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  • FIRST POST
    • longleggedhair
    • By longleggedhair 11th Sep 17, 12:26 PM
    • 268Posts
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    longleggedhair
    What's wrong with people.
    • #1
    • 11th Sep 17, 12:26 PM
    What's wrong with people. 11th Sep 17 at 12:26 PM
    Despite earning big money, why are some people in big debt and have no savings.

    I think it's definitely a psychological thing. I had parents who were professionals & earned very good money, but never had any money, because while they are both intelligent people they are financially illiterate. Money was just wasted on needless things and quite often financial problems would crop up.

    The experience as a child changed my whole mindset and as an adult I've saved & invested with every pay rise. Just added up my latest total and im around £200,000 after 12 years....and it really was very easy! I don't earn big money (just above minimum wage) I did have a small inheritance and have done well with my investments.

    The key is not to chase the posh cars/clothes/phones. I absolutely love my life, I live it to the full but that money gives me so much security and happiness you wouldn't believe. I know that if I want I can walk out of work tomorrow I can, it gives you choices. And that security is worth far more than material things.

    As others have said it's important to live life and enjoy it, we only come this way once, but what I don't understand is why most people haven't "seen the light" (time is precious, we don't have much so why spend most of our life at work to buy things that make us feel better about going to work, which then results in us having to be at work almost forever) I work with people who hate work, are desperate to leave but have no prospect of ever being able to become they are driving the posh car, the designer clothes etc

    It seems so simple to me...but why have so few seen the light?
Page 4
    • jack_pott
    • By jack_pott 12th Sep 17, 11:30 AM
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    jack_pott
    I've noticed that myself and think there's various reasons as to why this happens. There's an element of competition and an element of not knowing any better. With a bit more maturity people take a number of years to get that impressing people you don't like won't make you happy. However young lads chasing girls will strive to show their wealth though as its a primary indicator of success. In biological terms "investing" money in a flash car is probably a good investment for a young lad. Once married and settled down they'll have less disposable income, have learnt from their financial mistakes and will no longer be competing for women.
    Originally posted by Anonymous101
    Yes, there are also other ways of competing for status too. When you are established in life, and your peers all know that you are a bank manager or a professor there is less need to be driving round in the latest BMW.

    Status competition is a zero sum game: it's not how much you have, but whether you have more than the neighbour. The problem is that if the Jones' are only happy when they have a bigger car than the Smiths, and the Smiths are only happy when they have a bigger car than the Jones', then society is locked into a competition to consume more and more when no amount of wealth will make them both happy at the same time.

    We have passed the point when we have enough, so the only way to keep the economy growing is to waste. Robert Frank's vision is not to prevent status competition, but to restrict it, reducing the waste, and inequality between rich and poor, and to invest the wealth that is freed up on inconspicuous rather than conspicuous consumables.
    • Glen Clark
    • By Glen Clark 12th Sep 17, 11:38 AM
    • 3,889 Posts
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    Glen Clark
    Well that's interesting, because the last time I mentioned Frank on a forum I was told that it's communism.

    I think you need to read the book before you start arguing with it, because what Frank advocates has absolutely nothing to do with the Howe policies you describe. In fact he devotes a large part of the book to explaining what's wrong with them just as you have. Frank's policies will reduce inequality rather than increasing it, which is precisely his objective.
    Originally posted by jack_pott
    I haven't read that book. Just wanted to point out that the way the Government has raised the income tax threshold has created more inequality and more losers than gainers. Because everybody pays the stealth taxes, wheras only those above a certain level gain from raising the tax threshold and the rich on higher rate tax gain the most.
    So they have to dress it as help for the low paid to get elected - and hope the poorest don't understand how they are being conned.
    “It is difficult to get a man to understand something, when his salary depends on his not understanding it.” --Upton Sinclair
    • jack_pott
    • By jack_pott 12th Sep 17, 11:48 AM
    • 4,264 Posts
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    jack_pott
    Does happiness given by spending have an inherently lower quality than happiness brought by a walk out fund ...
    Originally posted by justme111
    The answer would appear to be yes. It's been known for a long time that increasing wealth doesn't produce a corresponding increase in happiness, probably because happiness is inextricably linked to status, which is a zero sum game.

    When Mr Jones buys a bigger car than Mr Smith, the happiness only lasts until Mr Smith buys a bigger car, so if you look at the collective happiness of them both, particularly over the long term, there's no change, in spite of the escalating size of their cars.

