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Savings vs Spending
Old 06-06-2009, 11:15 AM   #1
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Savings vs Spending

Here's another dire prediction that indicates that if we save, we will hurt the economy. Probably true, but I predict that in less that 5 years we will be among the lowest nations when it comes to saving rates. Just like the good old days. My fellow Americans love to spend and hate to save.

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Better savings habits will make consumers more secure. But they could also keep the economy in the dumps. Economist Gary Shilling predicts that the savings rate will increase one percentage point per year for about 10 years. Consumer spending, as a result, seems likely to fall from 70 percent of economic activity to 65 percent or less, which means slower economic growth, fewer jobs and even more conservative spending and saving habits.

We used to envy our neighbors' new acquisitions. Now we wish they'd make a few more.
Why You're Going to Save More, Like It Or Not - Yahoo! Finance
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Old 06-06-2009, 11:19 AM   #2
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As a saver. I can only hope the others pick up their spending .
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Old 06-06-2009, 05:55 PM   #3
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Is it true that investments in stock or bonds is considered an expense? I read this here

I looked around in the US Department of Commerce's Bureau of Economic Analysis site and came away with no confirmation that this is the case. Its a confusing site with LOTS of information, so I probably missed it.
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Old 06-06-2009, 07:19 PM   #4
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Originally Posted by Notmuchlonger View Post
As a saver. I can only hope the others pick up their spending .
My birthday is in the fall. Need ideas?

IMHO, chronic problem spenders are no different than chronic drinkers or druggies. The thrill experienced when blowing large amounts of money is a "here for now" high, but like any sustance, it needs be redone, over and over again.
American consumers are "on the wagon" right now because they got the financial equivalent of a DWI.
I have no doubt the majority will be back in the sauce again once their jail term is up. Let's just hope someone takes the keys away.
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Old 06-06-2009, 08:33 PM   #5
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We're retired. We've gone from savers to spenders. Egads....
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Old 06-06-2009, 09:14 PM   #6
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We're retired. We've gone from savers to spenders. Egads....
Isn't that the idea? We work, skimp and save all our lives and when you reach FIRE, you turn over a new leaf, right? DW and I have a "nest egg" that brings in a significant percentage of our total retirement income. We spend all of our retirement income and keep the nest egg year after year. Some day we may need to dip into that egg but that's why it's there. As I mentioned once before, my wife's greatest fear is that she will die and not have spent all the money. My greatest fear is that she will accomplish it.
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Old 06-06-2009, 09:19 PM   #7
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Isn't that the idea? We work, skimp and save all our lives and when you reach FIRE, you turn over a new leaf, right?
Absolutely...I couldn't agree with you more. But it sure takes some getting used to.
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Old 06-07-2009, 07:27 AM   #8
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Savings don't hurt the economy, abrupt (collective) changes in savings and spending do. Whatever damage increased savings has caused in this economy have pretty much had their impact. So I hope Americans will start/continue saving 5-10% of their incomes --- but I'm not betting on it.
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Old 06-07-2009, 08:18 AM   #9
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The 'Savings Rate' is a statistical figure I have had questions about. I have searched online and from the definitions I find, the savings rate does not include all the retirement savings plans out there. If this is true, as people move more 'regular savings' into retirement savings, it would appear as a decrease in savings, when it is not. Then the decrease in the savings rate is used for political purposes.

A similar thing happens with Voter roles. Through several Voter Rights Acts, Voter roles have been bloated. i.e. a voter moves from one county to another and registers in the new county. The old county has to keep the voter on the roll, if not notified by the voter, for I think 3 years. If you go to the ridiculous there use to be one voter in the county with 100% voting. Now there is 100% not voting. All we hear in the news is 'The voting rate is dropping' Now one looks at the unintended consequence of the law changes, it is just chalked up to a more politily correct 'voter apathy'
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Old 06-07-2009, 08:30 AM   #10
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Yup, the flaws in the much thrown about "negative savings rate" have been discussed in this forum, it's definitely not as black and white as press headlines make it seem.

That said it is always interesting thinking about what behavior of your neighbors is advantageous to you financially. We do/don't want them to save, or spend, or work until they are 80, or be able to hang onto that house, etc.

I have one middle-aged female neighbor who is distinctly past any semblance of MILF stage yet doesn't realize, my only hope there is a new wardrobe for her.
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Old 06-07-2009, 09:00 AM   #11
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Savings don't hurt the economy, abrupt (collective) changes in savings and spending do. Whatever damage increased savings has caused in this economy have pretty much had their impact. So I hope Americans will start/continue saving 5-10% of their incomes --- but I'm not betting on it.
Yes. It's not the fact that we're saving that's killing the economy per se; it's the drastic, sudden and (in our lifetimes) unprecedented shift in the savings rate. Velocity of money is a very relevant indicator in that sense. A quick shift of 6% in the savings rate (from -1% to +5%) may not seem like much, but on the margins it has a huge impact on the economy in the short term.

In any event, whether it is a permanent shift in mindset or not -- and it was for many who lived through the 1930s, though I'm not saying we're anywhere near there -- either we have a long-term healthier economic position, or we're setting ourselves up for another consumption boom in the future when people start feeling more confident about their jobs and their finances again.
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"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

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Old 06-07-2009, 10:51 AM   #12
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According to this article (and savings rate statistics), I am a complete spendthrift. I "spend" a lot of money on stocks, bonds and real estate, but I "save" virtually nothing. I guess I'm doomed.
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