Shiller: Live Like a Student and Save

Walt34 said:
That's where we are too. After I retired I could easily have found a mid-six figures job and most of the guys working in that field did so.
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Out of curiosity which field to which you refer pays $400k-$600k per year?
 
Spanky said:
He advocates saving more. Here's an app that would help people to save.
A 29-year-old invented a painless way to save money, and Google's buying into it!

It seems to be just another entrepreneurial idea to make a lot of money. This 29-year guy is amazing in making it big.
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"But there's a catch: Users do not earn any interest on their savings."

It is like the high tech version of a Christmas Club Account! - forced savings and no interest, but some people who might otherwise fritter away the money will benefit from the structure.
 
Spanky said:
That's how Digit makes money - keeping the interests, I think. They might receive fee or commission from the two banks.
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I'm reading a book now called Incognito: The Secret Lives of the Brain and the logic was the same from the Christmas Club Accounts, started in 1909. People willingly gave up the interest they could have earned in order to grant someone else the power to prevent them from making impulsive decisions with their money, so they would have the money they needed for gifts saved up at Christmas time. Banks loved the concept. It was free money for them to invest the rest of the year.

So here is a concept from 1909 made into an app. :)
 
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haha said:
Not to mention the favorite young person's hobby-copious sex with as many attractive partners as you fancy. Anyone who lives in the real world can testify that it would be essentially impossible for a man at least to replace that, for free or almost any realistic amount of money.

Ha
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Tell me about it, Ha. I didn't marry until 30, but it was a lot less work accomplishing the task at hand living in the frat house as it was in the bars after graduation.


Sent from my iPad using Tapatalk
 
2B said:
This similar to my bare bones budget if DW and I are reduced to just SS except I can live much larger on our combined SS than I ever did as a student. I could do better than my student days on just my SS.
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About six months into ER, I have to say it does feel a bit like returning to a simpler student lifestyle, but better (no hormone-crazy roommates, for one thing).

It's been reassuring to realize that I can live on less than I anticipated. And, like you, I think SS will cover the bare-bones budget, taking a lot of the pressure off. SS is still quite a few years away for me, though, so the most important thing is to make it safely from here to there.
 
daylatedollarshort said:
People willingly gave up the interest they could have earned in order to grant someone else the power to prevent them from making impulsive decisions with their money, so they would have the money they needed for gifts saved up at Christmas time. Banks loved the concept. It was free money for them to invest the rest of the year.
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Same with the IRS and tax refunds. Woo-hoo! I got a big refund! (Or, my pet peeve, "I got a big tax return!") Now I can buy a bigger TV!

As a taxpayer, I thank you for your interest-free loan to the US government.
 
athena53 said:
Same with the IRS and tax refunds. Woo-hoo! I got a big refund! (Or, my pet peeve, "I got a big tax return!") Now I can buy a bigger TV!

As a taxpayer, I thank you for your interest-free loan to the US government.
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That was actually the second example in the book of using an out of body mechanism for controlling potentially impulsive behavior of one's future self, at least until tax return time.
 
Shiller's advice to young workers to be frugal is not new. What I find more noteworthy is is his gloomy outlook about future investment returns.

In the example he describes, a person saving 5% while working can expect to have post-retirement spending of 5% of his previous income, if his retirement years are as long as his working years. Why? Because his investment return barely lets him catch up with inflation.

Such gloomy outlook from a Nobel laureate is noteworthy, don't you think?
 
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NW-Bound said:
Shiller's advice to young workers to be frugal is not new. What I find more noteworthy is is his gloomy outlook about future investment returns.

In the example he describes, a person saving 5% while working can expect to have post-retirement spending of 5% of his previous income, if his retirement years are as long as his working years. Why? Because his investment return barely lets him catch up with inflation.

Such gloomy outlook from a Nobel laureate is noteworthy, don't you think?
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I think he is careful to say he of course cannot predict the future, but has a hope for the best but prepare for the worst pragmatic type of advice, based on possible current potential bubble signs. I thought he came off well compared to some of the other less pragmatic and more formula oriented economists in the Nova show Mind Over Money:

NOVA | Mind Over Money

After I watched that I started paying more attention to what he predicts and recommends for investments.
 
The question for me about Shiller is : does he take his own advice?
He apparently took his Nobel winnings and bought a Connecticut beach house in 2003.
 
bld999 said:
The question for me about Shiller is : does he take his own advice?
He apparently took his Nobel winnings and bought a Connecticut beach house in 2003.
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In the articles I've read he doesn't tell people to buy or not buy houses - he just says that historically they usually keep pace with inflation so they may not be the great investment many think they are.

http://finance.yahoo.com/news/we-re...ng-slump--ever--robert-shiller-174038372.html

"There is an argument for helping low-income people get a house,” says Shiller. “I think it makes them feel better about their attachment to this country and themselves.” But he doesn’t believe there’s any reason to advise people towards owning a house instead of starting a business or paying for an education.

