On not saving

[Sunnypad]

I heard something on the news recently about savings at a record low again.

I realise that for a lot of people this is about the cost of living.

However, amongst some of my friends it remains the case that spending is kind of a hobby. Someone I know who buys pretty much everything she wants, this weekend said to me "well you know I'm very careful with money but I'm thinking of getting a cab on this trip" (talking about a small trip within the UK).

I didn't say anything but I was honestly surprised that she sees herself that way.

The "possible redundancies" thing is still rumbling on at my workplace - since around October last year - and a couple of friends have again expressed amazement at me not being too worried.

also comments about it being pointless to save in the context of inflation are coming up a lot. Of course I understand that cash value is eroded by inflation but it still puzzles me that people who can save are so relaxed about everything that they just don't bother.

anyway, as per usual, this is just one of those posts where I wanted to share with like minded people! I love LBMM!

[neversay]

It's depressing, isn't it?

One evening last week I did a long-term spending forecast. It included pensions, second-hand car changes, holidays, home maintenance and upgrades, plus (as a parent of two under 10s) university fees/living and some towards the kids getting cars or on the housing ladder. The results in terms of monthly savings required were sobering and that's assuming all other factors stay equal like incomes, health, inflation, market stability, or other unplanned costs.

Meanwhile, our next-door neighbours have three young kids, two new cars, a larger house to maintain, better and more frequent holidays, weekly cleaners, weekly gardener, window cleaners and a tradesperson there most weeks of the year. I doubt their income/finances are better than ours but, each time I do the garden, clean the house and windows or do my own DIY, I take great satisfaction in knowing it's a few more quid saved for long term benefit and security.

Also, I take great pride in driving an old (but cared-for) car, yet everyone around us seem to be driving brand-new ones. It's their spending choice of course, but I do wonder how many of the new cars are loan-financed and what savings people are making elsewhere in their lifestyle to compensate.

Sooner or later we will have another correction and perhaps one where the Governments can't bail out the wreckless. I'll happily drive my old car than be seen swimming naked when the tide goes out...

[Sunnypad]

I don't find it depressing so much as surprising

the main thing that strikes me is that people don't worry about illness. In fairness most of these friends can't contemplate giving up work whereas I'd give a lot to give up work.

so when they buy a new whatever, I just end up thinking how many hours of work it costs.

the message is getting through in that I'm not asked to expensive places any more, which is good!

[neversay]

Do others calculate the cost of 'stuff' in terms of 'hours of work' or an equivalent hourly rate? I keep meaning to do that exercise but generally just minimise costs without doing the translation. It stems from being taught not to waste during childhood and making sure lights were switched off, etc.

What I do think about are three types of pound: (figures for illustration)

1. Gross income pound - say you earn 30,000 of these a year
2. Net income pound - you get to keep 23,679 after PAYE/NIC
3. Savings pound - the (say) 10,000 of actual disposable income you have after pensions, mortgages and other essential living costs are met.

So that little expense of a £3 coffee or £7 lunch is a far more significant fraction of people's real income than they comprehend. Put this way, it makes you realise how valuable those savings pounds really are and how we need to use them wisely.

I also totally agree on your comment about health - the most valuable personal possession of all.

[Sunnypad]

Oh I never think about my income before tax.

I just have an hourly rate in my head which is my income after tax and NI and travel.

I am not a high earner though, I've earned more in the past. I don't do any unpaid overtime really to factor in so it's easy to think of hourly rate as £x. Then it's automatic to think "yes I would like to buy that dress, but it's half a day's work - is it worth it?" - the answer is no 99% of the time.

It's partly the unrelenting optimism that throws me - people thinking they'll never get ill or that they will never want to stuff their job and do something else for example.

As I said though, for some people it's a hobby of sorts. LIke the friend who told me she spends carefully - she is the type who will plan outfits ages in advance - so that in turn presumably puts a different perspective on work, if that sort of thing is really important to you.

I have another friend who is a real foodie - he actually trained as a chef before doing the work he does now - so he considers a posh meal money well spent, whereas I'd be happy with some chain Italian place. My boss likes to travel to far flung places and uses every holiday day for it, which is obviously costly.

