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Re: New plan to make US savings more negative.
Not as far as the math goes.
The fundamental problem with the household balance sheet is that Mr. and Mrs. Blow are sustaining a higher standard of living than they can afford by using consumer credit. If they made a lifestyle change in conjunction with tapping into their retirement savings to pay off high interest loans -- resulting in enough additional income left over to build adequate retirement savings -- then I would condone this move. However, years of voyeuristically listening to get-out-of-debt AM radio programs in the car has convinced me that this is not what Mr. and Mrs. Blow will do. Instead, they will squander their retirement savings or cut into their home equity to keep the collections wolf from their door, and continue to live essentialy as they had before.
The sad fact is that to be financially healthy, Mr. and Mrs. Blow need to accommodate themselves to a significantly lower standard of living. If their only means of maintaining a middle class lifestyle is to go deeper and deeper into debt, then they need to let go of that middle class lifestyle. Perhaps they need to rent a smaller house instead of owning one on which they cannot make the payments; they need to sell their newer cars and either take the bus or drive a $2000 beater; they need to eat rice and beans. By all means, they should be striving to increase their income, but the fundamental problem is that expenditures do not match income. Temporarily bridging the gap with retirement savings solves nothing in the long run.
By failing to save for retirement, they are imposing the costs of their subsistence in old age upon society -- and also placing their future in the hands of the state. I take a jaundiced view of paying for today's consumption with tomorrow's savings because this implicitly shifts the cost of that consumption to the public, and it undermines self-reliance.
Originally posted by bpr
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The fundamental problem with the household balance sheet is that Mr. and Mrs. Blow are sustaining a higher standard of living than they can afford by using consumer credit. If they made a lifestyle change in conjunction with tapping into their retirement savings to pay off high interest loans -- resulting in enough additional income left over to build adequate retirement savings -- then I would condone this move. However, years of voyeuristically listening to get-out-of-debt AM radio programs in the car has convinced me that this is not what Mr. and Mrs. Blow will do. Instead, they will squander their retirement savings or cut into their home equity to keep the collections wolf from their door, and continue to live essentialy as they had before.
The sad fact is that to be financially healthy, Mr. and Mrs. Blow need to accommodate themselves to a significantly lower standard of living. If their only means of maintaining a middle class lifestyle is to go deeper and deeper into debt, then they need to let go of that middle class lifestyle. Perhaps they need to rent a smaller house instead of owning one on which they cannot make the payments; they need to sell their newer cars and either take the bus or drive a $2000 beater; they need to eat rice and beans. By all means, they should be striving to increase their income, but the fundamental problem is that expenditures do not match income. Temporarily bridging the gap with retirement savings solves nothing in the long run.
By failing to save for retirement, they are imposing the costs of their subsistence in old age upon society -- and also placing their future in the hands of the state. I take a jaundiced view of paying for today's consumption with tomorrow's savings because this implicitly shifts the cost of that consumption to the public, and it undermines self-reliance.
) To me the only way forward is to trudge through the blizzard, mad dogs snapping at my heels. Maybe I'll end up exhausted under a snow-laden tree, but I'll be attempting to make a fire. ;)
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