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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck...
Old 07-11-2006, 12:02 PM   #41
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck...

Quote:
Originally Posted by MasterBlaster
Well to beat the savings rate drum once again.

The savings rate is defined as the rate of money that you (and we) put in passbook savings accounts and certificates of deposit. Money invested in stocks, bonds, IRAs and 401ks is not "savings"

By that definition I have very little "savings".

How much of your stash do you have in CDs and passbook savings accounts ?

The zero or negitive savings rate story makes a great headline but is meaningless when deciding if I (or we as a nation) have enough to FIRE.
I had a very different understanding of what goes into the personal savings rate calcualtion. According to

http://www.sfgate.com/cgi-bin/articl...UG5JE423K1.DTL

The Bureau of Economic Analysis starts with personal income, which includes wages (from a job or self-employment), dividends, interest, rental income (if you are a landlord), and employer contributions to health and retirement plans.

From this it subtracts income tax and the employee's share of payroll taxes. The difference is disposable personal income.

From this it subtracts consumer non-investment expenditures, including retail sales, utilities, interest payments on consumer debt, and money people send to friends and relatives overseas.

For housing, the bureau counts rent for renters or mortgage interest, property taxes and insurance for owners. It does not subtract down payments or principal payments on a house.

What's left is personal savings.

"It's the amount of money out of your income that you don't spend and don't pay in taxes. It's what you can put in the bank or stock market," says Shoven.


It does include money put into stocks and bonds. What it does not include is appreciation of those assets once invested. This implies that we are not adding to our investments or our savings accounts.

Am I interpreting this correctly?
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck....
Old 07-11-2006, 12:26 PM   #42
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck....

My understanding of the "savings rate" definition is that it only includes money put in "on deposit" ie. bank deposits.

Since these investment vehicles are losers in after tax, after inflation purchasing power it's no wonder that people have avoided them in droves.

My personal definition of savings is money that I invest and the gains from it. I know that's different from the official statistic.

I think most people think as I do. The official statistic is useful for bankers and makes a good headline but really isn't meaningful when thinking about how prepared Americans are for retirement.
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck....
Old 07-11-2006, 01:26 PM   #43
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck....

I don't agree with including the appreciation of assets in the savings rate. I don't believe that's what it's measuring, and would lead to someone buying wave runners for 40k because his house appreciated 50k and he took out a home equity line as a "saver".
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck....
Old 07-11-2006, 01:56 PM   #44
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck....

As others suggest, this seems to depends a lot on how you define "living paycheck to paycheck." Since losing my wife five years ago, I've lived more or less paycheck to paycheck...putting about 20k a year in 401ks, but (with two kids in college and family income halved) also withdrawing 30-40k or so from savings.

On the other hand, my net worth has gone up more than 100k/year and I've got plenty of resources to use in a pinch ($2.5m+).
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck....
Old 07-11-2006, 02:28 PM   #45
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck....

Hmmmmmm.......* It's becoming clear that the definition of "living paycheck to paycheck" varies greatly among us!* I think of living paycheck to paycheck as meaning your total net worth, including the value of the paycheck you most recently received, is only enough to carry you through to the next paycheck.

Folks living "paycheck to paycheck" would become unable to pay routine bills and living expenses quickly after losing their job even if they were willing to liquidate non-cash assets or pay early withdrawal penalities.

If we're calling folks who have zillions in their retirement accounts (various types), zillions in home equity, zillions in other non-monetary assets (collectibles, etc.) but who would have a liquidity or cash flow problem if their paycheck stopped living "paycheck to paycheck" I would say there is nothing to worry about!

Liqudity problems are easy to solve, even if you have to pay some penalties or sell equities at an inopportune time.* Just being broke and losing your job is a lot tougher nut to crack!*
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck....
Old 07-11-2006, 05:22 PM   #46
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck....

Hmm, how many paychecks could you go without before you'd be in some serious debt?

