katsrevenge

Wow.

I might know one person who has that much cash laying around. Just one. He works in NYC but lives in PA because...well... he wanted a house out of the city as he is a SHTF stockpiler of dried food. But, he does make NYC wages.

Then again, he might not have that kind of money in the bank. He spends pretty freely as he's constantly trying to pull stuff over on the IRS.

It isn't lack of planning to live with less. It's lack of well paying work, education and luck. It's lack of opportunity today and plain old economic class stagnation. How nice for you that you are 'stuck' in one of the higher brackets.

Joe Perez

Apathy, the victim-mentality, and a proclivity to blame others or the environment for one's own problems are all strongly correlated with personal economic failure. I won't imply that correlation = causality, but it would seem that one is a reliable predictor of the other.

I'm as shocked to hear you refer to $5-10k as "that much cash" as you presumably are to hear me talk about it as though it were a reasonable thing to keep some liquid cash in the bank.

Roody

Somebody has to buy new cars or there won't be any used cars. And probably less than ten percent of the population has enough spare cash to buy a new car or even a nice used car. I don't particularly like that fact, but it is how our economic system works.

All the financial advisors I've heard recommend some level of debt. That's how you establish a credit history, which the gurus always say is a good idea. And if somebody needs a car, they need it now--not three years from now after they've saved enough cash. Most people want to buy a house when they have young children, not after they've saved money for 30 years. The only way to do that is to take on a mortgage.

Roody

Sorry, but you are very ignorant of what life is like for a large number of people. And I sincerely hope you never have to find out. You really would be shocked then.

RPK79

Yeah, the Dave Ramsey financial plan isn't for everyone. You have to be willing to put up with hardships and put off instant gratification. I'm actually surprised that there aren't more here in the LCF forum of all places who don't prescribe to that mentality.

Spld cyclist

I think that some people never get ahead financially through no fault of their own. I also think that the opportunity for frugality and building savings is still there for many people. In some ways, it's not unlike being car-free or car-light. Some people who depend on their cars every day can't imagine life without a car even if they live within a few miles of where they need to go. Some people without savings don't realize that there are opportunities to save that they're not taking advantage of.

My wife and I bought inexpensive used cars with loans early on. Once they were paid off, we kept the payments going into a separate savings account using direct deposit. We did our best not to touch the money. We maintained those cars and drove them essentially until they were dead. When it was time to buy another car, there was money in the account to help buy the next one. (Full disclosure - unfortunately, we currently own two cars, although there are times I could have honestly described us as car light).

birdhunter1

My dad sold cars for 30 years, part of that was his vehicle (always a truck) was always for sale whether it was a demo model or actually his. I remember one time he had 4 trucks by December 31st 3 were demo models the 4th he bought himself, as a side to that I was never one to think buy a vehicle and keep it as he often traded moms vehicle in to keep her in a newer (less than 3 years old) vehicle for peace of mind.
When I graduated college and had that career type job I of course was looking at a new truck, current one was 10 years old and 130,000 miles, near time for a clutch and a few other repairs, truck was paid off. The owner of the dealership, a man of great wealth both financially and spiritually took me in his office for an hour and gave me a financial talk. He said find a balance of a dependable vehicle and cost of it's replacement, we went through all of my debt (at the time just student loan debt and not much) and the projected debt in the next 5 years (buying a house etc). Not that my dad hadn't also also told me this but over the course of a week we went through current finances, goals, needs and wants. He told me to get a truck and keep it 5 years (I kept it 2 and ended up leasing practically the same truck for 1/3 the payment of my current truck), pay it off and get another... through his talk he talked me out of a Supercab FX4 F 150 into a more basic regular cab F 150 4 wd, talked me into waiting another year to buy a house (and continue saving for it) and investment opportunities (built a fake stock portfolio and reviewed it with him monthly on what the stock was doing and why I kept or wanted to get rid of it).
When the lease was up I decided on a Regular cab Ranger 4wd which I still have 8 years later, didn't invest in the stock I'd chosen (should have on one the others tanked), bought and sold a house and besides my wifes vehicle payment (again going on dads logic to keep her in the most dependable vehicle, fairly new and safe, and paying cash for 2/3 of it) I am debt free (other than a house payment).

What I took from all this and the owner's work with me.... not all debt is bad, having some keeps you frugal, and having some and paying it off keeps a high credit score for when you need more.

FenderTL5

I have no objection to savings, rainy day funds nor the quoted response in general.

