothing or less than 10 percent of their income. That seems to be a sign of the times," she says.

This means little compated to first quote above.

66 percent would skip going on vacation one year rather than put it on a credit card or finance it in some other way.
90 percent would keep an older car that runs fine and is paid for, rather than finance a new one.
78 percent would save up for major home improvements, rather than take out a loan to do them.

Is the survey measuring people's thoughts or actions?

Interestingly, those earning more than $50,000 are more willing to make sacrifices than their lower-income brethren. For example, those earning $50,000-plus say they are more likely to skip going on vacation (74 percent vs. 62 percent) and drive an older car (95 percent vs. 89 percent) to avoid debt.

almost makes sense.

Our disparate savings habits are reflected in this interesting parallel: roughly an equal number of Americans could live for a year off of their savings (25 percent) as could only make it a month or less (22 percent).

Does this really mean anything?

Some 41 percent of survey respondents report they are satisfied with the amount they save. However, that means the inverse is true: nearly 60 percent are not satisfied.

again does that comment really mean anything?

The tables at beginning made it even worse (I could not follow the tables the first two times I read them).

There is no common theme to the article and the people here could probably write better, if they had the data.

**LuxLiving** · 03-21-2008, 09:18 AM

Oh bull-****zle, I can think of no reason why everybody can't save IF THEY WANT TO.

Get a dime, take a penny out and put it back for later. Big whoop. We don't save 'as a nation' in America anymore because we think we Have To HAVE a TV in every room, a chicken in every pot and a Hummer in every drive.

No, big-spender, a cable tv connection is not a necessity.

Neither is a drive thru burger.

Neither is a box of Fruity-O-Nos.

Air, food, water, shelter - these are the necessities.

Everything else is GRAVY folks.

NEEDS VS. WANTS, people!!!!

I'll just go on pretending that we could all save if we wanted to badly enough. We may not have our priorities straight to be able to do so though. We might have to move to a lower cost of living area, or sell our second or third car, or whatever, but by cracky we can keep a penny jar if we are that low in the savings/earning race, but yes, we could save SOMETHING if we wanted to badly enough.

GRRR. I understand people get in bad situations and get gridlocked w/their finances at times. But each moment is a new opportunity to turn it around and try something different. I don't know, say, how's about putting at least 1% back out of the next paycheck and giving it the old college try? If it works and you don't miss it, get daring and set aside 2% next paycheck! Get your expenses reduced and evaluate your situation and priorities and see if you can't turn a nickle or two loose somewhere.

You say it can't be done? I beg to differ. We were that tight at one time due to our own mistakes. Face them, and try something different. What have you got to lose but a bunch of stress over feeling like you can never get ahead?

**Ima saver** · 03-21-2008, 09:36 AM

We have taken out loans to buy property to build on. However, we have always sold at a profit and saved the profit. Now we have the cash, not only to buy the property, but to build the house for cash. (dh is a licensed builder, BTW)

**disneysteve** · 03-21-2008, 11:54 AM

Tell us what you really think, LuxLiving!

Just kidding. Couldn't agree more. I get so tired of hearing people complain that they've got no money but when they are complaining to a friend while talking on their $300 cell phone, somehow the complaint just doesn't seem reasonable.

Just this week, we talked about this at work. I've posted before about the one girl who works in my office. She's 21, lives at home, parents pay for a lot of her expenses, she works full time and has zero savings. She apparently is shopping for a new cell phone. The one she was looking at was a few hundred dollars. Mind you, she has a working cell phone that has nothing at all wrong with it. She just really wants this new model. I said that my spending limit for a cell phone is $9.99 and I'd only go that high if there wasn't one available free after rebate. I suggested looking online at her carrier's website to see if they are selling refurbs. I know AT&T does. As far as she's concerned, though, there's no point in doing that if she can't get the exact model she wants. No wonder she has no savings.

**maat55** · 03-21-2008, 01:00 PM

I just ran a savings calculation on what you could save in 40 years at 12% on 100 a month or the cost of a cell phone. It came to 1.1 million.

Debtors better savers