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Notes From the Fieldby Martin Weil

Posts Tagged ‘Personal Savings’

July 27, 2015

Millenials and Their Risky Financial Behaviors

20-Something? Know or related to one?  This short article should be required reading for those in college or recently graduated.

Only 58% of students from four-year institutions say they feel prepared to manage their money. Three out of five don’t use budgets. 17% say they don’t even manage their money; their parents do it for them. 16% say they lived paycheck to paycheck, and yet only three-quarters stop spending when their bank account balances were low.

@Michael Kitces

July 29, 2014

So Warren Buffett Walks Into a Bar…

Ten working class guys are in a bar when Warren walks in, goes the tale. As soon as Buffett crosses the bar’s threshold, the average person’s wealth in the room skyrockets.

This is a classic example of how statistics can be used to make utterly misleading statements. It is preamble to this more than a little shocking bit of data from Marginal Revolution

The inflation-adjusted net worth for the typical household was $87,992 in 2003. Ten years later, it was only $56,335, or a 36 percent decline, according to a study financed by the Russell Sage Foundation. Those are the figures for a household at the median point in the wealth distribution — the level at which there are an equal number of households whose worth is higher and lower.

The median is the statistical measure that provides real insight here regarding how the typical American household’s wealth has fared. Average wealth and income in the US has certainly risen since 2003. But this information is of no value if we are trying to explain how the typical household is doing. Average in this case is not “average.”

Much like Warren walking into the bar, this rise in average income is a consequence not of rising wealth across the board, but of extreme wealth increases at the very highest end of the spectrum. This rising tide has not raised all boats this time around and most people affected “get” this fact. The typical household, as shown by this study, has not benefited from an increase in wealth at all, but has instead suffered a substantial decline.

It is data points such as these that betray for me the factors underlying the ongoing discontent with the current economy in the US.

inflation-adjusted net worth for the typical household was $87,992 in 2003. Ten years later, it was only $56,335, or a 36 percent decline, according to a study financed by the Russell Sage Foundation. Those are the figures for a household at the median point in the wealth distribution — the level at which there are an equal number of households whose worth is higher and lower. – See more at: http://marginalrevolution.com/marginalrevolution/2014/07/were-not-as-wealthy-as-we-thought-we-were.html#sthash.xK1atyzm.dpuf

November 20, 2013

A Picture Worth A Thousand Words

NgramThis simple, but potent, chart is a Google Ngram of the frequency in printed material of the terms “Spending” and “Saving” since 1800.  Note that the incidence of the term “Spending” starts to rise dramatically after WWII and surpasses the slowly declining Savings term in 1980. Funny how this coincides with the decline in personal savings and explosion of debt-driven spending that began in earnest in the early 1980s.

Thanks for the pointer to Dylan Grice.

July 29, 2013

Simple Investment Advice for Gen Y

If you do nothing else about your retirement, start saving early.  You should also save a lot and stay out of debt

This is the best advice possible from Above the Market and much the same as my own tax person told me when I was 20-something, a long time ago. The sooner you start, the easier it is to save a lot of money. The author’s simple demonstration shows that saving $2,000/yr starting at age 19 for just 7 years equals the sum a person would have accumulated by age 65 if they waited to start until 26 and made contributions for 40 years. Counterintuitive for sure, which is why of course, I knew better at the time, as I suspect many 20-somethings do today.

April 17, 2013

Annual Costs of Car Ownership, Higher than You Think

Cost of owning and operating a vehicle, 2013:

  • Small sedan: 46.4 cents a mile, $6,967 a year
  • Medium sedan: 61 cents a mile, $9,151 a year
  • Large sedan: 75 cents a mile, $11,248 a year
  • 4WD SUV: 77.3 cents a mile, $11,599 a year
  • Minivan: 65.3 cents a mile, $9,795 a year

Includes gas, maintenance, insurance and depreciation.  Based on driving 15,000 miles a year. SOURCE: AAA

Posted at Marketwatch

March 25, 2013

A New Option for Individual Investors with Smaller Accounts

Wealthfront is a new entrant in the automated online investment advice world. This may be an option for many with smaller investment accounts, who otherwise would be do-it-yourselfers, to obtain prudent investment oversight at a very low price point.

March 16, 2013

“401Ks Are A Disaster”

Many, many, years ago, a colleague who happens to be an actuary complained to me at every opportunity about what the emerging change from pensions (defined benefit and social security) to retirement schemes like 401ks was going to mean for the future of retirement savings. “No good will come of this,” was the essential message. He groused that individuals would make poor investment choices, save insufficiently and only discover the resulting shortfalls when it was too late. Of course, this was the mid-1990s. Stock markets were routinely going up 20-30% per year and individual retirement accounts were soaring. Richard’s was a lonely voice indeed. Since then of course, we have had the Dot-Com collapse and the 2008 financial crisis, which combined to bring us the infamous phrase “201K.”

Duncan Black (aka the political commentator Atrios) writes in a USA Today editorial with the above title:

The 401(k) experiment has been a disaster, a disaster which threatens to doom millions to economic misery during the later years of their lives. Proposals to improve our system of private retirement savings — even good ones — will offer little to no help for the baby boomers who are currently nearing retirement, and are also unlikely to be of sufficient help for current younger workers….

Black’s op-ed is just one more voice adding to the chorus of concerns that baby-boomers, and even worse, those who follow, are facing a very much less financially secure future than that of their parents’ generation. In hindsight, this is just one further manifestation of the persistent over-spending (under-saving) we as a nation indulged in from 1980-2008. In this morning-after our twenty-plus year party, the bills are just starting to come due. And I do not see these fiscal imbalances being easily resolved or without considerable pain. The vitriolic political fights that are our steady diet are simply a factional debate over how to apportion the burden of these accumulated obligations.

Richard, it was 1995 and you were so right.

 

 

February 7, 2013

This is definitely not good news

The classic contrarian warning sign for stock prices.

January 15, 2013

7 Financial Resolutions Worth Keeping

The WSJ, of all places, offers this pretty good basic advice for 7 ways to get your financial house in order in 2013.

For accumulators:

  1. Track your spending
  2. Put savings on autopilot
  3. Talk with your spouse about money
  4. Long term care insurance in mid-to-late career

For retirees

  1. Don’t take SS benefits early
  2. Make sure you maximize tax advantages when withdrawing
  3. Consider an immediate, or deferred,  annuity

Thanks to Rita McGrath

December 17, 2012

Facebook Makes You Fat and Poor

Stop the Presses!

Findings showed that more time spent on Facebook was linked with a higher body mass index, increased binge eating, a lower credit score, and higher levels of credit card debt.

According to a new study cited in the NY Daily News, Facebook enhances the self-esteem of users, while they are online. This has the perverse effect of lessening their self-control when they are not online, leading specifically to overeating and overspending. 

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