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> "As a result, millions of Americans are living too frugally" WTF, really? Reminds me of Edward Bernays [1], the "father of public relations", who set out to
by charlieflowers 9y ago
> "As a result, millions of Americans are living too frugally"
WTF, really? Reminds me of Edward Bernays [1], the "father of public relations", who set out to help Americans become materialistic (and succeeded!).
If someone is enjoying their life without blowing all their money, that person is BETTER off. It's just corporations that want to suck the money away from them that need to "train them to spend."
[1] https://en.wikipedia.org/wiki/Edward_Bernays https://en.wikipedia.org/wiki/Edward_Bernays
- macspoofing 9y agoWay to take down that strawman.
- acover 9y agoIt's not a strawman. Most of the article is written with the assumption that not spending all your money is sub-optimal. From the article: > After a lifetime of saving, it requires some psychological gymnastics to start spending your nest egg. Browning’s suggestion is that financial planners urge their thriftiest clients to make big purchases–like a second home or a fancy car–before they retire, out of their pot of savings. The idea, he said, is “training people to spend.” Edit: this comment is attracting a surprising amount of downvotes. Strangeness
- skybrian 9y agoSub-optimal for whom? What does sub-optimal even mean in this case? Who benefits from "training to spend"? It's not at all clear that the authors of the article are concerned about the well-being of rich old people. There seems to be some other argument that's not being stated explicitly.
- acover 9y agoThe quote is about what financial planners should recommend to their clients (the retiree). I don't think the article is suggesting that financial planners recommend their clients take one for the team and spend more money.
- FabHK 9y agoThat might well be the paradox of thrift, that is that their frugality, while individually rational, collectively harms the entire economy (including themselves). Just like arguably a lot of austerity in the Euro zone was self-defeating.
- deleted 9y ago[deleted]
- anigbrowl 9y agoIf you saved it with the intention of enjoying it as well as relying on it for financial security and you don't let yourself enjoy any of it, then a lot of the work you did was wasted.
- graedus 9y ago> then a lot of the work you did was wasted. Unless you get enjoyment on some level from the financial security of having a bunch of money saved (i.e. you sleep better at night because of it). It's like purchasing insurance - if you never end up using the insurance, that doesn't imply you made a poor decision (wasted money) in purchasing it. Likewise, knowing that an expensive medical emergency could come up means that having considerable savings is an appropriate response. Or you could take the opposite view and arrive at the same conclusion - if you have a healthy lifestyle and expect to remain healthy, you might predict that you'll have a long lifespan, making it prudent to conserve your retirement savings by spending it at a very slow rate.
- artursapek 9y ago> If someone is enjoying their life without blowing all their money, that person is BETTER off. And that's where the entire FI concept of "knowing when you have enough" comes in. http://moneyboss.com/beyond-wealth/ http://moneyboss.com/beyond-wealth/
- bradleyjg 9y agoOptionality has value but it decays over time. If you forgo consumption in favor of savings up until the very end then you haven't been better off, you've been worse off. The dead can't benefit from spending money.
- djrogers 9y agoThe benefit of leaving my heirs a legacy far outweighs any 'benefit' I'd get from spending money needlessly...
- derefr 9y agoPresume you don't have any heirs, either. (Which is likely: when people are intent on "living frugally", having kids is usually seen as an expense they can't afford.)
- toomuchtodo 9y agoThe estate typically goes to a charity in that case, pre-selected by the deceased. When done properly, it can be fairly tax efficient.
- bradleyjg 9y agoConsider, it's up to you but consider, that you might get more joy out of gifts while you are alive to watch the recipients benefit from them than you do out of imagining how much they'll benefit from bequests you intend to leave when you die.
- asdfjlkasdf88 9y agoThat's how my grandpa lived: A life full of fleeting moments now in exchange for shellshock when 65 arrived. Given the reluctance of our culture to show care and concern for people in general, I'm not too psyched about getting to the end and needing a handout.