I do think you're original statement, "..quite frankly, if you don't have $5-10k in spare change rolling around.." was poorly communicated, especially to anyone living in a household where 10K in "spare change" is unfathomable due to whatever reason(s).
Just a matter of example: severe medical crisis/expenses.

prathmann

One problem I have with Ramsey's advice is his fixation on eliminating debt and ignoring other risks. E.g. he's fine with a liquid reserve of only $1000 and advocates spending everything else on paying off debts. That could leave you severely strapped if you have a sudden unexpected loss of income or incur a necessary expense. I'd much rather have a remaining mortgage of $20K and have $21K in the bank than use that money in the bank to pay off the mortgage and then be laid off and need some cash to buy food and other necessities while looking for new employment. Yes you'll pay a bit more interest on the mortgage balance than you'll earn from the bank, but there's also some value in having an available cash reserve so you aren't forced to sell assets in a panic sale or be forced to accept a really bad job offer out of desperation.

katsrevenge

Ah... I've placed you now! Republican/Randian/Libertarian... right? It all comes to the same thing. I doubt you've spent much time wondering about how to make rent or putting food on the family table. Again, how nice for you. Today's economic reality is that the majority of Americans are no longer middle class. Most educated people of my generation (and I include myself and my partner here with our shiny and debt laden degrees) may be lucky to enjoy the same monetary successes that our parents enjoyed.

For the vast majority of the people I know, 10K is roughly half a years salary. And, most of the people I know are college educated, smart and capable of hard work.. not the Randian 'welfare bum' you seem to be imagining.

I think you need to check your privilege. Perhaps do some work for the social good. Volunteer at a soup kitchen... anything to learn some empathy. Eesh.


Screw that. I'm hoping that he/she does get to learn how hard life can actually be. It would be an education for the good of society.

Frugality plays into why we live car light. We buy well maintained 'beaters' once every few years for about a grand, do minor repairs and drive them till something important blows up (head, struts.. that kind of thing). Then we sell it for a few hundred to a scrapper or a guy who likes to repair cars. The car is necessary as public transportation here is iffy and my guy does not feel safe biking on some of the roads to his workplace.
We are frugal in other ways too. Most of the people I know are. It may be from scratch cooking, few 'extras' like cable or a cell phone or picking up used video games instead of new..it all adds up; if slowly.
To assume that everyone is capable of setting aside what amounts to a half a year's wages for way too many people is just asinine. I suppose I could give them the benefit of the doubt.. they are thinking in NYC dollars. Those buy a whole lot less.

enigmaT120

I've never listened to or read Dave Ramsey's stuff. I like this guy who, among other virtues, is a bike nut:

Mr. Money Mustache

Joe Perez

I assume that your mental picture of me and my background is something other than "emigrated to the US with no money at all, worked a series of menial jobs for low pay, saved every penny made, and was eventually able to go to college, move into the middle class, white-collar world, etc."





I don't think it was poorly communicated at all, inasmuch as that, upon re-reading, it continues to convey the desired sentiment with the appropriate tone. I acknowledge that it might sound harsh, but frankly, a general unwillingness to describe things as they truly are is anathema to productive discourse.





I am not a member of any US political party, nor do I see how political alignment is relevant to a discussion of fiscal responsibility.


See above response to Roody.

Lobbing personal attacks against the messenger suggests that you are ignoring the message.




Interesting.

According to the US Census bureau, the mean average household income in the US for 2012 was $51,371, and for the state of Pennsylvania the average was $51,230. Speaking from a purely economic standpoint, you have some very below-average friends. (I assume that you are fairly young, and that your friends' income represents mostly entry-level positions.)



For reference, the car which I owned immediately prior to moving to NYC in Sep of 2013 was a 1990 Mazda Miata with slightly over 210,000 miles on it. I paid $800 for it in late 2010, having just moved to southern California and finding that the car which I owned at the time was illegal and un-importable under California law. The car before that was a 1992 Miata in rather better condition for which I'd paid around $4,000 in mid-2004.








I am slightly dismayed to see this discussion devolve so quickly into mud-slinging and "Oh, woe is me, you cannot understand my burden."

wphamilton

Kat that's being a little unfair to him I think. Granted his idea that everyone should have 5-10K in the bank comes off as elitist and naive but I suspect that it's only because he didn't really think it through.


There are two sides to this coin in my opinion. I tend to agree with him in general (ie, it's better to save it up, and do without until you pay cash) and I'm not Republican nor heaven forbid, Randian. I've been there, where you're scrambling to find rent or even groceries and you're right that $5K cash is pipe dream but I've also banked more than that, gradually, when I wasn't making all that much and supporting two households at the time. When you're able to, it just takes discipline but at some point, of course it's impossible.

I think that, if a person is seriously contemplating a load of 20K or 25K for a new car, that he probably has the slack to put back a little each month, and it's probably more sound financially than to buy that car on credit.

