Yet another scary study on how poor Americans are...

[52andout]

I mean keeping cash and budgeting. Saving up in advance for large expenses. That's how my parents handled their finances, and they taught me how to do that. But then I got my first credit card and discovered I didn't have to budget and save up cash anymore. I wouldn't want to go back to that.

The old fashioned way was the only way we could be retired so young. If you save up for things you often find you really don't need it (except mortgage debt, which we paid off years early). Also, nothing is better than going into a car dealer and buying a car for cash- you can really negotiate a low price if you visit a few dealers and let them know you are doing so.

Most of my family does the opposite and they have trouble when they have an unexpected emergency finding a way out without paying a lot of interest.

 

[Sarah in SC]

The old fashioned way was the only way we could be retired so young. If you save up for things you often find you really don't need it (except mortgage debt, which we paid off years early). Also, nothing is better than going into a car dealer and buying a car for cash- you can really negotiate a low price if you visit a few dealers and let them know you are doing so.

Most of my family does the opposite and they have trouble when they have an unexpected emergency finding a way out without paying a lot of interest.

I'm happily old-fashioned, like countless others on the board. Budgeting is key to my planning to retire way before the typical 65+ year old!

 

[Webzter]

I mean keeping cash and budgeting. Saving up in advance for large expenses. That's how my parents handled their finances, and they taught me how to do that. But then I got my first credit card and discovered I didn't have to budget and save up cash anymore. I wouldn't want to go back to that.

We also call and yell at the credit card co any time they try and raise our limit... now that's [-]probably[/-] a bad move but we really don't want a $50k limit on our card (and it's our only card)

 

[Sarah in SC]

Webz, I love your sig line! And your sentiment!

 

[Alan]

I mean keeping cash and budgeting. Saving up in advance for large expenses. That's how my parents handled their finances, and they taught me how to do that. But then I got my first credit card and discovered I didn't have to budget and save up cash anymore. I wouldn't want to go back to that.

That's how my parents had to manage as well, and that is how we have always managed. We do have credit cards for convenience and rewards, but never, ever, carry a balance.

Neither of our kids have credit cards (aged 28 & 30). I'm pleased that they do things "the old fashioned way".

My 2 sisters gave up their credit cards many years ago because they got into CC debt big time. They now pay as they go but keeping $2k in an emergency fund is too big a stretch for them. I've often seen them without a car while their own is off the road waiting for a repair they are saving for. Just as well there are good bus services where they live.

 

[free4now]

For many people "saving" means saving for a 3d HDTV, not saving for decades later or even next year.

 

[MasterBlaster]

We have a solution for these poor people. We can take money from pweople who retired early. Those early retire-people...

1) Have too much money
2) Are just a bunch of fat-cats - we should take their money cause we need it and they don't.
3) Got lucky somehow and need to share it with those with little
4) They should go back to work like those poor people - Just who do they think they are not working and helping ?

 

[GregLee]

We do have credit cards for convenience and rewards, but never, ever, carry a balance.

My CC balances were pushing $20k, at one point. I don't carry any month-to-month balance now, but when I needed (maybe I should say "wanted") to borrow to get by, my CCs sure were convenient. I can see that it's safe to never spend beyond your means, and in fact rather charming to hold to the old ways, but here in this thread we're commenting on how well contemporary Americans in general are managing their financial lives, and I just don't think it's plausible to apply a model from an age that is past.

 

[Darryl]

charming to hold to the old ways, but here in this thread we're commenting on how well contemporary Americans in general are managing their financial lives, and I just don't think it's plausible to apply a model from an age that is past.

I don't think the age is past. It's hard for me to understand why LBYM isn't more popular.
I can't imagine borrowing money ever again.
The things you can do and choices you can make when you have the improved cash flow of no payments and a net worth to smooth out bumps in the road feels so much better than living like the 75%. Certainly a lot of reasons why the 75% are living as they do. Using the outdated model is the surest way to

 

[Koolau]

I thank God that DW and I always made a decent enough living that we had no excuse to be without some emergency funds. Unfortunately, for the first couple of years, we didn't take advantage of that ability. We spent to the limits of our income - and borrowed some more. A couple of times, that got very uncomfortable for us. Neither of our sets of parents had ever lived the way we were trying to live (no, the parents never offered advice) so we were taking our cue from the folks we worked with. After a couple of close calls, financially, we changed our ways and have never looked back. I could not imagine living paycheck to paycheck ever again. My heart goes out to those who do (even the ones who could break the debt cycle if they tried hard enough). In other words, I know how easy it is to get sucked into the "American lifestyle" and how difficult it can be to get out. Still, the rewards of living debt free (with savings) are worth whatever temporary sacrifice one has to make.

