11 ms·

Your income level does not make you wealthy, it is your capacity to absorb financial speed bumps. At uni, I made less money than some of my peers but I felt wea

Your income level does not make you wealthy, it is your capacity to absorb financial speed bumps. At uni, I made less money than some of my peers but I felt wealthier than them. This continued into our professional lives and had nothing to do with our relative income levels. Back then I always had spare cash to spend when an opportunity arose. An unplanned weekend trip away, a celebratory night out, no problem. Sure I didn't have what they had. No car, I took the bus instead of flying home, had to have drinks before going out rather then buying them out, that sort of stuff. The difference was that I saved money to have savings for the sake of having a financial buffer rather than saving for something that I wanted to buy. Don't live beyond your means, it's that simple. These loans are targeted at middle class Americans, not the poor and starving. They should be able to save.

Viliam1234 7y ago
Your capacity to absorb financial speed bumps today is (among other things) a result of your income level yesterday. I am often surprised how people whose income is the same or greater than mine live in stress, because each extra euro of income is immediately translated into an extra euro of consumption, and there is no reserve for a rainy day. However, I am not surprised when the same thing happens to people with incomes much smaller than mine. Sometimes I am instead surprised how these people manage to survive at all. (Well, obviously, if I'd ever got in the same situation, I would probably gradually learn a few tricks I don't know today.)
christophilus 7y ago
This brings up a tangential question I've had lately. When I played video games (especially RPGs), I always ended the game with a mountain of unused resources at my disposal. I rarely used items, cash, etc, unless the ROI was plainly evident. Many of my friends would just burn through cash / items as soon as they had them, and were often in a bind during tough battles / situations. I wonder if this followed us into life. I tend to be a saver, and have always lived below my means. Many of my friends struggle to make ends meet, regardless of their salaries. So, I'm curious. Do / did you play video games? If so, did you end the games with a huge pile of cash, or did you burn through it as you went?
- deleted 7y ago
  [deleted]
- GrumpyYoungMan 7y ago
  I almost always wind up finishing up games with a huge pile of resources left over. It's only natural; even hardened adventurers need to keep their retirement in mind while saving the world.
- logicchains 7y ago
  There was a studying showing that the trait behind this tendency towards saving, the ability to delay gratification, is present relatively early in childhood, and has strong predictive effect on success in life: https://en.wikipedia.org/wiki/Delayed_gratification#The_Stanford_marshmallow_experiment https://en.wikipedia.org/wiki/Delayed_gratification#The_Stan... . Perhaps this implies that no matter how rich society gets, there'll always be people who just burn though whatever they earn. This would partially explain why people in poor countries like China and India are still able to save a greater percantage of their income than people in western countries who earn an order of magnitude more.
  - SilasX 7y ago
    >Perhaps this implies that no matter how rich society gets, there'll always be people who just burn though whatever they earn. This would partially explain why people in poor countries like China and India are still able to save a greater percantage of their income than people in western countries who earn an order of magnitude more. What's the connection there you're implying [1]? I would think that the higher (capacity to) save is an artifact of peer pressure/ecosystem effects. If a frugal person is still expected to have a big house, or else be seen as weird, that imposes a constraint that forces a lower savings rate than they prefer. It's a hard Gordian knot to cut, but once everyone expects normal people to pay a certain expense, you can get stuck in that kind of bad equilibrium. [1] between "some people always burn through everything" and "people in some poor countries have higher savings rates than in rich countries"
  - ThrustVectoring 7y ago
    The marshmallow experiment is less about whether children are able to delay gratification, and more about whether or not they trust adults to deliver on the promises they make.
xeromal 7y ago
I grew up in North Georgia where the rural and ghetto areas are poor, not middle class, and everyone has a subprime loan. It usually goes like this: you run up your shitty interest rate credit cards on car repairs to get to work, you come across this refinance service that will pull your 3-5 1000$ credit cars into one payment and reduce what they're paying by 80-200$. They're excited and don't even notice that it's 20% interest for 5 years. They realize after a while but they just say that they'll refinance once their credit score has improved after building their credit. Their car has another issue and now they have more credit card debt and a subprime loan. I know you think it's mostly middle class but I grew up in dirt poor white ghettos and I could write a book on how many people make this mistake. Surviving sucks.
- sokamyung 7y ago
  It sucks most because those poor rural and urban ghetto communities have been utterly plundered by illegal and legal immigration that has led the ruling aristocracy to plunder other countries of their skilled people with H1B visas instead of actually having to be competent governors of the country. Immigration of any kind of any substantial number is a sign of utter failure in governance. The more you rely on immigration the more the government is a failure and was mismanaged.
algaeontoast 7y ago
Most people I know who make less than $50k a year and are between the age of 19-25 have better money management skills / perception of money than my peers making $100k and up. Many have similar social lives, I think it boils down to perception and realizing what it's really like to go broke. Most people who don't come from means know the emotional / mental value of not freaking out about money constantly, while those who come from money or just spend like there's no tomorrow seem to feel like buying out to their ego's delight will lead to a life they want. It's bizarre to watch. Some of my friends think it's normal to have $40k+ in credit card debt or $80k+ in student loans and still have a $100 gym membership and blow money like crazy. Again, bizarre to watch.