RPK79

For reference katsrevenge is a self proclaimed communist.

Some folks have a hard time believing that people's economic standing is a direct result of their own actions. I came from a broken home and grew up in poverty. I continued on in life as a poor young adult until I realized I didn't want to live like that forever. Then, I put myself through college earning an actual usable degree. Now I'm solidly in the middle class.

Life is what you make of it.

FenderTL5

In that case I will concur with what Roody said previously.

Dave Cutter

Well we have different advisors. Mine is more like Ramsey the entertainer in many ways. But Ramsey the financial planner... would be trying to sell you investment products if you sat across his desk from him. They all do! They can't make much income saying "be cheap"... unless you have a TV show and write books.

"History" does provide a portion of a person credit rating... but not much. Ether you pay your bills... or you don't. Missing deadlines and/or due dates doesn't help anyone. Not being in debt... and having a hefty sum set aside is what raises ratings.

Its a path as narrow as a swords edge: Plan like you'll live forever... and live like you'll die tomorrow. Most likely... whatever anyone does... will be wrong.

katsrevenge

I seem to have ruffled your feathers. Good.
Most legal immigrants I have known have come from money in their home country. It takes money to immigrate through the system; money and skills. The US really doesn't take the tired, hungry and poor anymore.

I also assume that your movement into the 'white collar world' was done before the economy tanked... right when my friends and I graduated and found no work to be had. Most of us found work as unskilled types, retail, factory... the kind of thing that doesn't pay. Now things are slightly better.. but those entry level jobs are still full of new graduates and older workers with skills.

Median is slightly better than average but not a true indication of much. Actual incomes are down some 8% since 2007.
15% of Americans live in poverty. 1% of the population owns some 42% of the wealth. The bottom 80% owns roughly 7% of the total wealth of the US. One scale even has the American poverty rate at 16%, after fine tuning.

It isn't just 'one person's burden'. This is a serious issue that affects a large chunk of an entire generation. It is a troubling trend if you care about such things as a stable society and a functional democracy. But, as you say, you aren't a member of any American political party and don't do politics. Shame that. People should be involved in those things that affect where they live.

katsrevenge

Mostly because I support unions and green causes. That party does a better job of supporting those things then more middle of the road parties.

That, and I enjoy telling people I'm a card carrying commie.

RPK79

What are you and your friends' degrees in?

I graduated college in the heart of the tanking economy and it didn't slow my rise to white collar.

Gallo

Sub prime loans have existed in the auto industry forever.They ebb and flow normally being more prominent during bad times. They have a long history of taking advantage of low income families in any economy. How these folks sleep at night on their pillow of money is beyond me.

It is a threat to human decency and those that use their services but a non factor in the National or World Economy

Roody

I'm tapping out of this debate before I get too emotional and dogmatic. Two last non-dogmatic thoughts:

- Be careful with advice--whatever works for me (or you) will not work for everybody else.

- Luck (good or bad) is part of everybody's story (but not the only part).

katsrevenge

He seems to have thought it through. It's a shame, I really do prefer to give folk the benefit of the doubt.

And I agree with you. Saving is good; if you can do it. Do without until you can afford it sans strings. It's what we practice.

I've found that once you build up a nice nest egg, something bad happens. Our last fat egg was squished when my guy got himself an infected tooth and had to take a ride in an ambulance. It wasn't covered by insurance, most of the ER visits wasn't covered. Neither was all of the surgery he had to have. Thanks to Obamacare, the next one will be mostly covered. At least there is that.

And I agree that if you are looking to buy a 25,000 car than it may be best to save up and do cash. Makes more sense.

katsrevenge

Everything from marketing to art to philosophy/law to communications to education to design.

Funnily enough, the guy who stuck with art is doing the best and is actually working in his field.

The rest of us.. well, two of the educators work in education. They moved to places with a high demand for teachers. No one else is working in the field we are educated in. I ended up in freelance writing, for goodness sake. My fiancée works in a chemical plant. A friend with two masters in two different fields is doing caseworker-type work he has no qualifications for. Another friend is a sort of orderly in assisted living. These are all good, worthy jobs.. but well paying, no. Not at all. Nor do they really require any education beyond HS.

... I do like the hours freelancing gives me, at least. Pay could be better, but it's enough.

wphamilton

That's so true. Circumstances, sometimes random unforeseeable events, play a larger role than we like to admit. Not always something bad. I think that the hard times are useful, to remind ourselves when we're riding high, that it's not really just because we're smarter, harder working and more prospicient than others.

katsrevenge

So true. It's just hard to accept that luck plays a big role in one's life.
It isn't all bad either. Some of the best things in a life are due to luck. Love comes to mind.