So motivation will work differently. But there's definitely more of an element of shopping for a hobby than there used to be. The local charity shops often have signs up saying they can't take any more stuff.

none of the people I'm thinking of have children btw - my friends with children are saving.

[UncleEbenezer]

The non-savers have it right these days. Savings have ceased to be a store of value, so why bother? What would you save for, when houses are a rigged market that penalises savers, and other things for which people traditionally saved (like kitchen white goods) are about two days minimum wage?

And with credit at approx. 0%, you have unlimited money when you want it (if you do the spending lifestyle and don't recoil at the debt - obviously not LBYM-mentality).

[Bminusrob]

I have known many people who spend every penny they earn (and some) with no regard to saving for a rainy day, emergency fund, the future etc.

I got to the point of just tutting at them. I am a firm believer that you can spend each pound only once. As I got older, my children left home, I paid off the mortgage, and my salary kept rising (even if slowly), and as a result, I found that by my mod fifties, I could save a significant amount of money each month, as well as making good pension contributions.

In my late fifties, I was diagnosed with cancer, which, fortunately has been successfully treated by surgery, so when the opportunity came up to withdraw from work when I was sixty, I jumped at the chance. I (and my wife) are living off our savings, and don't expect to need to access my pensions before my normal retirement date when I am 65.

My current lifestyle is only possible because I was a saver rather than a spender. I don't think I would change anything.

[elkay]

So that little expense of a £3 coffee or £7 lunch is a far more significant fraction of people's real income than they comprehend.

I saw a stat today that 37% of coffee shop customers are aged 16-24. There seems to be a real problem with young adults in particular understanding the value of their income.

[didds]

I saw a stat today that 37% of coffee shop customers are aged 16-24. There seems to be a real problem with young adults in particular understanding the value of their income.

That's true I'm sure. But I wouldn't limit it to youngsters. Older adults knee deep in car loans so they can drive chelsea tractors at 20K+ around town centres. There's still 63% of other people paying £3 for a coffee.
Sky Everything at £60+ a month (I overheard a conversation in a bank with a bank advisor talking to a couple in the 60s about their finances [ why in a public place? wierd ] - the bank advisor was pointing out they spent over £60 a month on Sky... the chap was saying its our relaxation and Ive worked all my life to relax ... he just couldn't grasp the fact that it was £60 he didn't have per month.

In another thread elsewhere a LF contributor has mentioned a bloke presumably in his 50s who has blown a lot of money and is living on £90 a week in a bedsit on his own.

its endemic.

[Sunnypad]

Ebenezer "Savings have ceased to be a store of value, so why bother? What would you save for, when houses are a rigged market that penalises savers, and other things for which people traditionally saved (like kitchen white goods) are about two days minimum wage?"

Well I wouldn't sniff at 2 days min wage, that's a lot of money really.

As for what you'd save for - a safety net? Again, you talk as if illness etc never happens.

I think years ago I posted for help about a friend who was broke I was convinced she'd appear on the doorstep of my one bed flat, with her husband and her cat. She earned nearly six figures for several years, never saved. Once asked if I had a cream scarf she could borrow for a wedding, then refused the one i offered because it was from a high street shop - quite she thought I'd have a designer one, I don't know.

Her post was made redundant, sadly in a new job, she refused to do any work to tide them over while looking for work. Ended up flat broke. When I talked to her about benefits she said "what's the point, £60 a week won't even cover our food bill".

they left London - not from choice - her husband now works all hours in a supermarket (having previously not worked so in a way he's lucky to be 50+ and be offered the work) and I'm not sure what she's doing as she is no longer in touch with anyone who knew her.

my mum's last hospitalisation was made easier for me by the fact that I could do things like take cabs, pick up a pricey meal from Waitrose on the way home, and not to worry too much because some rainy day money was there.

In cases like this, the argument of low interest rates, eroding cash etc seem bizarre. The point is to have a cushion isn't it? The cushion value might change from 2017 to 2020 but surely the point is just to have it?

[Sunnypad]

Didds, what's LF?

Sorry if being dense!

[Biggles]

Didds, what's LF?

Here's a clue: you're on it!

[PinkDalek]

I call it TLF, usually, as in TMF.

What's this about a £3.00 coffee? I never pay more than £1.95 for a double espresso.***


Edit *** Strewth https://www.londontoolkit.com/briefing/ ... shops.html but that's London prices.