I have a dear friend who has spent an entire life on the edge, even though he and his wife have made as much money as I have. I tried to council him that he could actually have MORE if he could ever just take a pause and get out from under his cc debt. ("Think how much interest you are paying, good buddy. Think how much fun you could have with that money if you didn't have to give it to the cc company.") He could see the logic, but he could never break free. Now, he has finally retired, defaulted on credit cards and has NOTHING. He is able to live on his small pension and SS, but can never travel, never have any more "toys", never own new cars, etc. etc. He is philosophical about it. "I had fun while it lasted. If I had died, I would have 'won'". God bless him. God bless America!!

 

[ItDontMeanAThing]

What's even more scary is that ONLY 25% said they could definitely get the money. That leaves 75% in some degree of stress.

Haves vs have nots or spenders vs spend nots? I was surrounded by yuppies in the early to mid 80s at w*rk and play. Money was one of the things most yuppies wouldn't stop talking about. My conclusion was that financial security had nothing to do with income. The single guys with the Porsches and 3 piece suits were as likely to be living paycheck to paycheck as the beach bums I played volleyball with.

From the linked article
>The survey asked a simple question, “If you were to face a $2,000 unexpected expense in the next month, how would you get the funds you need?”
That question wouldn't pass muster at any of the consumer research places I worked for 7 years. In a credit society one doesn't need to get the funds, what matters is what and how would one juggle expenses and debt to handle the additional 2k.

 

[Alan]

My CC balances were pushing $20k, at one point. I don't carry any month-to-month balance now, but when I needed (maybe I should say "wanted") to borrow to get by, my CCs sure were convenient. I can see that it's safe to never spend beyond your means, and in fact rather charming to hold to the old ways, but here in this thread we're commenting on how well contemporary Americans in general are managing their financial lives, and I just don't think it's plausible to apply a model from an age that is past.

Credit Cards are a bit like alcohol in that many folks, like yourself, can use them sensibly, but an awful lot of folks get drunk on them and many get addicted and end up in a downward spiral of increasing debt.

I just think saving up to buy something and keeping a "rainy day" savings account is a better model than using credit cards for unexpected expenses or buying something before you have the funds to buy it.

 

[aaronc879]

They just started voluntary lay-offs at work. You can sign up for 1 week at a time. Almost everyone else I talked to said they couldn't afford to take even 1 week off unpaid. I'll take as much as they'll give me although if I take too much time off then it'll be too hard to go back so maybe i'll just take 1 week each month over the summer. Hard to believe most 40 or 50-somethings at work can't even afford 1 week unpaid

 

[Walt34]

I can see that it's safe to never spend beyond your means, and in fact rather charming to hold to the old ways, but here in this thread we're commenting on how well contemporary Americans in general are managing their financial lives, and I just don't think it's plausible to apply a model from an age that is past.

I'm not sure it's quite that simple. We keep a large amount in readily-accessible savings (probably more that most FA's would say we "should") but we like having the ability to not have to give up anything else when the inevitable unexpected and unplanned-for events happen.

Example: Yesterday DW was involved in a relatively minor car accident but her car may be totaled, if there is significant damage to the front-wheel-drive drivetrain. If it becomes necessary we are in a financial position to write a check for a new car without impacting our day-to-day lifestyle one bit.

In contrast, one BIL & SIL wrecked a 7-year-old pickup truck in last winter's snow. They now have to give up other planned activities because they have payments on replacement vehicle to make.

We much prefer the former position to the latter.

 

[Dances With Fire]

Call it "old fashioned" if you like. Like many others here, we are happy to be with this group.(25%) By paying off cc balances each month, and saving to pay cash for cars etc. we have been able to save thousands in interest charges alone.

The look on the car dealers face when I offered 20k cash (wrote a check) for a used tundra was worth more than the "sacrifice" to save....

...getting him to finance it just wouldn't have been as much fun.

Dances

 

[W2R]

They just started voluntary lay-offs at work. You can sign up for 1 week at a time. Almost everyone else I talked to said they couldn't afford to take even 1 week off unpaid. I'll take as much as they'll give me although if I take too much time off then it'll be too hard to go back so maybe i'll just take 1 week each month over the summer. Hard to believe most 40 or 50-somethings at work can't even afford 1 week unpaid

Sounds like a really nice summer ahead, and even nicer since you can afford it.

 

[kombat]

The article makes no mention of how this has changed over any period of time. It could be an improvement vs 1999.