I could probably go for quite a few years without a paycheck. And I'm sure most people here could do that as they are working towards not having a 'paycheck' for their lifestyle.

As for the 70% - I can believe it - when I re-fi'd the house for a 10 year payoff, the notary said she'd had none of those, a couple 15 year and mostly 30 year with payout of equity. Now, as the rates go up, there are quire a few defaults (my county was listed as fourth in northern California on default rates - ouch!)

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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck....
Old 07-11-2006, 05:51 PM   #47
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck....

Quote:
Originally Posted by youbet
Hmmmmmm.......* It's becoming clear that the definition of "living paycheck to paycheck" varies greatly among us!* I think of living paycheck to paycheck as meaning your total net worth, including the value of the paycheck you most recently received, is only enough to carry you through to the next paycheck.

Folks living "paycheck to paycheck" would become unable to pay routine bills and living expenses quickly after losing their job even if they were willing to liquidate non-cash assets or pay early withdrawal penalities.

If we're calling folks who have zillions in their retirement accounts (various types), zillions in home equity, zillions in other non-monetary assets (collectibles, etc.) but who would have a liquidity or cash flow problem if their paycheck stopped living "paycheck to paycheck" I would say there is nothing to worry about!

Liqudity problems are easy to solve, even if you have to pay some penalties or sell equities at an inopportune time.* Just being broke and losing your job is a lot tougher nut to crack!*
Youbet...

I would slightly disagree with you.. there are people who have bought a lot of 'stuff' and need to make payments... they live in a nice house, drive a nice car, take nice vacations,but not savings... they are living paycheck to paycheck, but living nicely...

If they lost their job, thier standard of living drops a long way and FAST... that is what I would call living paycheck to paycheck no matter how much you make..
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck...
Old 07-11-2006, 07:07 PM   #48
 
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck...

The definition for 'living Paycheck to Paycheck' given by Oprah was. If you lost your paycheck, you would have to borrow money to eat. You had no savings at all. No retirement savings, no Stocks, No bonds - nothing.

You would have to sell furniture, cars, electronics etc or borrow money from friends or family. This also means these folks had a lot of credit card debt also and were making minimum payments on the debt.
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck....
Old 07-11-2006, 08:11 PM   #49
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck....

http://www.bls.gov/cex/home.htm
If you look at avg income those numbers are just plain scary.
Of course I would never pay cash for a car. To me its just cheap money. I rather throw that money back into the market and pay off the car over time. I did try to put a cheap used car on a credit card. They wouldnt let me though. Something to do with the risk of me changing my mind and then disputing the bill.

We call how long you can live without your paycheck your wealth. Its nice when your wealth is atleast measured in yrs and not hours
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck...
Old 07-11-2006, 08:12 PM   #50
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck...

Quote:
Originally Posted by MasterBlaster
My understanding of the "savings rate" definition is that it only includes money put in "on deposit" ie. bank deposits.

I think most people think as I do. The official statistic is useful for bankers and makes a good headline but really isn't meaningful when thinking about how prepared Americans are for retirement.
MB,

Not quite. The personal savings rate is basically the difference between personal income and personal expenditures. Thus, whether an individual puts money in a checkiong account or buys stocks, that still counts as savings. I've also heard folks say the PSR does not include IRAs, 401Ks, etc--this is not true. There are some problems with the PSR definition ("income" includes pay, dividends, and interest, but does not include appreciation of assets--inncluding real estate, stocks and bonds. "Expenditures" includes things like education expenses, etc as well as food, clothing, housing, insurance, etc).

The growing number of retirees is one reason for the falling PSR. For example, if your annual withdrawal from your savings is higher than your dividends and interest, then you had a negative PSR (even if your portfolio doubled that year due to increases in the value of your stock)

travellingval,
I think you are right.

For more on the personal savings rate, see:

http://www.onwallstreet.com/article.cfm?articleId=3328
and
http://www.frbsf.org/publications/ec...el2002-09.html
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck...
Old 07-11-2006, 08:58 PM   #51
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck...

