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Re: The Zero-Savings Problem in the US (CNN)
Old 08-03-2005, 02:58 PM   #21
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Re: The Zero-Savings Problem in the US (CNN)

I think the BEA defines savings as the amount of disposable income that you didn't spend. Since 401-K deductions are made before income is distributed, I don't think they count that towards savings.
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Re: The Zero-Savings Problem in the US (CNN)
Old 08-03-2005, 03:03 PM   #22
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Re: The Zero-Savings Problem in the US (CNN)

REWahoo,

I got smashed in the TX housing bubble bursting too. I lost all my equity and had to pay to get out of my mortagage because the house value (as determined by them) went below my mortgage due amount. That hurt for sure. Why did it happen? A lot of reasons but the facts were that no one was buying (demand) and the supply was high at the same time due to overbuilt area and speculation. In my area (Austin) there were millions of square feet of unrented office space and yet they were still building more. Cranes were everywhere and so were For Rent signs. The housing side slid down with the rest of it.

Is it always just about supply and demand? Well, I guess it is all in the way you look at it. I believe it is but the reason for the two of them vary in each boom or bust cycle.

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Re: The Zero-Savings Problem in the US (CNN)
Old 08-03-2005, 03:40 PM   #23
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Re: The Zero-Savings Problem in the US (CNN)

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Originally Posted by SteveR
I lost all my equity and had to pay to get out of my mortagage because the house value (as determined by them) went below my mortgage due amount. That hurt for sure.
"as determined by them" - just curious, did you sell the house, and have to write a check at closing? Or did the mortgage company call you up one day and say, "your loan to value is greater than 100% based on our appraisal, so send us a check tomorrow for the difference. Or we'll take your house. Thanks, Your Mortgage Friends."?

That last scenario is hard to believe if it did happen!
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Re: The Zero-Savings Problem in the US (CNN)
Old 08-03-2005, 05:11 PM   #24
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Re: The Zero-Savings Problem in the US (CNN)

Just an observation, but homes here in North San Diego county have stopped selling. In my neighborhood alone, the houses 2, 3, and 4 houses down have had a sign out front for months, and each has lowered his asking price between 20-30%. Sure, some of that was probably an overshoot of what they could get, but the feeling in this neck of the woods is the RE boom is over.
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Re: The Zero-Savings Problem in the US (CNN)
Old 08-03-2005, 05:12 PM   #25
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Re: The Zero-Savings Problem in the US (CNN)

Justin,

I had taken a promotion in my company and was moving from the area. *When I started the sale process the mortgage company sent out an appraiser and then I got the nasty news that I had to pay up the difference or lose my credit rating. *Several people in my area just walked out of their loans and left the empty house. *I could not do that so I had to write the mortgage company a check at closing to cover the difference. *I had to take out a personal loan to do so an that was a double hit to my wallet. *I had to rent a very cheap place in my new city for almost a year to make up enough to save for a minimum downpayment.

Two years later we divorced and I sold the new house. *Got out of the whole divorce with my son and no money and half of my retirement and all her credit card debt. *What a deal! *So, 15 years ago I was charging groceries to live on due to lack of funds. *I will never do that again. *My IRA will allow me to live well and still have money to pass on the my grandkids. *If I can go from zero (actually a negative networth) to a very positive one today, anyone can do it with proper motivation. *

Anyway, back to the topic....yes it sucked to have to pay the mortgage company to actually sell my house. *My company did not help at that time. *I was the poster child for company buy outs after that so others who followed in my footsteps got a nice buyout at their original purchase price and lost nothing. *Too bad I had to be the one to get the policy changed. * :
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Re: The Zero-Savings Problem in the US (CNN)
Old 08-03-2005, 05:14 PM   #26
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Re: The Zero-Savings Problem in the US (CNN)

We are selling my wife's condo. It went up on the market last week and we have 3 offers already. We are countering right now but it looks like we will be very near full price. That is unusual for here so it looks like the boom is alive and well here. Also, two houses in my area have sold in less than 30 days...these are all 5000+ sq. ft. Mcmansions too. Usually these sit on the market for months.

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Re: The Zero-Savings Problem in the US (CNN)
Old 08-03-2005, 05:36 PM   #27
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Re: The Zero-Savings Problem in the US (CNN)

Steve,

It sounds like the price you sold the house at did not pay off the mortgage in full. That isn't the mortgage company being mean, that's the market working its "magic". I feel sorry for the Californians (and others) that will probably have this problem soon.
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Re: The Zero-Savings Problem in the US (CNN)
Old 08-03-2005, 05:46 PM   #28
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Re: The Zero-Savings Problem in the US (CNN)

Quote:
Originally Posted by wabmester
I think the BEA defines savings as the amount of disposable income that you didn't spend. Since 401-K deductions are made before income is distributed, I don't think they count that towards savings.
Yes. A quote from the original article...

"Any money directed into 401(k) plans is considered to be part of take-home pay in the government calcuation. But that 401(k) money isn't available to spend.

Take a person who contributes 10 percent of income to a 401(k). If the government counts him or her as having a zero savings rate, he or she is actually spending about 10 percent more than the actual take-home pay, liquidating assets or taking on debt to support spending. "

Doesn't this make their statistics kinda screwy? Perhaps the reason "savings rate" is going down is because people are contributing to 401Ks now because they are more popular and well understood.