In the corporate world we used to call these "gee whiz numbers". They look impressive but without context don't lead to any meaningful conclusion.

I feel the opposite. While I agree that the "trend" can be interesting, I think the absolute numbers themselves are more worthy of attention. It's troubling that 75% of the population would have trouble coming up with such a relatively small amount of cash on short notice. Whether or not it was 70% or 80% 10 years ago isn't really very relevant - the fact that so many are in such a financially precarious situation is a problem.

It's like looking at the national debt. If I told you that the debt went up or down $x billion this year, that may be interesting, but it could just as easily go the other way next year, or may have been see-sawing for several years. But if I told you that as of today, the US owes $14 trillion, that's the big story. Adding a little here or paying down a little there is pretty meaningless. $14 trillion in debt is a big deal, regardless of what happened with the budget this year.

 

[donheff]

They just started voluntary lay-offs at work. You can sign up for 1 week at a time. Almost everyone else I talked to said they couldn't afford to take even 1 week off unpaid. I'll take as much as they'll give me although if I take too much time off then it'll be too hard to go back so maybe i'll just take 1 week each month over the summer. Hard to believe most 40 or 50-somethings at work can't even afford 1 week unpaid

Ha. When Federal budget woes led to proposals for staggered furloughs I looked forward to the time off. I worried about the impact on some of my employees but for me time was always as important (or more so) than money. For a couple of decades managers in the Senior Executive Service could store up unlimited vacation days. Some saved as much as a year of unused time. I built up a reasonable store for emergencies then used the rest and enjoyed every minute.

 

[Texas Proud]

They just started voluntary lay-offs at work. You can sign up for 1 week at a time. Almost everyone else I talked to said they couldn't afford to take even 1 week off unpaid. I'll take as much as they'll give me although if I take too much time off then it'll be too hard to go back so maybe i'll just take 1 week each month over the summer. Hard to believe most 40 or 50-somethings at work can't even afford 1 week unpaid

Unless you are FI.... I would not take to many weeks off.... it might give them an idea of who to lay off when it is NOT voluntary....

 

[Andre1969]

Ha. When Federal budget woes led to proposals for staggered furloughs I looked forward to the time off.

I have to admit, I was looking forward to some time off as well. And that last Friday before the budget finally got passed, I felt like a kid on the last day of school before summer vacation!

 

[packrat44]

Unless you are FI.... I would not take to many weeks off.... it might give them an idea of who to lay off when it is NOT voluntary....

But if you are FI and close to pulling the trigger, involuntary lay off might look appealing. If I were laid off involuntarily (rather than retiring) I would have received a severance allowance and been able to draw unemployment benefits (oh to be on the Government dole).

 

[Texas Proud]

But if you are FI and close to pulling the trigger, involuntary lay off might look appealing. If I were laid off involuntarily (rather than retiring) I would have received a severance allowance and been able to draw unemployment benefits (oh to be on the Government dole).

Agree 100%.... that is why I said FI... not everybody is right now... I know I am not... (I was, then I got married and was not)

 

[ERD50]

Also, nothing is better than going into a car dealer and buying a car for cash- you can really negotiate a low price if you visit a few dealers and let them know you are doing so.

Is this true? I thought they made money from the loans, so cash is a negative for them?


-ERD50

 

[scrabbler1]

Call it "old fashioned" if you like. Like many others here, we are happy to be with this group.(25%) By paying off cc balances each month, and saving to pay cash for cars etc. we have been able to save thousands in interest charges alone.

The look on the car dealers face when I offered 20k cash (wrote a check) for a used tundra was worth more than the "sacrifice" to save....

...getting him to finance it just wouldn't have been as much fun.

Dances

I always thought that paying interest (other than on a home mortgage) was the biggest waste of money possible. At least if you waste money to buy some useless item you at least have something to show for it. But paying interest gives you nothing other than paying more for something than you needed to.

I rarely use my CC and never carried an outstanding balance. I paid cash for my cars, paid off my student loans in 18 months and my mortgage in 9 years (I got tired of paying that interest, too!).

For me, the CC and debit card are generally a safety net, something I use to buy an item or service when carrying cash to buy it is not feasable. Most months I receive no credit card bill, so when I use my CC it is a minor nuisance because it adds one more bill to my household, even if it is a small one.

 

[Texas Proud]

Is this true? I thought they made money from the loans, so cash is a negative for them?


-ERD50

They do make money from the loan... when my mom bought her car, the guy said 'get a loan as we can take $1,000 off the price'... he even said we can pay it off on the second payment... and who cares what the interest rate is (it was 4%)....

So, we did it that way and saved $1,000... cash is NOT king all the time...