- 9y ago
- chc 9y agoOne way to frame this is "corporations want to suck that money away." Another way to frame it is "most participants in the economy are non-rich and would appreciate that money more, so it's unfortunate if it's sitting around making nobody happy and not adding much in the way of security to an already-wealthy person."
- acover 9y agoMost money isn't just sitting around. It's in a bank or an investment. Other people are using this money.
- gutnor 9y agoThat's not exactly true. Money in the bank is invested and is different than consumption money. One drive the offer, the second one drive the demand. The economy is basically the flow from one pot to the other. With interest rate at historical low, large business with trillion hoarded, money is already plentiful on the investment side. This article is just claiming that there is portion of that investment money could be reallocated on the consumption side which would indeed allow the economy to run. The article is very optimistic that this money is really what is missing. Personally not quite sure about that as the economy already relies on historically high level of debt on the consumer side (i.e. consumer spend today and tomorrow money), adding fresh money in the system is at best a short term "solution", adding memory to a memory leaking system. The problem is that there is simply not enough money flowing from the investment pot into the consumer pot. i.e. salaries are too low, tax on profit are too low, ... something isn't balanced and we are all playing economic musical chair, with people hoarding money to avoid being without once the system breaks.
- acover 9y agoI never said they were the same. Further there is consumer debt.
- djsumdog 9y ago> Edward Bernays Sigmund Freud's nephew, who used psychoanalysis to sell products. Freud hated Edward and Anna for going that route. They are the reason more women smoke and why Americas eat bacon for breakfast. If you want to know more, watch The Century of the Self by Adam Curtis.
- nosuchthing 9y agoAdam Curtis's The Century of the Self: https://thoughtmaybe.com/the-century-of-the-self/ https://thoughtmaybe.com/the-century-of-the-self/ (Most of) the rest of his films: http://thoughtmaybe.com/by/adam-curtis/ http://thoughtmaybe.com/by/adam-curtis/
- irrational 9y ago"They are the reason more women smoke and why Americas eat bacon for breakfast." So like everyone else they did both good (bacon!) and evil (smoking).
- crdoconnor 9y agoLiving in sheer terror of a medical emergency triggering a financial emergency doesn't sound like an ideal way to spend one's retirement.
- drivingmenuts 9y agoI am going thru that very scenario right now, having had an emergency crop up while unemployed and uninsured. I'm very sure that unless I get very lucky, I am so very fsck'd for the rest of my life.
- xvedejas 9y agohttps://en.m.wikipedia.org/wiki/Paradox_of_thrift https://en.m.wikipedia.org/wiki/Paradox_of_thrift "an increase in autonomous saving leads to a decrease in aggregate demand and thus a decrease in gross output which will in turn lower total saving."
- FabHK 9y agoThe problem is that their individual virtuosity (or frugality) can hold back the economy as a whole (and poor people might suffer most from that). This is Keynes' Paradox of thrift. https://en.wikipedia.org/wiki/Paradox_of_thrift https://en.wikipedia.org/wiki/Paradox_of_thrift
- asdfjlkasdf88 9y agoPerhaps we should rethink the under pinnings of our culture rather than continue pushing "excessive material consumption"? Seems strange to live on the notions of man who lived before today's environmental concerns became cause for alarm.
- FabHK 9y agoI'm certainly not advocating conspicuous consumption and needless spending. However, these individual actions might collectively have unintended consequences, and that's what the paradox of thrift is about. It's a descriptive concept (i.e. about what happens in the real world), not a normative one (i.e. what people ought to do). But before you decide what one ought to do, it is best to take into account what actually happens in the world. It might well be better if people spent more (and that need not be on material things, it could be education, concerts, and so forth).
- asdfjlkasdf88 9y agoI get you. Keynes is often distilled as, for better or worse, "Go shopping." My jump off point is usually there when talking to folks in meatspace. But yeah, it could mean spend more on bridges, universities, or jewel studded iPhone cases.