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Re: The Zero-Savings Problem in the US (CNN)
Old 08-03-2005, 06:22 PM   #29
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Re: The Zero-Savings Problem in the US (CNN)

Doesn't this make their statistics kinda out of this world screwy?
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Re: The Zero-Savings Problem in the US (CNN)
Old 08-05-2005, 01:55 PM   #30
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Re: The Zero-Savings Problem in the US (CNN)

No, it's correct. Say someone has $100 of pay, puts $10 in a 401k, and then takes home $90. Now they spend $100, putting $10 on their credit card. That person has a 0% savings rate, just as the article says.
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Re: The Zero-Savings Problem in the US (CNN)
Old 08-08-2005, 10:09 AM   #31
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Re: The Zero-Savings Problem in the US (CNN)

Quote:
Originally Posted by MasterBlaster
Some will make the argument that is better to be a saver amongst debtors than a saver amongst savers

I would think that other than feeling smug, the real concern is that the vast number of debtors would vote in legislators, who then pass laws to make you give up your "fair share" to the debtors.

Beware of hungry people that can vote themselves some of your loot.

So based on that, I will make the argument that is better to be a saver amongst savers than a saver amongst debtors
Would agree, saver amongst savers my preference. Just as everybody benefits when everybody is educated, can read, etc. The mindset of a saver maybe net- "contribute" more to society than just the raising of GDP.
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Re: The Zero-Savings Problem in the US (CNN)
Old 08-09-2005, 03:49 PM   #32
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Re: The Zero-Savings Problem in the US (CNN)

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Originally Posted by P.S.
Would agree, saver amongst savers my preference. Just as everybody benefits when everybody is educated, can read, etc. The mindset of a saver maybe net- "contribute" more to society than just the raising of GDP.
I disagree.* I'll admit right now that I haven't thought about this much, and I'm not an economist.* However, I think it's better to be a saver amongs spenders.*

Because the spenders keep happily putting their financial futures on the line, our economy is humming right now.* The example of Japan that someone else raised earlier is apt.* Also, is it unrealistic to hope that as the spenders' debts eventually catch up to them, they'll sell their assets below market rates, or some of their homes will be foreclosed, providing opportunities for the savers?* Another consequence a lot of the spenders will have to deal with is their inability to retire.* That could have both good and bad consequences for the savers, so I'm not sure which way it cuts.

On the other hand, I recognize it is true that when the spenders become too powerful, they can demand various kinds of forgiveness and welfare from the government to help them avoid the consequences of their own actions.* For example, they can demand tax breaks for people with big families, even though it's their own fault they had more kids than they could afford and spent their money unwisely.* And they can demand that gas prices stay unrealistically low despite all the costs that entails--costs that must be borne by the taxpayers (military forces defending the oil flow, environmental costs, etc.).

All in all, there are a lot of factors to consider, but I like that smug feeling I get from not being one of the teeming hordes of people going into hock to buy wall-sized plasma TVs and similarly frivolous shiny things.
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Re: The Zero-Savings Problem in the US (CNN)
Old 08-09-2005, 04:02 PM   #33
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Re: The Zero-Savings Problem in the US (CNN)

Saver among spenders is best. I did get a BA in Econ, but I don't think we need to get that technical as to why:

If you are buying a house, you want everybody else selling, not buying.

If you are a loaner of money, you want everybody else borrowing, not loaning. I'd rather be the only game in town with a ton of customers vs. competing against everyone else.
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Re: The Zero-Savings Problem in the US (CNN)
Old 08-09-2005, 04:06 PM   #34
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Re: The Zero-Savings Problem in the US (CNN)

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I did get a BA in Econ,...
Thought you could only get BS in Econ...

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Re: The Zero-Savings Problem in the US (CNN)
Old 08-09-2005, 04:18 PM   #35
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Re: The Zero-Savings Problem in the US (CNN)

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Originally Posted by REWahoo!
Thought you could only get BS in Econ...

REW
Are you the moderator or the agitator?* Oh, that's a different section.* Nevermind.*
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Re: The Zero-Savings Problem in the US (CNN)
Old 08-09-2005, 04:26 PM   #36
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Re: The Zero-Savings Problem in the US (CNN)

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Are you the moderator or the agitator? Oh, that's a different section. Nevermind.
I try to lead a balanced life.

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Re: The Zero-Savings Problem in the US (CNN)
Old 08-09-2005, 05:22 PM   #37
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Re: The Zero-Savings Problem in the US (CNN)

Quote:
Originally Posted by REWahoo!
Thought you could only get BS in Econ...

REW
Hey, guilty as charged! We like to do things like bundle everything that doesn't fit into our neat formula, label them as "externalities" and banish them.
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Re: The Zero-Savings Problem in the US (CNN)
Old 08-09-2005, 07:22 PM   #38
 
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Re: The Zero-Savings Problem in the US (CNN)

We savers have already benefited by being savers among spenders. As the government struggles to get the spenders to save, we just gobble up all the incentives. New higher "catch-up" limits on IRAs, Roth IRAs, HSAs. Yum -- tastes good!
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