    There's also the effect of habituation. When you drive to the car dealer on the way to pick up your brand new car you may be daydreaming about how much more fun it will be to drive, and how much more pleasant you commute will be, but you've completely forgotten that you felt exactly the same way about the car you're sitting in when you bought that. The excitement of a new purchase quickly wears off because of habituation, but when people don't understand this you get the Imelda Marcos effect: buying hundreds of shoes/handbags/dresses/whatever in an attempt to maintain the feeling. As Geoffrey Miller says: consumerism is founded on the denial of habituation.
    • Anonymous101
    • By Anonymous101 12th Sep 17, 12:23 PM
    • 1,012 Posts
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    Anonymous101
    The answer would appear to be yes. It's been known for a long time that increasing wealth doesn't produce a corresponding increase in happiness, probably because happiness is inextricably linked to status, which is a zero sum game.

    When Mr Jones buys a bigger car than Mr Smith, the happiness only lasts until Mr Smith buys a bigger car, so if you look at the collective happiness of them both, particularly over the long term, there's no change, in spite of the escalating size of their cars.

    There's also the effect of habituation. When you drive to the car dealer on the way to pick up your brand new car you may be daydreaming about how much more fun it will be to drive, and how much more pleasant you commute will be, but you've completely forgotten that you felt exactly the same way about the car you're sitting in when you bought that. The excitement of a new purchase quickly wears off because of habituation, but when people don't understand this you get the Imelda Marcos effect: buying hundreds of shoes/handbags/dresses/whatever in an attempt to maintain the feeling. As Geoffrey Miller says: consumerism is founded on the denial of habituation.
    Originally posted by jack_pott
    As I get older I am less and less concerned with the Smiths and Jones'. I'm not even that old but I much prefer to laugh at the pair of them spinning their little hamster wheels faster and faster whilst traveling a total distance of zero!

    • adonis10
    • By adonis10 12th Sep 17, 12:26 PM
    • 1,477 Posts
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    adonis10
    Saving £200'000, over 12 years on minimum wage "easy" ?

    When I was on minimum wage, doing 39 hours a week, once my living costs had come out, I was happy to see a tenner a week.

    Even on the salary I'm on now, I don't see £200'000 being easy. It's doable if I had absolutely no living costs, and little/no social life. But then I wouldn't be living.
    Originally posted by binaryuniverse
    The maths doesn't add up; 200k/12 is 16.7k per year which, unless working 80 odd hours a week, is not possible on min wage. As the OP 'loves their life' I am assuming they've not been working 80 hours a week on min wage because to me the two are mutually exclusive! Even factoring in a 'small' inheritance of, say, 50k (small is very subjective so I've just used 1/4 as a ball park figure) that is 150k over 12 years so 12.5k a year.


    How is it even possible, unless living rent free, getting free food etc.


    OP - please share some tips because I earn well above min wage and cannot save anywhere near 12.5k a year!
    Last edited by adonis10; 12-09-2017 at 12:29 PM.
    • longleggedhair
    • By longleggedhair 12th Sep 17, 12:34 PM
    • 268 Posts
    • 342 Thanks
    longleggedhair
    The maths don't add up; 200k/12 is 16.7k per year which, unless working 80 odd hours a week, is not possible. Even factoring in a 'small' inheritance of, say, 50k (small is very subjective) that is 150k over 12 years so 12.5k a year.


    How is it even possible, unless living rent free, getting free food etc.


    OP - please share some tips because I earn well above min wage and cannot save anywhere near 12.5k a year!
    Originally posted by adonis10
    The inheritance was a house and cash of around 50 K, I live in the house which has obviously reduced expenditure considerably, and most of my money has been invested over the good market run we have had over the last 8 years (although I have now sold out of most of my shares).

    I have been fortunate, however the point I am trying to make is that even on a lowish wage I have always managed to save a good proportion of income (even prior to the inheritance) by not chasing the best cars, clothes & phones.

    While on a low wage I accept it would be impossible to build up a substantial amount of assets, but it should with sensible living be easy over a period of time to save for some security.
    • justme111
    • By justme111 12th Sep 17, 12:36 PM
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    justme111
    Two obvious factors would be investment growth- people cleverer than me and having more interest in it could calculate it- it could account for about half that figure and op said they are not on minimum wage but close to it.
    • adonis10
    • By adonis10 12th Sep 17, 12:44 PM
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    • 194 Thanks
    adonis10
    The inheritance was a house and cash of around 50 K, I live in the house which has obviously reduced expenditure considerably, and most of my money has been invested over the good market run we have had over the last 8 years (although I have now sold out of most of my shares).

    I have been fortunate, however the point I am trying to make is that even on a lowish wage I have always managed to save a good proportion of income (even prior to the inheritance) by not chasing the best cars, clothes & phones.

