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outerboxthinkerJan 11, 2011
To make you strong and powerful, make others weak
To be safe and sound, protect and serve the monster
warp25Jan 11, 2011
FTA "Having a sound financial strategy, including a commitment to saving money, has a large impact on lifting families out of poverty, the research reveals"
Translation: stop spending on crap you don't need and live below your means.
0crabby0Jan 11, 2011
lol
http://www.youtube.com/watch?v=0HOlc7PcCMk
myztryJan 11, 2011
This highlights the flip side of the equation. Earnings are only half on what creates wealth. Spendings are equally important to the point where a penny saved is literally a penny earnt when coupled with earnings.
Closed AccountJan 11, 2011
Earnings do not equal wealth. And spending on it's own definitely does not create wealth.
Wealth is created via excess useful produce.
If someone is doing a job for someone else. Say baking bread. And on their own they can only bake 10 loaves a day. If someone comes by with a means or way (including working for the individual) to create twice that amount. And only charges a price for that service/machine worth less than the gains reaped, both parties benefit, and now a more efficient system produces more than ever could have been produced by the two normally.
That excess could now either feed more people, allow them to take a few days off each week, or anything else they choose to do with it.
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Creating wealth has NOTHING to do with spending. And earnings are only a TRANSFER of wealth at best. (Often some part is lost or used up in the transfer)
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So do you want to take/steal more wealth from something else?
Or do you want to actually CREATE wealth for yourself and everyone else?
Closed AccountJan 11, 2011
In a world where it takes money to make money, it's a one sided game.
what you fail to see is that people aren't necessarily poor because they're living beyond their means, they're poor because they aren't paid enough to live within the most basic of 'means'. things like foodstamps and medicaid exist SOLELY because companies aren't paying their employee's enough to afford these things, nor are they offering affordable, if any, medical benefits.
even investing won't make the average person rich. if a poor person invests 10K over a year (not to mention the time it takes to save up 10k), and see's a return rate of 5%, they'd only make $500. if they take that 10.5K and invest it again and see another 5%, they'd only see $525 more. 2 years of investing, and all they have to show for it is less than a months pay. not very lucrative. and that's assuming they don't go into the negative from dropping stock prices. however, say some guy invests 1 million dollars with a 5% profit, and he just made 50K, which is about a good years pay. that's enough to live off of without a job for the rest of your life if you see the same returns every year.
people are poor because of inflation, because of the federal reserve, because jobs are shipped overseas, because companies want to make more profit every year, while offer the same or less benefits/pay. they want people to work longer hours with less pay, less hours with less pay.
people are poor because they have to pay 50-100K for a college education that may or may not offer actual employment. whether it allows them to be employed or not, they'll be paying that sum for many years to come, and if they are unable to pay it the effects on their credit are crippling and devastating. they'd be lucky to get a loan on a car. and any loan they would be able to get would probably have a high financing rate, making the item cost much more than it originally would have. so you see, the credit system itself makes things cost more simply be being poor. the guy that has less money ends up having to pay more than the guy who has more money.
even if you were to save money your entire life, that money would be nearly worthless by the time you reached elder age, losing much of its value.
the idea of this article would actually have the opposite effect. example: if all the middle and lower class people in the USA stopped spending, the economy would stall. why? because these people are what drives the economy. saving money may make you slightly richer but once you spend that money you're no longer richer. what is the use of being richer if you're no longer rich once you need to spend any of it. the rich hoarding their cash under lock and key is a big contributor to economic problems, because one rich person won't consume or produce as much as 99 poor people.
example: that one rich person might own several cars. the 99 poor people will need 99 cars.
many purchasing activities of the rich, are things bought from other rich people, hence it doesn't even get a chance to trickle down. if I buy a $10,000 designer dress from a famous designer, who is benefiting from that economically? the designer might have spent (trickled down) a few hundred dollars on the material, but the rest of that value goes directly into his own pocket. so that dress designer decides to buy a ferrari. well first off, that benefits another countries economy, and second the people who produce ferrari are all rich. even the workers who build them by hand. the only thing that trickles down to the poorer people is the cost of the materials to build it, which is always far less than the profit made by the rich off of the final product. So let's now say one of the guys who builds ferrari's gets his bathroom redone by an interior designer with expensive tiling. each tiling might only cost $1 to quarry and cut through mass production. but because of greed and profit and luxury, the tiles end up costing $20 or $40 a piece. and none of that money trickles back down to the people who made the tiles, only the people who hired the people to make the tiles.
