Should You Save or Spend?
Discussion
I’m someone who is incredibly reluctant to spend money. It’s just how I am.
I couldn’t believe what I was hearing in that video, it’s just so alien to how I think.
“No one has any money left at the end of the month.”
I normally have more than two thirds of my income that month remaining after all my bills and living costs
I couldn’t believe what I was hearing in that video, it’s just so alien to how I think.
“No one has any money left at the end of the month.”
I normally have more than two thirds of my income that month remaining after all my bills and living costs
Shnozz said:
What will be interesting is if rates change vastly in that period and those who have paid into a pot find rates back up where they were and their £500k pot suddenly paying what the £1m pot would have paid 10 - 15 years earlier when they can only take a target from present-day rates.
The problem is it won't have a huge effect, as if you start with say 10 years of perhaps 2% interest then the compound effect will be that much lower than if it started on say 7% and then dropped to 2% at the end.Behemoth said:
All this makes me think of the Stanford kid's psychology test with marshmallows. Give a bunch of kids a plate each containing a marshmallow. You can eat one now. or wait 15 minutes and & you will get two to eat. Follow ups showed that the kids who were able to delay gratification were the more successful years later.
https://en.wikipedia.org/wiki/Stanford_marshmallow...
And it can apparently be taught.https://en.wikipedia.org/wiki/Stanford_marshmallow...
swerni said:
red_slr said:
So what generation are you talking about then? You must have been born in the late 60s or early 70s?
The generation before you have already passed or very close to SP age.
late 60's.The generation before you have already passed or very close to SP age.
it's not a case of not being able to retire, in reality, I could now.
I just don't want to
Jimmy Recard said:
I’m someone who is incredibly reluctant to spend money. It’s just how I am.
I couldn’t believe what I was hearing in that video, it’s just so alien to how I think.
“No one has any money left at the end of the month.”
I normally have more than two thirds of my income that month remaining after all my bills and living costs
What do you plan to do with your money if you don't want to spend it? Serious question I couldn’t believe what I was hearing in that video, it’s just so alien to how I think.
“No one has any money left at the end of the month.”
I normally have more than two thirds of my income that month remaining after all my bills and living costs
Camelot1971 said:
Jimmy Recard said:
I’m someone who is incredibly reluctant to spend money. It’s just how I am.
I couldn’t believe what I was hearing in that video, it’s just so alien to how I think.
“No one has any money left at the end of the month.”
I normally have more than two thirds of my income that month remaining after all my bills and living costs
What do you plan to do with your money if you don't want to spend it? Serious question I couldn’t believe what I was hearing in that video, it’s just so alien to how I think.
“No one has any money left at the end of the month.”
I normally have more than two thirds of my income that month remaining after all my bills and living costs
p1stonhead said:
Camelot1971 said:
Jimmy Recard said:
I’m someone who is incredibly reluctant to spend money. It’s just how I am.
I couldn’t believe what I was hearing in that video, it’s just so alien to how I think.
“No one has any money left at the end of the month.”
I normally have more than two thirds of my income that month remaining after all my bills and living costs
What do you plan to do with your money if you don't want to spend it? Serious question I couldn’t believe what I was hearing in that video, it’s just so alien to how I think.
“No one has any money left at the end of the month.”
I normally have more than two thirds of my income that month remaining after all my bills and living costs
droopsnoot said:
p1stonhead said:
Camelot1971 said:
Jimmy Recard said:
I’m someone who is incredibly reluctant to spend money. It’s just how I am.
I couldn’t believe what I was hearing in that video, it’s just so alien to how I think.
“No one has any money left at the end of the month.”
I normally have more than two thirds of my income that month remaining after all my bills and living costs
What do you plan to do with your money if you don't want to spend it? Serious question I couldn’t believe what I was hearing in that video, it’s just so alien to how I think.
“No one has any money left at the end of the month.”
I normally have more than two thirds of my income that month remaining after all my bills and living costs
Edit - I would add that i am incredibly tight
Edited by p1stonhead on Tuesday 19th June 10:14
Gary29 said:
Agreed. The enforced contributory pension scheme is a joke, and when you 'do the math' you soon see that it is not even close to addressing the problem.
1, now 2% is negligible on lower salaries, and yet I've seen first hand how some of these people think they have nothing to worry about because they have a pension and don't need to give it a second thought.
No it’s not enough something had to be done to plug the gap as we all live and have to work longer. I think it started as 1% and is now 2%. I‘d expect it to increase over time as a sort of tax but I’d course it does slow employment as workers become more expensive. 1, now 2% is negligible on lower salaries, and yet I've seen first hand how some of these people think they have nothing to worry about because they have a pension and don't need to give it a second thought.
The alternative is to find somewhere with a decent defined benefit scheme, like the civil service.
If you can guarantee that you'll never lose your job or get so sick you have to take time out for say a year, then spend it all!
Money gives you choices and flexibility.
The guy promoting spend-it-now is an idiot and his mentality is why we have so many people up to their eyeballs in debt.
It doesn't mean you have to live in a mud hut and wear sacks for clothes, obviously.
Money gives you choices and flexibility.
The guy promoting spend-it-now is an idiot and his mentality is why we have so many people up to their eyeballs in debt.