    While on a low wage I accept it would be impossible to build up a substantial amount of assets, but it should with sensible living be easy over a period of time to save for some security.
    Originally posted by longleggedhair

    That makes sense then. Whilst fantastic, I do think that quoting figures such as 200k and 12 years whilst on just above minimum wage is slightly misleading as most people do not get a mortgage free (presumably) house and 50k so would spend those 12 years paying 500-1200/month on rent/mortgage. However, I do get the point of your post in the sense that a lot of people more than likely do spend on frivolous things. I also applaud you for not doing so as, even though I am quite prudent, I would find it tempting to increase my discretionary spending rather than simply saving/investing every penny I would otherwise have spent on the mortgage.
    • justme111
    • By justme111 12th Sep 17, 12:48 PM
    • 2,856 Posts
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    justme111
    I suppose it was not most sensitive of you to post how well you have done on mimimal wage if you were left a house. For someone on minimal wage would not be able to afford decent accommodation full stop to have quality of life let alone save that amount as cost of renting/mortgage (one that you did not have) would swallow up most of their income. So your inheritance was not small, it was massive and lifechanging.
    The topic is still interesting though
    • Anonymous101
    • By Anonymous101 12th Sep 17, 12:53 PM
    • 1,012 Posts
    • 370 Thanks
    Anonymous101
    Two obvious factors would be investment growth- people cleverer than me and having more interest in it could calculate it- it could account for about half that figure and op said they are not on minimum wage but close to it.
    Originally posted by justme111
    I've got several formula's if anyone wants to work it out properly but as a rough guide assuming 5% a year growth an investment will double in 20 years.
    • fiisch
    • By fiisch 12th Sep 17, 1:00 PM
    • 201 Posts
    • 79 Thanks
    fiisch
    I was/am one of these idiots, and am slowly seeing the light. My problem has always been "I've got to have it now, I'll earn more later".


    My now wife and I were forced to move out early (21 and 19 respectively), so we battled hard to get enough money together to rent our own flat. We live in the Southeast, so cost of living is difficult, especially for people starting out in their careers.


    We made a gamble in "borrowing" against my parents home (they remortgaged, gave us the money and we paid their mortgage) to buy our first flat. By the ages of 29/27, we had a decent-sized four-bedroom home with a fair chunk of equity, two brand new cars on the drive, and about 4-5 debt payments every month. Joint income was nearly six figures, but we had no savings to speak of and everything was "on tick".


    Cars has always been my biggest weakness - I am determined not to splash out again at the end of the PCP, but easy for me to say now as my current car is only a few months old.


    Yes we bought some things we could have done without - we're on our fourth set of furniture/sofas, we've had holidays we couldn't afford, but....


    Had I been frugal from the start, I might have a few grand in the bank, but I probably wouldn't be on the property ladder. Change in approach is largely down to having our first child, and wanting to save so she might go to private secondary school (prep school seems out the question). Now I've climbed a little way up the corporate ladder, it's also harder to just go out and earn an extra few grand to pay for the latest luxury.


    Do I regret being wasteful? In some respects, but I am still only 30 and plenty of time to change my ways and start saving.
    • Audaxer
    • By Audaxer 12th Sep 17, 1:23 PM
    • 589 Posts
    • 258 Thanks
    Audaxer
    most of my money has been invested over the good market run we have had over the last 8 years (although I have now sold out of most of my shares).
    Originally posted by longleggedhair
    Interested to know why you have sold most of your shares? Because you have a good run over 8 years have you decided to capitalise all your gains and move most of the £200k to cash savings? If so it does seem to be overly cautious.
    • atush
    • By atush 12th Sep 17, 2:27 PM
    • 16,334 Posts
    • 10,083 Thanks
    atush
    I am unsure about the whole 'london card' people pull.

    My son is a young professional new to London. yes it is expensive, but knowing what his salary was before bonus/after tax, he chose to live in Streatham.

    Sure he could have choosen somewhere flashier, but he wanted to live within his means. So he lives in south london (sure it is a house share and not his own flat) he has a work pension, he has savings, and is saving more. And he has a pretty great lifestyle.

    I imagine buying may be difficult w/o out help but we dont know if he will have a partner earning the same or not. He doesnt need a flash car, he uses public transport and even left his car at home- it now belongs to his younger brother.

    I think it depends on how you were raised re attitudes to money. The OP parents didnt have a grip, and that stuck with him. WE taught our kids that even though the income coming intot he house could pay for pensions, university and travel abroad, we didnt get takeouts every night (once every 2 months max) and that we didnt pay 100 quid for trainers or designer stuff.

    They didnt like it, but when they went to university (w/o student loans) and had a set amount to live on, they soon knew how to budget and how to live within their means.

    If they want a new laptop, a new phone or new expensive trainers - ask for them for xmas or birthday. Now they earn their own money, they arent profligate, and they all have savings and pensions.