Quote:
Originally Posted by spideyrdpd
We call how long you can live without your paycheck your wealth. Its nice when your wealth is atleast measured in yrs and not hours
I like that formula. I'm not doing as well as the rest of you, since I only just started working on it... But if my math is right, without tapping into my IRA, if I had to liquidate the rest of my savings, I could go 1 year 10months before I hit bottom.
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck....
Old 07-11-2006, 09:37 PM   #52
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck....

Bankrupt Maxed out in America:

http://americanradioworks.publicradi...es/bankruptcy/
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck....
Old 07-11-2006, 10:41 PM   #53
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck....

I am noticing people are getting their credit card declined at points of purchase.* Three times this week I have heard the cashier quietly ask for another card.*
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck...
Old 07-11-2006, 11:00 PM   #54
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck...

Not quietly enough
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck...
Old 07-11-2006, 11:22 PM   #55
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck...

i FEEL like im paycheck to paycheck, but after callcs, with NO income, and liquidating my SMALL retirement portfolio, I figure I coiuld survive 12 months...then be flat out BROKE

BUT, I could then sell my 2 investment properties and clear 30k or so to make ends meet for a bit

(when I was younger, I thought the term was making ends meat....sorta like making cow butt meat....dunno why)
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck....
Old 07-11-2006, 11:27 PM   #56
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck....

Thanks C-T for the Oprah definition. *That gives some clarity to the Oprah 70% figure. *Clearly, she wasn't refering to liquidity issues but rather to "no food on the table" issues.

I think it's important to understand the difference between folks with liquidity problems (money tied up in houses, cars, collectibles, land, airplanes, jewelry, retirement plans, etc.) and someone who is just plain broke. *Sadly, I think it's the latter situation that is plagueing many of our fellow citizens today. * :-

If it was just a matter of selling off non-financial assets, and there were plenty of them, to make ends meet, not so bad, eh?*
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck...
Old 07-11-2006, 11:31 PM   #57
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck...

You bet.
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck....
Old 07-12-2006, 12:11 AM   #58
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck....

Living paycheck to paycheck according to the Oprah definition is what I had in mind. If you can't make the house payment or the rent, can't buy food, can't make the car payment, can't make the CC minimum payments (which are higher now) and can't pay all your bills that are currently due because you do not have the funds to do so nor cash or cash like instruments you can convert to cash, then you are screwed. All it takes is a higher than expected power or gas bill and you are juggling bills to see who gets paid now vs from the next check. If the next check never show up you are blued, screwed and tatooed.

I used to be there myself. My kids in law are darn close and other family member and friends are only a couple of paychecks away also. It is not a good place to be and it becomes a major ordeal to get out of the never ending cycle. Talk about stress! This was one major reason for my divorce. I live on the edge for almost two decades and never had more than a few hundred $ in the bank; no savings, no investments, no bonds, just bills and debt. Yuck! gives me heartburn to just type this.

I consider myself a bit of a Cinderella story or sorts. I know I never had it as bad as many do but it was bad enough. It is amazing what a little education and a lot of persistence can do for your net worth over time.
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck....
Old 07-12-2006, 12:55 AM   #59
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck....

Steve R, your's is a great story of triumph over adversity. Congratulations!

Ha
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck...
Old 07-12-2006, 06:08 AM   #60
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Re: Just heard a statistic that 70% of America is living Paycheck to Paycheck...

I find 70% hard to believe. The top 20% of households have income of around $100k at the low end. This means that most of them probably wouldn't have to "borrow money to eat" if they missed a paycheck or two. So that means that only 1/8th of the other 80% of the country has any measurable amount saved. Sorry Oprah I don't buy it. Doesn't 30%+ of the country have IRA accounts of more than a few thousand dollars? Maybe they have no efund but it's not quite paycheck to paycheck as she described.
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