Owning a home appeals to certain people, according to Shiller, people who are upwardly mobile with young children. But, he warns, owning a home is an incredible nuisance that can trap people and end up costing a lot in upkeep. “I’m a homeowner but there’s a lot of stuff that goes wrong, we had our heat go out the other day,” he jokes."
 
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Bestwifeever said:
Please don't make me eat those generic frozen pot pies every day for dinner again!
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I liked the Swanson pot pies. ;)

My college daze diet consisted of Kraft Mac and Cheese, various flavors of canned soup over white rice or pasta, and when I got my Work-Study check...chicken and veggie based casseroles, with canned cream of mushroom/chicken/celery soup as the gravy.

PB and jelly or cheese sandwiches with lettuce was my take-to-campus lunch. Once in a while I could afford the pizza and sub shop.

I tried the Ramen noodles but found it too salty.
 
During grad school at Tennessee in the early 70's, TA's were allowed to participate in "faculty lunch." This was a pretty nice buffet for $1 offered every weekday. I'd eat until I could eat no more and leave with a sandwich wrapped in a napkin to have for supper. It was a great deal since we'd focus on protein and veggies. Whatever we had stashed in our rooms was usually carb based......
 
youbet said:
It was a great deal since we'd focus on protein and veggies. Whatever we had stashed in our rooms was usually carb based......
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Aren't veggies generally carb based?
 
We usually had a stash as well...




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I have thought about "the savings question" a bit, since my eldest just entered the work force. She asked for my opinion, so I gave her the basics (fund the Roth, blah, blah).

But I did couch the advice by saying "the advice is only good if everything 'financial' stays about the same, but that is not guaranteed". Not that I think it's likely, but there's always the chance that somebody presses the reset button. Then the guy/gal that lived like a college student is in worse shape than the spendthrift (has a cheaper sofa to exchange for 22 bullets, LOL!). And of course there's the financial penalties for having assets and income (student aid comes to mind) and perks for being poor (food stamps, etc). Not that I BELIEVE that's the way to go! But I wanted to provide a complete picture of the situation....I didn't want her to come to me after the reset button was pressed and blame me for living like a college student "for nothing".
 
daylatedollarshort said:
In the articles I've read he doesn't tell people to buy or not buy houses - he just says that historically they usually keep pace with inflation so they may not be the great investment many think they are.

http://finance.yahoo.com/news/we-re...ng-slump--ever--robert-shiller-174038372.html

"There is an argument for helping low-income people get a house,” says Shiller. “I think it makes them feel better about their attachment to this country and themselves.” But he doesn’t believe there’s any reason to advise people towards owning a house instead of starting a business or paying for an education.

Owning a home appeals to certain people, according to Shiller, people who are upwardly mobile with young children. But, he warns, owning a home is an incredible nuisance that can trap people and end up costing a lot in upkeep. “I’m a homeowner but there’s a lot of stuff that goes wrong, we had our heat go out the other day,” he jokes."
Click to expand...

Still, he bought a second home with his winnings. Maybe he really likes the beach, and if so it was likely a good decision. I would expect someone who insists that houses make low to middling investments would have looked for a different job for that money.
 
He certainly hedged his bets with his opinion on home ownership. No one could be offended with his statement as he certainly covered all the angles.


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Shiller is a Nobel Prize winning economist who is a principal in many successful high margin businesses, plus having a chair in the department of economics at Yale.

Does he really need to maximize cash returns on everything he owns?

Ha
 
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haha said:
Shiller is a Nobel Prize winning economist who is a principal in many successful high margin businesses, plus having a chair in the department of economics at Yale.

Does he really need to maximize cash returns on everything he owns?

Ha
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+1. I think the advice he gives his students and the general public is not the same advice he would give to his older self and likely well off age 50+ fellow Nobel laureates and business partners. Part of what we suggest for our kids to do now is the wisdom we learned from our own mistakes. We tell them not to get tied down to a big house right away. We did that ourselves because the conventional wisdom, or so we thought at the time, was that houses can only go up and houses are great investments, right?

Shiller is just pointing out houses tend to keep up with inflation, they tie down your money and your free time and there may be better options.
 
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Shiller does not live like college students, because he does not have to. I am younger, and have less than he does (most likely), and I do not have to live like a student either. And I even have a 2nd home, because I can afford it.

I was fortunate to be working and saving during the boom years of 1980-2000. I hope my adult-age children will have the same opportunity I had, but there's nothing certain in life. They aren't living as college students either (my son bought an Audi S4), but I encourage them to save as much as they can.
 
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