From MarketWatch:
The low to no savings rate in the United States extends to rich people too. It isn’t just low and middle-income people who find it difficult saving money — people who earn a lot say they also have trouble stashing money away.
HSBC Bank reports in a new survey that savings barriers stretch across income levels.
“It’s clear from this survey that savings hurdles transcend income levels and that savings requires more discipline than we may realize, regardless of household income,” said Kevin Martin, senior vice president, HSBC Bank in the U.S. “The data revealed recurring bills get in the way of saving for the majority of households at both ends of the income spectrum.”
…
As evidence, HSBC reports that people with more than $250,000 in household income, who constitute the top 1.5% of U.S. households, report facing many obstacles when it comes to saving. Indeed when HSBC asked what prevents them from saving more, the top answer was the need to pay everyday bills, with 34% of respondents of those who earn more than $250,000 concurring.
…
HSBC found that 49% of respondents with at least $250,000 in income aren’t saving more because they simply “want some spending money.” In 28% of the cases for those who earn between $100,000 and $250,000 they do not save more because “something unforeseen always comes up.” And in nearly one in 10 situations, people who earn $250,000 or more say they aren’t even earning “enough to make ends meet as it is.”
…
Wow. Those statistics are great insight. The serious case of consumerism in the U.S. — we spend more than twice as much as anyone else in any other country in the world on average per year — may come back to bite if the economy slips and employment slows.“Savings can be a challenge at any stage of your life,” says Martin. “Regardless of your income, financial status, or age, saving does require a level of control and awareness.”
It seems that awareness dims, however, with the more money you earn. More people who earn between $50,000 and $100,000 save consistently than people who earn between $200,000 and $250,000 per year, according to HSBC.
…
These days, I bet a lot more people wish they had a bigger savings account instead of a bigger house.
Is this even for real? Am i supposed to feel sorry or expect this to relate to me in ANY way. Boo hoo i make $250,000 and can’t save a penny! I spend all my money on SUVS, McMansions, summer homes, boats etc…
Whatever…
I saved more when I made less!
Here is the deal, you same some now have some more later? I always think of my sarcastic/angry what can you do with 500K in the bank comments. The answer “Get rid of your financhal worries”
The problem psychologically with many of these people is I think they feel that they need to have lifestyle X which is MTV cribs/Lifestyles of the rich and famous, Instead of an incredibly comfortable lifestyle.
I spent two years convincing my wife of the importance of investing and saving. Now I can’t touch anything other than checking account funds. She has become more frugal than me! I’m glad I made an impression…but it sucks when I can’t have the $3500 grill or the $500/month car lease….
Par, same here. Our marriage vows included no credit use..I required it!
Saving can be just as addictive as spending. More. I wish Booyyaa could teach me how to have a good balance. Every time he talks about picking up some toys, I think..nope, not for me.
My husband asks me if it’s O.K. to book a free hotel room for a holiday weekend away, and use some of his free points. That’s how cheap I am. My poor husband is worried I’ll be pissed if he uses free points. It’s sick.
Just in case you were feeling chipper today, we have the Jedi Master of the LOD
http://www.bloomberg.com/apps/data?pid=avimage&iid=ivgsmH9p2iWM
http://www.bloomberg.com/avp/avp.htm?clipSRC=mms://media2.bloomberg.com/cache/vCSiK6vtgP3o.asf
This link has nothing to do with NJ RE Report except that the subject is a REA.
http://news.yahoo.com/s/ap/20070522/ap_on_re_us/golf_cart_plunge
grim unmoderate the Jedi Master please
CF…are you a Dracula the Bear fan as well?
I vaant to scarrrr the livink h*ll out uff dose hoo tink vee vill haff good times in zee future.
WSJ
GETTING GOING
By JONATHAN CLEMENTS
Why a Mortgage May Be Your Best (and Worst) Move
May 23, 2007
If mortgage debt is good debt, why are so many borrowers having such a bad time?
Financial experts often tout the virtues of home loans, arguing mortgages are the cheapest money you will ever borrow. Yet many homeowners are ruing the day they took out a big loan, and some are falling behind on their payments and even losing their homes to foreclosure.