pw378Jan 11, 2011
"if a poor person invests 10K over a year (not to mention the time it takes to save up 10k), and see's a return rate of 5%, they'd only make $500. if they take that 10.5K and invest it again and see another 5%, they'd only see $525 more. 2 years of investing, and all they have to show for it is less than a months pay. "
Thinking like this is why the poor stay poor. Instead think if you continue saving $10k/yr at 5%, starting at 18 until you are 58, you can retire early with $1,338,797.52 Then you live off the 5% returns, and pass the principle down to your children.
You look at investments over a short term and see failure. The future rich look at investments over the long term and see success. Its not a matter of rich vs. poor, its a matter of vision, diligence and effort.
burgerkinghornJan 11, 2011
Your math is off by a factor of 10. $10,000 principal with 5% return per year for 50 years is 10000*(1.05)^50 = 114674 or a profit of $104,674.
That's not much of a profit and few working class people can afford to put a large sum away and not touch it for 50 years. The earning and spending by poor people is rapid because everything goes to basic needs.
pw378Jan 11, 2011
Save $10k per year, every year at 5% annualized compounding return. My math is quite correct.
I can predict who will die poor and who will not - not based on their starting position in life, but based on their attitude. People who believe like you do, that its too hard to save, that life is unfair, that the odds are against you, will almost certainly die poor because you always find an excuse why you cannot succeed.
Closed AccountJan 11, 2011
you assume that the average person has the ability to save 10k/yr. most people make anywhere from 15K to 30 or 40K per year. that means it could be from anywhere between 25 to 66 percent of their income going into savings. that's quite a chunk.
and again, investing doesn't always guarantee a return, you may lose money. from a little bit to all of it. there are many elderly people who even lost their pensions.
what does 1.3 million really mean when if you spend it you're no longer rich?
58 is quite an age, but you forget that the average life expectancy in the USA is 50 years. Yes, you heard me. 50. years. and I'll explain why. life expectancy is based on how long people CAN live on average, MINUS all of the things that will kill them in between. people die from other things than natural causes every day, from infection, to disease, to accidents, etc.
This is how you determine the true life expectancy (not the lies you were told). the US loses 1% of its population every year. that means every 50 years , 50% of the US population has died off (taking into account what's added). so in reality, it's a 50/50 chance to make it to 50 years old. half of ALL people in the country won't make it to 50 for one reason or another. In reality, there are less people that make it to 50, than there are people who make it past 50.
and once you're old, what are you going to do with that 1.3 million? spend it on medical care? what if they blow it all on vacations and such? they deserve it right? after all they saved all that time. so they might have had a total of 1.3 mil at 58, but they then have a total of 0 or a few 100K at best when they reach 68. not much left for their kids, if they even leave it to their kids or have kids to leave it to.
what you're basically saying is that one generation has to give up its entirely livelihood and live far below its means in order to prop up the next generation with wealth. but the next generation has a good chance of squandering that wealth, making the sacrifice all for nothing. you're basically saying that people should live poor so their kids can live rich, that they should forgo a great portion of the fruits of their labor for their entire life time.
but you forget that 1.3 mil isn't going to have anywhere near as much spending power as it does today, so that 1.3mil saved might only buy as much 40 years from now, as 500K would have bought today. making their total investment of 10K a year for 40 years (which would equal 400K of out of pocket investments) only net an actual 100K extra in total spending power. 40 years of saving by taking 25-66% of your income for your money back and 100K extra. not exactly rich. the only thing you've really gained is 100K, the rest of the money you get back is the money you invested and would have otherwise spent in the first place if you had not invested. you see, the interest is counteracted by the buying power. it's like swimming upstream. it's not really acquiring much wealth, but more like it's shifting around when wealth is spent. it's no different than abstaining for a year, then the next year going all out with what you saved.
