From: Adam Back <aba@dcs.ex.ac.uk>
Date: Sat, 25 Oct 1997 19:29:41 +0800
To: tcmay@got.net
Subject: Re: Saving money
In-Reply-To: <v03102800b07742497420@[207.167.93.63]>
Message-ID: <199710251122.MAA00713@server.test.net>
MIME-Version: 1.0
Content-Type: text/plain



Tim May <tcmay@got.net> writes:
> Harka writes:
> > [...]
>
> As I recall your point, it was that most people are a few weeks away from
> running out of money and hence cannot change jobs readily. I was saying
> that a small amount of self-discipline and sacrifice can quite easily
> translate into having a few _months'_ worth of savings.

Absolutely.  I recall trying to explain to someone who was prone to
spending money he didn't have:

- if you spend it before you've got it, you'll get to spend less,
  because of the interest you pay in the mean time

- where as if you spend it some time after you've got it, you'll be able
  to spend more because you will accumulate interest prior to spending.

Most people seem to have bought into the credit concept.  Hire
purchase everything.  Their idea of how much they can afford is how
many hire purchase fee structures fit within their current wages.
Same for houses, and mortgages, their idea of how expensive a house
they can afford is determined by how large a loan the bank is willing
to give them on a 99% mortgate over a 25 year mortgage repayment plan.

Well more fool them.

I have no loans.  I bought my house for cash to rent out as an
investment (the house was cheap because I was a cash buyer and one of
those 99% mortgage types had had it repossed from them by the bank so
I bought it at 25% below market value).  I have been working for 20
months (after finishing higher education).  I have enough wealth to
not work for about 7 years at current expenditure levels.  I am
married, and have two pre-school children.  I have a second hand car
which I bought (for cash obviously) for L2000 (you should have seen
the previous car which cost L300).  I have received no inheritances
worth mentioning.  My income is probably lower than most of our US
friends (UK universities do not pay well).  I expect most of our US
friends will be working when they are 50.  I don't figure on being
forced to work to eat at that age.  My liquid assets are invested in
stocks and high interest accounts.  Their's are locked up in fast
depreciating assets: flash cars, big mortgages, consumer electronics,
and in high consumption life styles: eating out, entertainment, etc.

Their life-style choice, their risk.

> If they won't make these spending tradeoffs and have not even a
> buffer sufficient to carry them through a month or two or three, I
> say screw them.

There's some kind of parable in the bible about investments (not that
I'm any kind of religious freak... just it is a reasonable story),
some thing about several people being given a gold coin to look after.
One spent it, another burried it in the ground, and another invested
it.  The person who's money it was came back and took the money off
the one who'd burried it in the ground and gave it to the one who'd
invested it.

Socialism has it in reverse, the one who'd spent it would have had the
government steal it from the investor for redistribution to the
financially foolish one.

Spending every penny before you've got it and then looking around for
someone else to pay the bills is a socialist tendency.  The nanny
welfare state.  Legalised theft from those that have worked to those
who have not.

OK, so maybe you can get a run of bad luck, but that bad luck is going
to hit you much worse if you've spent the next two months wages before
they've arrived.

Adam
-- 
Now officially an EAR violation...
Have *you* exported RSA today? --> http://www.dcs.ex.ac.uk/~aba/rsa/

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