As these folks have discovered, mortgages are a double-edged sword. The leverage can magnify your gains — but it can also leave you in a nasty bind.
• Playing the spread. If you need to borrow, you will be hard-pressed to do better than a home loan. Not only are interest rates typically low, but that interest is usually tax deductible. To get a mortgage, you need to own a home or agree to buy one. But once you have that debt, the effect is to leverage all your assets. That can be highly profitable.
Suppose you have $300,000 in stocks and you want to buy a $300,000 home. You could sell your stocks and pay cash for the house. But you will likely fare better by putting, say, $100,000 of your stock money toward the house and funding the rest with a $200,000 mortgage.
Result: You control $500,000 of stocks and real estate, 40% of which was bought with borrowed money. As long as your assets generate higher returns than your mortgage rate, the leverage is working in your favor.
• Missing the boat. Many homeowners, however, aren’t taking full advantage of their mortgage’s leverage. Consider a study slated to appear in the Journal of Public Economics.
Economists Gene Amromin, Jennifer Huang and Clemens Sialm found that, among households striving to pay down their mortgage quickly, at least 38% could be stashing more in their employer’s 401(k) or 403(b) plan. That means these folks are missing out on their 401(k)’s initial tax deduction and tax-deferred investment growth. That combination should easily outpace the interest expense they save by paying down their mortgage.
Throw in a matching employer contribution, and the 401(k) would be even more compelling. Similarly, you could probably improve returns by taking money earmarked for extra mortgage payments and using it to fund an individual retirement account or to buy stocks in a taxable account.
Still, prepaying a mortgage can be attractive, especially if the alternative is to purchase bonds or money-market funds in a taxable account. The mortgage’s after-tax interest cost is likely higher than the after-tax yield on these conservative investments.
• Unraveling fast. Like the idea of supercharging your returns with low-cost leverage? Before you take out a hefty home loan, make absolutely sure you can handle the monthly payments.
Indeed, that’s why I get nervous when experts advocate getting the largest mortgage possible or recommend re-mortgaging a house to buy stocks or cash-value life insurance. If you end up with monthly payments you can’t afford, things can unravel fast.
Consider the dilemma facing many recent home buyers. Their homes are falling in value, even as their mortgage payments are sometimes rising.
If you are in this predicament, it isn’t a calamity, provided you can afford the monthly payments. What if you can’t? This is one financial quagmire that’s hard to escape.
If you have other savings, you could pay off a chunk of your mortgage. That should trim your monthly payment next time your mortgage rate resets — assuming you have an adjustable-rate loan. “But unless you make a sizable repayment, it’s not going to help a great deal,” warns Keith Gumbinger, a vice president with mortgage-information provider HSH Associates.
Meanwhile, if you have a fixed-rate mortgage, paying down principal won’t lower your required monthly payments. Instead, it will shorten the life of your loan, which won’t help with your current cash crunch.
Mr. Gumbinger’s advice: Try refinancing. By taking out a new 30-year mortgage, you could reduce your monthly payments, simply because you’re re-extending your loan back over 30 years. If, at the same time, you can pay down a chunk of principal, that will help even more.
http://www.foxnews.com/story/0,2933,274393,00.html
O.K. Bagholders, or whiners?
Hey, make money (from today’s earlier thread)-
Sorry I couldn’t respond to your witty riposte earlier today; just too busy hangin’ with the doctors’ trophy wives and trying to rip off prospective marks for my “sacrosanct” (it must be true…Lesley Stahl said so) 6%.
But, evidently, there are even bigger idiots out there than me: namely, a gang of longtime clients who keep stupidly coming back my way and sending friends and family in the form of referrals. What a bunch of dupes.
And what about my day today? Just red-letter, from beginning to end. At the start: a homeowner, listed with a flat-fee company, calls me on my cell- in tears- and explains that I’m the only person who’s shown her home in the past five weeks (three times to three different clients). She wants to know what the problem is. I explain that a big part of the problem is the fact she’s calling ME, instead of her own agent. I then try to give her some advice & pull her head out of her a$$, but she’s just too far gone. The conversation ends with her blurting out to me that she’s a “master negotiator”. Oh, well…
So I go to the office, bang down some ramen, make some small talk, kill some time…and it’s 5:00: cocktail hour!