50K in 1950 would have bought a hell of a lot more than 50K would buy today, so do you think a person from 1950 would have been better off spending 50K in 1950 or saving it and spending it today?
pw378Jan 11, 2011
"save 10k/yr. most people make anywhere from 15K to 30 or 40K per year. that means it could be from anywhere between 25 to 66 percent of their income going into savings"
Bulls**t. 25% of your income is NOT a lot of money regardless of your income level. Everyone can live with 25% less "stuff" - be it eating cheaper, living cheaper, skipping the non-necessities, etc. If you only save 10% of your income from 18-65 and get a modest 4% return, you will have a larger income in retirement from your investments than you will from Social Security. In addition, you'll have a huge nest egg that you can pass along or rely on in the event of a personal catastrophe.
EVERYONE can save 10%. Almost EVERYONE can save 25%. Its a matter of choice. Just do it and while it won't seem like much at first, but after time you'll recognize that poverty is a choice people make by failing to plan ahead.
warp25Jan 11, 2011
I know of two people personally who when growing up whose family used to run out of money every week because they grew up in very low income households. They could only afford to have one meal a day if at all.
30 years down the track, one of them has a multi million dollar mansion on the riverfront and has set up and owns businesses in 4 different countries. The other is also living in a mansion (which he paid by cash) and put 3 of his children all through college. Before you ask, neither of them won the lottery or acquired a huge inheritance from anybody.
Not many people make it like them because it's so much easier to fail. Most people have an attitude of "it cannot be done" or <insert another intellectual excuse>. Who should I follow? The two people whom I know who have gone from rags to riches or your philosophy where it's just "impossible" to do?
Closed AccountJan 11, 2011
I never claimed it was impossible. It's just highly improbable. You statistically have a better chance of getting rich on your own than winning the lottery. I don't play the lottery. It's just that the chances are low enough that 90-99 out of 100 people WON'T reach that.
There's less than 10 million millionaires in the USA, and approx 400 billionaires. that would be less than a 3rd of 1%. 99.6% of working people in the USA aren't millionaires or billionaires. 98.3% of Americans will never make more than 250K a year. Only 1 in 11 or 10 out of 110 will make more than 75K a year. Half of all the people in the country are making less than 50K a year. Nearly 30% of all Americans only make 25K or less per year.
These stats might be from around 2006 or 2008...but the economy has only gotten worse so these numbers are accurate enough and probably even more damning. And I don't think these figures even include the 10-20% of unemployed.
warp25Jan 12, 2011
You're right.. it is highly improbable. That's because 99% of people spend money on crap they don't need and also suffer from affluenza. It it those 1% of people who have the fortitude that will make it. Do you CHOOSE to be in the 1% or the 99% ?
bcronosJan 11, 2011
Thailand? Welfare Americans will have no choice but to follow this advice after the last few administrations...
kalvinbJan 11, 2011
I brought some of Dave Ramsey's teachings to some high risk high school students. That was my big point: focus on what you really want and get an education so you can make more money.
I said we all start out poor. We work minimum wage jobs as teenagers and as we get older we make more money. If you find yourself older and not making more money then you missed something and that something is an education.
The teacher told me they were not likely to pay attention while I was talking. They paid attention the entire time. And asked a lot of questions at the end.
A minimum wage job as a teenager will get you a BMW if you really want it. You more than likely will have to save your money for five years and buy it in cash (getting a loan will be tough) but it can be yours if that's what you want when you have a job and no financial responsibilities.
skidooerJan 11, 2011
"get an education so you can make more money."
Not to belittle the value of an education, there are lots of good reasons to go to school. But if making money is your goal, education is not what you need to achieve that dream.Comment is buried, click here to see the rest.
kalvinbJan 11, 2011
Don't confuse a "formal" education with Education. If you want money you have to know things. If you can learn them in a non-formal environment then great. But learn them somewhere.
