Spender or Saver

kabayiri

michaels wrote: »

...
I have been helping the economy, saving approx 30% of my gross income for the last 5 year and then spending 5x my gross income this year on building works that are directly benefiting the UK economy. Can't get much more counter-cyclical than that.

Agreed, saving is a mugs game.

I have also spent a lot this year on building work.

Giving money to trades people is a very efficient transfer mechanism, because quite a bit of it seems to end up directly in their back pocket

[edit: I am obviously confident that they declare all earned income, errm]

Loughton_Monkey

The 'spenders' of this world seem not to understand the 'double' sin they are committing. Over, say, 40 years of earning, this person gets used to a lifestyle - equivalent to 100 units of income - and then drops massively to peanuts [state pension]. Someone who gets used to a lifestyle costing 80 units will be able to enjoy 60/80 units of income in retirement as well.

It is a matter of human psychology that the 'absolute' level of spending is less important to 'happiness' than things like (a) whether it is going up rather than down, and (b) what 'The Jones's' are doing/what is expected of my status....

One of my relatives never earned a penny more than £25K in 45 years of working life, but paid off his mortgage early, has never spent more than £15K on 'lifestyle' and now has the financial resources to spend twice that amount for the rest of his life! Since he simply can't [won't] spend more, his 'sin' is not having retired at (say) 50 or 55.

And yet how many people on £50K bleat about 'I find it impossible to save more than £50 a month - if that....'. This argument simply holds no water, since the lifestyle one leads is 100% a matter of personal choice.

Maybe the psychologists have an answer for this (I don't). I can understand, say, a person [like myself] who smokes. Perceived wisdom says that this has a risk and hence it can be 'explained' by saying "It's a risk I take - the worst may not happen. If it does, then OK, I lost the gamble...."

But when spending 100% of income, we are not dealing with risk we are dealing with 100% certainty. It is mathematical certainty that nothing has been saved for the inevitable retirement, and hence 100% certain that your lifestyle must nosedive dramatically at some point. Unless, the psychology of these people is "I understand that I might need to stop work at age 65. But I will live on the assumption that I will die before then. If I don't, then OK, it was a risk worth taking...."

The thing is, when you're 70, it's a lot harder to eat beans on toast only. To have to turn off the boiler in mid-winter. To forego holidays......

ruggedtoast

Since we bought house, for the first time in years we have sorted our budget out and know what we are spending. Its tough because its a tight margin now but I'm paying down debt on the mortgage and student loans and still paying into my pension, which feels good at the end of every month.

nick1977

Loughton_Monkey wrote: »

But when spending 100% of income, we are not dealing with risk we are dealing with 100% certainty. It is mathematical certainty that nothing has been saved for the inevitable retirement, and hence 100% certain that your lifestyle must nosedive dramatically at some point. Unless, the psychology of these people is "I understand that I might need to stop work at age 65. But I will live on the assumption that I will die before then. If I don't, then OK, it was a risk worth taking...."

I know people exactly like this. Their spending habits and lifestyle is very much a "live for now" approach. The interesting thing is seeing people who adopt this lifestyle and are at different stages of it. One person I know is in their 20's and to some has a lifestyle that others envy. Another is mid 50's, rent-sharing a 2 bed flat with a guy he knows but wouldn't call a friend, pouring most of his earnings into the rent or propping up the bar in the local pub. He's a heavy drinker and a heavy smoker.

All I know is, it motivated me even more to get our own family home, as I don't want rent/mortgage hanging over my head when I (hopefully!) approach retirement.

Nick

EDIT: Just to add, in line with orginal post, a mixture of spending and saving at the moment. Paying back parents for a car we bought, plus doing bits on the house. Putting away £100 a month. Trying to get my target of 12 months salary in an ISA, but think it'll take a fair few years..! Hopefully increase savings rate once parents are paid back.

Loughton_Monkey

nick1977 wrote: »

I know people exactly like this. Their spending habits and lifestyle is very much a "live for now" approach. The interesting thing is seeing people who adopt this lifestyle and are at different stages of it.

It is interesting to speculate what would happen in the following experiment:

Send 100 people at random to a specific desert island. Comfortable enough, but each person is given a private locker with exactly enough food/water to last on a 'subsistence level' for 6 weeks and no more.

Big questions would include how many would 'pig it down' quickly and be running out after 4 weeks? And then what would the attitude be of the others who had saved just enough for themselves?

If you extended the experiment for longer, with regular 'deliveries' of rations, I wonder what sort of 'social security' system these people would develop (if any)?

michaels

I suspect you are not a big brother watcher but in the past the groups have both feasted and then ended up subsisting on survival rations and had '!!!!!!!!!!s' who have taken whatever they wanted from the fridge/store cupboard with no thought about how the supplies will last ill the end of the week nor whether it is fair to their fellow housemates...but that's celebrities/wanabees for you.

Mallotum_X

I'm a bit of both, overpaying the mortgage - is that saving or spending?, then save some and spend some.

Life is all about Balance, one extreme or the other is unlikely to make you happy long term.

Batchy

Mallotum_X wrote: »

I'm a bit of both, overpaying the mortgage - is that saving or spending?, then save some and spend some.

Life is all about Balance, one extreme or the other is unlikely to make you happy long term.

I consider overpaying mortgage as saving. Just like the capital part of repayment mortgages is saving IMO.

Cheers Guys,

I agree with everyones sentiment, never spend 100% of income (if you can avoid it) and earn enough to do that.

Try and strike the balance.

michaels

free-loaders - how rude?!

michaels wrote: »

... and had '!!!!!!!!!!s' who ...

IveSeenTheLight

I'm not a saver at the moment. I just don't see the value in it.
What I am doing is putting the money I would normally save into reducing mortgage debt and further investments.