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"Duh. Of course no one should live beyond their means. But I’d never thought about the implications of that when I was 25." I read a while ago that 40% of Amer

"Duh. Of course no one should live beyond their means. But I’d never thought about the implications of that when I was 25." I read a while ago that 40% of American households spend more than they make in post-tax income. I imagine this has gone down a bit, but it's still astounding. People are really good at convincing themselves that their "ship will come in" and they'll be able to wipe that debt clean.

ShabbyDoo 16y ago
http://freakonomics.blogs.nytimes.com/2008/07/01/when-it-comes-to-saving-who-would-you-listen-to-my-wife-or-milton-friedman/ http://freakonomics.blogs.nytimes.com/2008/07/01/when-it-com... Consider a Standford CS undergrad working part-time in an on-campus computer lab who will graduate in a few months. Given that he/she has decided to take a market-rate job somewhere upon graduation, what is the probability that his income will be substantially higher a few months from now? How concerned should he be that his ship will not come in? Would it be rational for him to spend some money he doesn't have on bar tabs, weekend trips, and other such frivolity before working 60+ hours/week for Google/Facebook/Whatever? Conversely, it would be much riskier if this undergrad, after taking a job at Facebook, took upon debt with the assumption of a pay-off upon an IPO.
- webwright 16y ago
  They'd probably be fine. But debt (or lack of savings), as Jessica points out, limits options. Failure to save also results in a lifestyle inflation. Cable bills, expensive hobbies, etc. It's hard to step out of that tarpit once you're in it. Your CS undergrad would be LESS fine if, at the last minute, they realized they wanted to start their own company. My understanding is that (until very recently) household debt tended to go up every year. That seems to indicate that most people are pretty bad about judging when and if their ship will come in.
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ShabbyDoo 16y ago

http://freakonomics.blogs.nytimes.com/2008/07/01/when-it-comes-to-saving-who-would-you-listen-to-my-wife-or-milton-friedman/ http://freakonomics.blogs.nytimes.com/2008/07/01/when-it-com... Consider a Standford CS undergrad working part-time in an on-campus computer lab who will graduate in a few months. Given that he/she has decided to take a market-rate job somewhere upon graduation, what is the probability that his income will be substantially higher a few months from now? How concerned should he be that his ship will not come in? Would it be rational for him to spend some money he doesn't have on bar tabs, weekend trips, and other such frivolity before working 60+ hours/week for Google/Facebook/Whatever? Conversely, it would be much riskier if this undergrad, after taking a job at Facebook, took upon debt with the assumption of a pay-off upon an IPO.

webwright 16y ago
They'd probably be fine. But debt (or lack of savings), as Jessica points out, limits options. Failure to save also results in a lifestyle inflation. Cable bills, expensive hobbies, etc. It's hard to step out of that tarpit once you're in it. Your CS undergrad would be LESS fine if, at the last minute, they realized they wanted to start their own company. My understanding is that (until very recently) household debt tended to go up every year. That seems to indicate that most people are pretty bad about judging when and if their ship will come in.

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