Viliam1234 7y ago

Your capacity to absorb financial speed bumps today is (among other things) a result of your income level yesterday. I am often surprised how people whose income is the same or greater than mine live in stress, because each extra euro of income is immediately translated into an extra euro of consumption, and there is no reserve for a rainy day. However, I am not surprised when the same thing happens to people with incomes much smaller than mine. Sometimes I am instead surprised how these people manage to survive at all. (Well, obviously, if I'd ever got in the same situation, I would probably gradually learn a few tricks I don't know today.)

christophilus 7y ago

This brings up a tangential question I've had lately. When I played video games (especially RPGs), I always ended the game with a mountain of unused resources at my disposal. I rarely used items, cash, etc, unless the ROI was plainly evident. Many of my friends would just burn through cash / items as soon as they had them, and were often in a bind during tough battles / situations. I wonder if this followed us into life. I tend to be a saver, and have always lived below my means. Many of my friends struggle to make ends meet, regardless of their salaries. So, I'm curious. Do / did you play video games? If so, did you end the games with a huge pile of cash, or did you burn through it as you went?

deleted 7y ago
[deleted]
GrumpyYoungMan 7y ago
I almost always wind up finishing up games with a huge pile of resources left over. It's only natural; even hardened adventurers need to keep their retirement in mind while saving the world.
logicchains 7y ago
There was a studying showing that the trait behind this tendency towards saving, the ability to delay gratification, is present relatively early in childhood, and has strong predictive effect on success in life: https://en.wikipedia.org/wiki/Delayed_gratification#The_Stanford_marshmallow_experiment https://en.wikipedia.org/wiki/Delayed_gratification#The_Stan... . Perhaps this implies that no matter how rich society gets, there'll always be people who just burn though whatever they earn. This would partially explain why people in poor countries like China and India are still able to save a greater percantage of their income than people in western countries who earn an order of magnitude more.
- SilasX 7y ago
  >Perhaps this implies that no matter how rich society gets, there'll always be people who just burn though whatever they earn. This would partially explain why people in poor countries like China and India are still able to save a greater percantage of their income than people in western countries who earn an order of magnitude more. What's the connection there you're implying [1]? I would think that the higher (capacity to) save is an artifact of peer pressure/ecosystem effects. If a frugal person is still expected to have a big house, or else be seen as weird, that imposes a constraint that forces a lower savings rate than they prefer. It's a hard Gordian knot to cut, but once everyone expects normal people to pay a certain expense, you can get stuck in that kind of bad equilibrium. [1] between "some people always burn through everything" and "people in some poor countries have higher savings rates than in rich countries"
- ThrustVectoring 7y ago
  The marshmallow experiment is less about whether children are able to delay gratification, and more about whether or not they trust adults to deliver on the promises they make.

xeromal 7y ago

I grew up in North Georgia where the rural and ghetto areas are poor, not middle class, and everyone has a subprime loan. It usually goes like this: you run up your shitty interest rate credit cards on car repairs to get to work, you come across this refinance service that will pull your 3-5 1000$ credit cars into one payment and reduce what they're paying by 80-200$. They're excited and don't even notice that it's 20% interest for 5 years. They realize after a while but they just say that they'll refinance once their credit score has improved after building their credit. Their car has another issue and now they have more credit card debt and a subprime loan. I know you think it's mostly middle class but I grew up in dirt poor white ghettos and I could write a book on how many people make this mistake. Surviving sucks.

sokamyung 7y ago
It sucks most because those poor rural and urban ghetto communities have been utterly plundered by illegal and legal immigration that has led the ruling aristocracy to plunder other countries of their skilled people with H1B visas instead of actually having to be competent governors of the country. Immigration of any kind of any substantial number is a sign of utter failure in governance. The more you rely on immigration the more the government is a failure and was mismanaged.

algaeontoast 7y ago

Most people I know who make less than $50k a year and are between the age of 19-25 have better money management skills / perception of money than my peers making $100k and up. Many have similar social lives, I think it boils down to perception and realizing what it's really like to go broke. Most people who don't come from means know the emotional / mental value of not freaking out about money constantly, while those who come from money or just spend like there's no tomorrow seem to feel like buying out to their ego's delight will lead to a life they want. It's bizarre to watch. Some of my friends think it's normal to have $40k+ in credit card debt or $80k+ in student loans and still have a $100 gym membership and blow money like crazy. Again, bizarre to watch.