Save, don't borrow.

Soubrette

Degenerate wrote: »

What's so great about never claiming benefits? You pay in through the tax system when you're working, why celebrate not getting your rightful payback when you're out of work? Also, you make it sound like you've made a choice not to claim benefits when you could have, but if your savings were above a certain level you would have lost your entitlement anyway. How is this a win for you?

What's great about never claiming benefits is that there is more in the pot for those in genuine need, those who actually had no control over their circumstances, people who become chronically ill, where the main earner needs care or dies etc. I'm a winner because I'm better off than I would be on benefits because I've never worried about only saving up to the benefit limits.

It's not logical to grow and grow your rainy day fund throughout your life as another form of saving for retirement. It's not tax efficient at all. And when you are retired, logically you will still need a rainy day fund for unexpected events.

I don't believe you would need as big a rainy day fund and it's not growing it as another form of retirement - it's using the majority of what's left in it as part of your retirement fund. There is a subtle but distinct difference, after all I may have none of it left if that rainy day comes early and is more expensive than I had anticipated. I may need to sell my house after a price slump or one or more of my employers may have gone bust and taken my pension with them - I feel I have spread the risk in my retirement plans which to me is a logical thing to do.

On a more general note, I think if you were to speak to an independent financial advisor, they would not advise you to put all your savings into one pot, whether that be pensions, ISAs or whatever, it makes perfect sense to fund part of your retirement from ISAs - that can be a tax efficient way of saving too. It is strange to describe it as an illogical decision imo.

Soubrette

Degenerate wrote: »

but any money you don't spend on something before you die was pointless to earn.

...and if we had the benefit of knowing when we were to die then I'd wholeheartedly agree with you.

But we don't, making your determination to spend it all before you die a little bit pointless unless you are hoping that someone will look after you if you spend a lifetime which ends up with you 'over consuming'. So if you live until 94 and run out of money at 83 - what are you going to do? Try and get a loan?

Derivative

Degenerate wrote: »

any money you don't spend on something before you die was pointless to earn.

Assuming you have no wife, kids, family, give it to charity?
There's also a big difference between saving 100k away for a 'rainy day' and 20k or so to last you a year.

Or for the hedonistic, on retirement rent yourself a helicopter and pilot, go fly about for a bit? Buy a swimming pool? Or a flash car for a laugh?

Degenerate

Soubrette wrote: »

What's great about never claiming benefits is that there is more in the pot for those in genuine need, those who actually had no control over their circumstances, people who become chronically ill, where the main earner needs care or dies etc. I'm a winner because I'm better off than I would be on benefits because I've never worried about only saving up to the benefit limits.

Good for you. Your steely determination to get back less that your fair share is admirable. Don't expect the rest of us to be such mugs though.

I don't believe you would need as big a rainy day fund

This make no sense at all. The "rainy day" fund is a reserve of cash for the aformentioned unpredictable large expenses such as appliance failures, boiler replacement, serious car breakdown, etc. These can happen at any time, the risk does not increase or reduce substantially with age.

I suppose the one thing I can grant you is that you also seem to consider it a fund for general living expenses in event of redundancy, and these may reduce over time... But you already know what I think of that, I would claim my entitled benefits.

There is a subtle but distinct difference, after all I may have none of it left if that rainy day comes early and is more expensive than I had anticipated. I may need to sell my house after a price slump or one or more of my employers may have gone bust and taken my pension with them

Unless you've got a whopping pension entitlement, your occupational pension is guaranteed by the government up to 90% of its value.

On a more general note, I think if you were to speak to an independent financial advisor, they would not advise you to put all your savings into one pot, whether that be pensions, ISAs or whatever,

A pension scheme isn't really a single pot, it's a tax wrapper. With the right sort of pension you can be well diversified within the confines of that wrapper. If you want to be really clever, get a SIPP and you can control exactly what your pension funds are invested in.

it makes perfect sense to fund part of your retirement from ISAs - that can be a tax efficient way of saving too.

Not compared to pensions. ISAs only grant tax relief to the compounded interest - you still paid income tax on the principal you invested. A pension grants you full tax relief on contributions, not just the investment returns. This is a big difference.

It is strange to describe it as an illogical decision imo.

I think you need to do more research. For all your claims of prudence, you're basically just doing yourself out of money by insisting on paying more tax and getting less back than you should.

Degenerate

Soubrette wrote: »

...and if we had the benefit of knowing when we were to die then I'd wholeheartedly agree with you.

But we don't, making your determination to spend it all before you die a little bit pointless unless you are hoping that someone will look after you if you spend a lifetime which ends up with you 'over consuming'. So if you live until 94 and run out of money at 83 - what are you going to do? Try and get a loan?

That's what annuities are for. A regular income that ends when you die.

CLAPTON

Degenerate wrote: »

That's what annuities are for. A regular income that ends when you die.

as I said

methinks that we have a little joker here
I doubt very much that you actually live your own life that way because you are too intelligent to actually do that
do what I say not what I do
a champagne socialist maybe

ILW

I think my earlier point stands, that if you in normal employment and living a lifestyle that means you cannot afford to save for a contingency fund, you are in fact living beyond your means. Just breaking even every month or year is a risky lifestyle financially.

Derivative

I do believe Degenerate is simply trolling. Look at any person of wealth and tell me they spend their entire income as soon as they get it.

Money begets money. If you have a lump sum saved away, you can afford to buy food/toiletries/other consumables when it comes up on offer. So you spend less, and have more to invest/save and gain returns on. Many people made millions during the current "recession" as they invested in stocks on the uptick. Whereas if you're fumbling living paycheck to paycheck, there's a decent chance you were made redundant and got screwed.

When the boiler breaks you can actually afford to fix it instead of having to wait a month for the next paycheck. Examples go on and on.

I think I've given enough examples of the use of "under-consuming". Now can you give me a reason to spend money on lavish status symbols besides hedonism?

Degenerate

ILW wrote: »

I think my earlier point stands, that if you in normal employment and living a lifestyle that means you cannot afford to save for a contingency fund, you are in fact living beyond your means. Just breaking even every month or year is a risky lifestyle financially.

I made a direct response to that earlier point illustrating how a contingency fund would vanish quickly if you're a homeowner and got made redundant. Interesting debating tactic - just ignore the counter-points and repeat yourself. It would seem to suggest you can't actually refute my assertion.

ILW

Degenerate wrote: »

I made a direct response to that earlier point illustrating how a contingency fund would vanish quickly if you're a homeowner and got made redundant. Interesting debating tactic - just ignore the counter-points and repeat yourself. It would seem to suggest you can't actually refute my assertion.

My point was that if you have committed yourself to a level of spending that does not allow any saving for a contingency and then get made redundant and take out a loan to tide things over. You will need a higher paid job to not only cover your overheads but also service the loan. It is very unusual for someone to be made redundant and find higher paid employment, so the loan will just get one into deeper trouble.