[UncleEbenezer]

As for what you'd save for - a safety net? Again, you talk as if illness etc never happens.

I had a safety net when I moved from working (long hours) for others in their offices to working (harder than ever) for myself, creating but failing to sell more than a handful of a couple of great products. I had never earned six figures, but had been six years on a comfortable income around the lower £20ks.

About four years later, that safety net was all spent. But because I had my business, I couldn't get the dole. Income from the business was just above the level of "jobseekers", but well below my rent. I was on an Effective Tax Rate of 270% compared to sitting at home, doing nothing, and getting jobseekers + housing benefit.

My diet was one meal a day of Tesco value-line pasta and beans or lentils (£2/week at today's prices) plus what I could forage (blackberries right into late November in 2003, long after they were no longer fit to eat by today's standards). And I lost my last transport when I couldn't afford a fiver to replace parts on the bike.

Really, I'd've been far better off spending that safety net, then falling back on the state when my efforts failed to make an income.

I was rescued by the coming of ADSL. Once online, I could get paying contract work, and in 2008 was headhunted to a job paying close to £100k which became the basis for my starting to invest.

they left London - not from choice - her husband now works all hours in a supermarket (having previously not worked so in a way he's lucky to be 50+ and be offered the work) and I'm not sure what she's doing as she is no longer in touch with anyone who knew her.

For what it's worth, I left London - not through choice - in the 1980s. Couldn't afford to live there as a young graduate in a supposedly-good job. That's when it became clear to me that income was largely irrelevant: the difference between rich and poor was property ownership vs rent.

my mum's last hospitalisation was made easier for me by the fact that I could do things like take cabs, pick up a pricey meal from Waitrose on the way home, and not to worry too much because some rainy day money was there.

In cases like this, the argument of low interest rates, eroding cash etc seem bizarre. The point is to have a cushion isn't it? The cushion value might change from 2017 to 2020 but surely the point is just to have it?

That mindset only works for you if you're quite rich. Rich enough to save while also living better than you would if you relied solely on the state's safety net. For me in the 1980s it got me savings that lagged far behind house price rises, from which I fled abroad. And in the 1990s it just built up a pot which disqualified me from state benefits when the 'rainy day' happened.

[redsturgeon]

That's some roller coaster ride UncleE!

John

[Sunnypad]

Ebenezer - was this before you could get contributions based JSA?

Didds - oh dear!

re the coffee shop point and young people, I get that, but I think in the 16-24 bracket there can be a genuine issue with where a group of you can meet, especially if 6 of you don't want to crowd in a bedsit.

I'd still automatically think (for over 18s) that a lime and soda in the pub would be a lot cheaper - and presumably less full of screaming babies - but I don't know the stats, maybe the pubs are full of people in that bracket with a 60p lime and soda.

I am in London, as are my friends, and many of them are on 2 x £4 coffee a day, also think that £5 for lunch isn't enough. I know what it's like to work long hours and make yet another ruddy packed lunch in the morning but for me it was the only way I could see the light at the end of the tunnel.

which leads us back again to how much you do or don't enjoy working.

[didds]

Didds, what's LF?

Sorry if being dense!

Lemon fool

[didds]

What's this about a £3.00 coffee?

TBH, I never buy coffee out unless we are out for the day away from home etc etc etc. I know people who pop out of their home to a coffee place and buy coffee to take home. I don't honestly get that but each to their own.


So the £3 was a bit of a guess to be fair, based on a guess for the the bucket sizes I see people walking around with.

So I am probably wrong with how much coffee costs

didds

[didds]

maybe the pubs are full of people in that bracket with a 60p lime and soda.

One of my locals sells L+S for 60p. Other pubs in town charge £2. So possibly why would anybody drink L+S for £2 when you can get a coffee for not much more, or even a pint (driving aside)?

didds

[didds]

also think that £5 for lunch isn't enough. I know what it's like to work long hours and make yet another ruddy packed lunch in the morning

I'm with you on this SP, but even if you cant; face making a packed lunch at home, all you need is a roll + a slice of ham and make your own lunch at your desk etc, so its a laziness thing (for those that dopn;t make a packed lunch or take the makings I mean - not you SP!)

didds