Except, this guy comes walking into the office. Very anxious, very interested in talking to me. Do I have time? Sure, I’ve got nuttin but time; I’m a Realtard.
So who is this guy? Well, he’s- as of today- the (former) top agent for the flat-fee RE agency who represents the lady who called me in tears this morning! He’s had it with them; NONE of the company’s listings actually sell; they either expire or withdraw. He’s tried to help several of his clients market, negotiate and do more to get their homes sold…and his boss GETS MAD AT HIM for making an extra effort! Since it’s a flat-fee company, there’s nothing more in it for them when their listings actually sell…but, if a client demands a withdrawal, the company has a chance to make more money by CHARGING A FEE to withdraw the listing!!! And, to top it all off, the listings have dried up, since the company’s biggest flat-fee competitor just undercut their deal with forsalebyowner.com and is now siphoning off the 100 or so listings that used to come their way every month. All of a sudden, the agent standing in front of me has figured out that accepting compensation from a client doesn’t preclude a mutuality of interest. “Are you taking on agents? I’d like to work for a real company.” Funny how getting your teeth kicked in gives one a fresh perspective…
Every bit of those two conversations I had today is the God’s honest truth. Nothing enhanced, nothing made up. Weirder than coincidence.
So, make money, keep trying to deal with RE like it’s plane tickets. Keep thinking it’s a commodity that requires no intermediation. I just keep seeing more examples- on both sides of the table- that tell me the exact opposite is true.
BTW, how’s that apartment building coming? How’s the wifey? She still bugging you about getting a job? Call your Dad today? Does he still speak to you?
Pat – I’d be pretty creeped out.
“The data revealed recurring bills get in the way of saving for the majority of households at both ends of the income spectrum.”
I had a severe saving fetish which my wife had thoroughly cured. However, got a chance to indulge in it again when family went away 5 months back. In the first month got rid of TV, Internet and phone, mobile phone. just got a local verizon line(19$) and prepaid mobile (15$ a month). Monthly credit card spending came down from 2000 to $400 ( mostly gas and gifts, and taking friends to Dinners ). Paid off car/home insurance, so the only bills I get is heating and electricity. I know I will have to switch back to the normal mode again soon, but I did enjoy it while it lasted.
“Every time he talks about picking up some toys, I think..nope, not for me.”
what kind of toys do you play with
Grim-
Begging you to release my vitriolic (#12) reply to the blockheaded make money.
New Today! Paulson Now Sees “Major Housing Correction”
http://www.paperdinero.com/BNN.aspx?id=194
Excerpt features Treasury Secretary Henry Paulson discussing his assessment of the housing decline and his outlook for the future. Paulson suggests that the US has experienced a “major” housing correction that was inevitable after years of historic gains. “That correction has now been significant, we think it is near the bottom, it will take a while to work its way through the system.” Unfortunately, Paulson only reiterates the same guidance he offered last year prior to the housing market taking another major leg down.
Originally aired on: 5/21/2007 on New Hour
Running Time: 1 minutes 29 seconds
Quicken software has a big “Net Worth” button, which shows all your accounts combined into one bar graph, broken down by month, for the last 2-3 years (you can modify the date range).
As the chart moves up and to the right, it’s a real motivator.
get a life people
We live with the inlaws, pay them 500.00 a month for the upstairs. Between my wife and I we make 100k a year. We save an astonishing 3 to 4 thousand a month. How do we do it. We never go out to dinner. Our cars are paid for , we buy garage sale items for us and our 3 year old. When she is a teen , is when were going to have to break out the dough for things. We are extremly happy as a family, even though we have not been to disneyland. When we have free time we gravitate towards free or almost free events. They can be found. Why do we do this to ourselves. I can give you 325k reasons. Saving money actually brings you happiness.