I became a professional programmer by teaching myself. But I also got a formal education to make myself marketable. A degree gets you past HR.
skidooerJan 11, 2011
Point taken, however to say "get an education", to me, implies a formal one. Education obtained outside the classroom happens in the every day course of life. You do not necessarily go out of your way to "get" it.
antialiasJan 11, 2011
Statistically an education does increase your earning potential. With every level of education earned, the average income earned by graduates goes up. Sure you might be a savvy person and work really hard and make a fortune, but why not increase the odds wherever you can?
skidooerJan 11, 2011
It appears that the statistics are flawed as they measure income from people of all personalities. It takes a certain personality to work your way through school; the same type of personality that is beneficial in business. Had those same individuals not gone to school, there is no evidence that their earnings would have been affected. Correlation does not imply causation.Comment is buried, click here to see the rest.
antialiasJan 11, 2011
So you are saying that if you don't have the skill set needed to be successful, no amount of self improvement or schooling will get you there? Certainly there are different learning styles, but education, even formal education ranges from the very structured classroom setup to trade schools to totally self driven research/trial and error style learning. My point is that if you don't pursue some method of self improvement and increase your skill set you will most likely stagnate in income and career opportunities.
themachine1Jan 11, 2011
Technolgy?
Wiping butt with leaves outside.
Wiping butt with corn cob in outhouse.
Wiping butt with Sear's and Roebuck catalog.
Wiping butt with factory made toilet paper in outhouse.
Wiping butt with factory made toilet paper with a fancy indoor flush toilet.
Hi tech no need to wipe your on ass toilet.Comment is buried, click here to see the rest.
crimsonleafJan 11, 2011
probably all wrong since its a university airing its concepts
mkawickJan 11, 2011
This is the biggest 'no-duh' article I've read in a while.
pethanksJan 11, 2011
Most poor people think also poor so they are just contented of what they have.
ben480Jan 11, 2011
Great info , thank you.
onreactJan 11, 2011
Misleading title, "How do poor people manage their finances?" from the first paragraph would be more appriopriate.
montafireJan 11, 2011
make money babe
Kenneth331Jan 11, 2011
You have a beneficial Blog here Mate. Please maintain up the excellent work.
jimclay75050Jan 11, 2011
Education is almost--but maybe not always-- a big factor. It's not always what you learn, as much as getting in the habit of thinking and looking for new ideas.
sanjananb99Jan 11, 2011
lifting families out of poverty, the research reveals
http://haffow.com/forumdisplay.php?fid=7
warpfieldJan 11, 2011
Prof. Smith was mystified initially. "Poor people are like, really boring because they're, you know, poor. I didn't know where to begin to study them because I couldn't for the life of me work up any motivation. I mean, seriously, who ever notices poor people or what they're doing? There's no point to it, right? The only time is when one of them gets rich but then they're not poor so it doesn't count. And when someone with money loses it, it's like, you know, they totally fall off the map and everything and all contact is lost. Happened to a friend of mine. Well, ex-friend. He's a total stranger to me now... I honestly have no idea where the hell he is. I would normally hope he's okay, except I totally don't care now. Plus I'm too busy banging -- I mean, consoling -- his wife. But even that's a weird concept. It's not like a poor guy can have a wife, because by definition poor people don't have anything. So it's not like I'm cheating on him. If he gets rich again, I guess it could get awkward, but I'm sure he'll understand. But she probably wouldn't take him back anyway, because poverty, you know, it's a big stigma... a guy does it once, and he's forever marked after. You can't really ever wash that stink off. He'll just have to find someone else and hope she doesn't know. But the Internet makes that tricky I guess. Although it's important that we track these things, because before it was awful, innocent people getting tricked into hooking up with previously poor people. The truth would sooner or later come out, then there'd be the yelling and divorcing and all that. Just terrible. My advice is, be rich. Just don't ever become poor. Just avoid it. Better yet, be born rich. It's much easier to stay rich if you're born rich, yeah. And be good looking and smart. And if you have to steal something, don't get caught. I'm not sure exactly how one could guarantee doing that, but, like I said, I really can't study poor people. I'm just going to chalk it up to being one of life's deep mysteries I guess. There are simply some things man was never meant to know. Like, how the universe began, and what poor people actually eat since they can't afford food, etc."
DallasWJan 11, 2011
Followed for this awesomeness.
dsdigitalJan 11, 2011
Loved it, thanks for the post!
alanskyJan 11, 2011
Oh yeah!!! Saving money is priority one when you don't even have enough to cover basic survival!!! What an idiot!
yannafelix1Jan 13, 2011
A topic I would love to read each time. Thanks.