- oppositelock 9y agoKeyne's paradox of thrift is hogwash. If the occasional person is thrifty, there's no problem. If everyone is collectively "too thrifty", then we've got a problem, but this isn't the cause of the problem, it's a symptom. What does it mean when everyone is saving? It means that there is some kind of uncertainty or fear which is making people forego current consumption in favor of future consumption. This isn't a natural state of human affairs, since we tend to value things today more than things tomorrow. The extra "thrift" happens because of political or economic uncertainty. Political uncertainty is fickle, you can't predict it or plan for it. However, saving is the correct response to economic uncertainty, and it's what's responsible for the eventual recovery after a crash.
- matchagaucho 9y ago"$14.9 trillion in individual retirement accounts and 401(k)-style plans." These are also tax-deferred plans... income the IRS is not receiving.
- ldayley 9y agoNot exactly, the IRS always gets their cut. In traditional IRAs and 401(k) plans taxes are deferred until the retiree begins taking income from their plan (by age 70.5 at the latest or they pay penalties). Those withdrawals are taxed at whatever the person's current tax rate is (often higher than when they were younger). Roth IRAs and Roth 401(k) plans are taxed up front-- there never was a tax deferment for those, but the upside is the contributions aren't taxed when withdrawn, either. EDIT: Clarity
- anigbrowl 9y agoEconomists distinguish between saving, consumption and investment. Excess saving is economically inefficient.
- incompatible 9y agoThe amount of cash is determined by central banks. If one person decides to spend their hoard, somebody else will end up with it so the amount doesn't change. Money in bank accounts is lent to somebody else (with a multiplier).
- draw_down 9y agoWe built a consumer economy so now we need people to be consumers to keep it turning. We also spent decades transferring wealth to older generations from the younger ones and of course now we want to talk frugality.
- kolbe 9y agoShouldn't that also indicate there's a misalignment between how hard you're working to earn so much money, if you have no intention of ever utilizing it?
- enraged_camel 9y agoNot really. Most of the time, hard work does not correlate with making lots of money. A single mother of four may work incredibly hard juggling multiple jobs on top of her family obligations, but she probably won't make a lot of money. In contrast, most rich people's income comes from investments, rather than salary.
- megablast 9y agoYou have a very simplistic view of this. This is looking at why people are living more frugally? If people want to buy less/travel less, then that is no problem. If they are doing it because they are worried about the future, that is a problem. Spending has an effect on not just those people, but on all of society when it happens at a large enough level. And it is one of the common way to pass money from old to young.
- tunesmith 9y agoOn the other hand, I've had a couple of experiences where I've grudgingly spent money on something, and then felt, "Oh my god, why didn't I do this sooner? It would have helped my quality of life." Not just as luxuries, but in ways that freed me up to feel more productive or healthy. For instance (all of this assumes you have the money to do so), a bookkeeper for your small business. A CPA for your taxes. A lawn service. A financial planner. A bidet. It makes me wonder what else like that is out there. Stuff that isn't purely materialistic, but is "worth it" for whatever value if "it" matches your net worth. For perpetual savers, being counseled on how they can spend their money (on worthwhile endeavors) might actually be useful.
- charlieflowers 9y agoI agree, there's a balance. But I'd advise being skeptical when someone proposes, from a "policy level", that we need to train people to spend more. It's highly likely that -- like Edward -- they don't have your best interests at heart (but not guaranteed).
- ashark 9y agoThose belts that ratchet (Slidebelts?). Electric toothbrush (yes, really). Decent-to-good leather shoes. Wool socks. Button fly jeans. Rice cooker. [EDIT] my belt says "Trak Line"
- tutufan 9y agoBose noise-cancelling headphones. That tuna ventresca packed in olive oil in a jar. One of those two-chamber syrup time toys.
- emodendroket 9y agoWell currently we live in an economic system that is predicated on domestic consumption of goods and services and experiences downturns when such spending tapers.