    So, you learn both good and bad from your parents, and you can live in london as a young professional w/o going to a food bank.
    Last edited by atush; 12-09-2017 at 2:29 PM.
    • Malthusian
    • By Malthusian 12th Sep 17, 2:43 PM
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    • 5,066 Thanks
    Malthusian
    Status competition is a zero sum game: it's not how much you have, but whether you have more than the neighbour. The problem is that if the Jones' are only happy when they have a bigger car than the Smiths, and the Smiths are only happy when they have a bigger car than the Jones', then society is locked into a competition to consume more and more when no amount of wealth will make them both happy at the same time.
    Originally posted by jack_pott
    Which is all well and good until you decide that the solution to this problem is to take both the Jones' and the Smiths' cars away. Success! Now both are equally happy and there is no more wasteful conspicuous consumption. Of course, they can't get to the shops, or have a weekend away in Cornwall, but the idea that people can be made happy by buying goods and services or travelling to nice places is an illusion promoted by the capitalist media.

    Where have the cars gone? I don't know, but isn't that a lovely car the Equality Director is driving - and his wife too.

    The only thing that makes people more miserable than conspicuous consumption is the alternative.
    • longleggedhair
    • By longleggedhair 12th Sep 17, 2:46 PM
    • 268 Posts
    • 342 Thanks
    longleggedhair
    Interested to know why you have sold most of your shares? Because you have a good run over 8 years have you decided to capitalise all your gains and move most of the £200k to cash savings? If so it does seem to be overly cautious.
    Originally posted by Audaxer
    I spent week after week post Brexit watching my portfolio increasing by several thousands of pounds (as the supposed meltdown turned into a surge) earlier this year I just thought this can't possibly continue and felt that I should capitalise the gains. I'm still doing the regular monthly investing as I always have but for me there is a little too much heat in the market. It's a personal thing, by and large I always have been a buy and hold person. That strategy has done very well for me over the years-but for the minute I'm waiting it out.
    • binaryuniverse
    • By binaryuniverse 12th Sep 17, 2:56 PM
    • 468 Posts
    • 249 Thanks
    binaryuniverse
    So it's easy if you a) don't pay rent/mortgage and b) you were given a starter of 50k. Also guessing at no children?

    You'll find that probably some 99% of people, on minimum wage, do not get that luxury.

    Whilst I get what you were trying to say about frivilous spending, to claim it is easy, and also believe there is something 'wrong' with people, for not being able to duplicate your achievments is frankly ludicrious, and does reek of sneering, if I'm being bluntly honest.

    And, if somebody is on minimum wage, struggling to get by, can you really blame them for buying themselves something nice now and then, in an attempt to make life seem a bit better?
    • fiisch
    • By fiisch 12th Sep 17, 2:59 PM
    • 201 Posts
    • 79 Thanks
    fiisch
    I am unsure about the whole 'london card' people pull.
    Originally posted by atush


    Streatham is hugely expensive compared to outer suburbs of Birmingham, Manchester and Leeds for example. Yes, salaries are higher, but not commensurate with higher housing costs.


    When he goes to buy a house, not only will the house cost significantly more, associated costs - council tax and stamp duty for example - will be much higher. When he comes to have a family, what then? Will he stay in Streatham, or be looking to re-locate to Coulsdon, Warlingham, Purley, Reigate? Or move further out to leafy Sussex, and pay £6k+ for the annual train fare?


    We have often been tempted to move away (my wife is from Herefordshire, for example), but there are more opportunities in and around London for a lot of careers, although with increasing remote working possibilities this may change in the future.
    • ams25
    • By ams25 12th Sep 17, 3:09 PM
    • 94 Posts
    • 75 Thanks
    ams25
    http://www.prnewswire.com/news-releases/new-study-finds-investment-strategy-is-in-the-genes-78136732.html

    Maybe its genetic.

    I have a sibling who is the complete opposite to me...when they have money they largely spend it. As they approach pension age with limited provision there is a bit of a "hope for the best' approach. Our parents did not overtly teach personal finance and for reasons I can't explain we are polar opposites in matters financial.

    Not saying which is better btw.
    Last edited by ams25; 12-09-2017 at 4:07 PM.
    • jack_pott
    • By jack_pott 12th Sep 17, 3:19 PM
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    jack_pott
    I am still only 30 and plenty of time to change my ways and start saving.
    Originally posted by fiisch
    The point is that compound interest works against you when you spend then save, but it works in your favour when you save then spend.
    • jack_pott
    • By jack_pott 12th Sep 17, 3:26 PM
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    • 5,484 Thanks
    jack_pott
    Which is all well and good until you decide that the solution to this problem is to take both the Jones' and the Smiths' cars away.
    Originally posted by Malthusian
    Who said anything about taking anyone's cars away?

    This will get you to work just as efficiently as this, it's just less likely to trump the neighbours car.
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