It doesn't mean you have to live in a mud hut and wear sacks for clothes, obviously.
For me, it’s not really that I restrict myself, it’s more that the things I like are pretty cheap. Therefore after bills and doing those things, there’s plenty of money left over.
I tend to have a couple of holidays a year but I only really go to places I really want to go to, so it tends to be planned and I don’t really bother with spontaneous weekend trips. Likewise with things - I’ve always had an enormous interest in cars but it’s more the theoretical side. I’ve never been interested in owning a sports car and I would enjoy a Dacia Sandero as much as I’d enjoy a Porsche. There just aren’t many things I want to spend my money on!
The left over money gets split into a mix of savings account, S&S ISA and pension
I tend to have a couple of holidays a year but I only really go to places I really want to go to, so it tends to be planned and I don’t really bother with spontaneous weekend trips. Likewise with things - I’ve always had an enormous interest in cars but it’s more the theoretical side. I’ve never been interested in owning a sports car and I would enjoy a Dacia Sandero as much as I’d enjoy a Porsche. There just aren’t many things I want to spend my money on!
The left over money gets split into a mix of savings account, S&S ISA and pension
p1stonhead said:
Quite. Its a balance. Two thirds left? Unless you are earning serious money and one third is like ten grand, live a little! Long time dead and all that.
Even with my wife's pretty reckless spending habits we have half left every month. Left to her own devices she'd spend the lot as she thinks you could drop dead tomorrow. My issue is, while that's true, you could also easily live into your 90's.p1stonhead said:
Camelot1971 said:
Jimmy Recard said:
I’m someone who is incredibly reluctant to spend money. It’s just how I am.
I couldn’t believe what I was hearing in that video, it’s just so alien to how I think.
“No one has any money left at the end of the month.”
I normally have more than two thirds of my income that month remaining after all my bills and living costs
What do you plan to do with your money if you don't want to spend it? Serious question I couldn’t believe what I was hearing in that video, it’s just so alien to how I think.
“No one has any money left at the end of the month.”
I normally have more than two thirds of my income that month remaining after all my bills and living costs
mikeiow said:
Simpo Two said:
My ex-bird justified her spending habits (ie if you have £100 in the bank, spend it) by saying 'Well I might fall under a bus tomorrow, haha'. Great - except that I have all the toys I want and no need to work, whilst she's still working hard.
Money buys you choices. And after a while, money makes more money. So if in doubt, save. Along with easy credit I blame monthly direct debits for much of people's problems.
I was with you right up to the last line.....I have direct debits for mortgage, gas, electric, tv, insurance, etc etc......should I be paying them in used fivers?!!Money buys you choices. And after a while, money makes more money. So if in doubt, save. Along with easy credit I blame monthly direct debits for much of people's problems.
Totally agree that easy credit and low interest rates are the problem with this country why save up for anything if you can have it tomorrow on the never never.
red_slr said:
The simple way to explain it to people is, at current rates, for every £1000 per year of pension income you need a pot size of around £30k. (give or take just round numbers).
So if you want to retire at say 60, and you are currently 20 you have 40 working years to contribute to your pot.
As a bare minimum you are going to have to contribute around 50% of the target pot in cash to ensure you get anywhere close to the target assuming tax relief and growth.
So, if someone wants £10k income (roughly speaking the current tax free allowance), very roughly speaking they will need to contribute around £300 a month over 40 years.
And that's the problem, I think a lot of young people just don't see the value in that.
It gets worse because a lot of younger people now start work later with them only getting onto full time work into their late 20s. So this then reduces their time to save to only 30 years. Suddenly the £300 becomes over £400.
I can see the value in it, I just can’t afford it! £400 a month into a pension would leave me with no savings or hardly any disposable income. I’m 31, I pay in about £100 a month and after absolutely everything have about £200 disposable income per month. Just about to put a deposit down on a house so at least we’ll have something to show. So if you want to retire at say 60, and you are currently 20 you have 40 working years to contribute to your pot.
As a bare minimum you are going to have to contribute around 50% of the target pot in cash to ensure you get anywhere close to the target assuming tax relief and growth.
So, if someone wants £10k income (roughly speaking the current tax free allowance), very roughly speaking they will need to contribute around £300 a month over 40 years.
And that's the problem, I think a lot of young people just don't see the value in that.
It gets worse because a lot of younger people now start work later with them only getting onto full time work into their late 20s. So this then reduces their time to save to only 30 years. Suddenly the £300 becomes over £400.
red_slr said:
The simple way to explain it to people is, at current rates, for every £1000 per year of pension income you need a pot size of around £30k. (give or take just round numbers).
So if you want to retire at say 60, and you are currently 20 you have 40 working years to contribute to your pot.
As a bare minimum you are going to have to contribute around 50% of the target pot in cash to ensure you get anywhere close to the target assuming tax relief and growth.
So, if someone wants £10k income (roughly speaking the current tax free allowance), very roughly speaking they will need to contribute around £300 a month over 40 years.
And that's the problem, I think a lot of young people just don't see the value in that.
It gets worse because a lot of younger people now start work later with them only getting onto full time work into their late 20s. So this then reduces their time to save to only 30 years. Suddenly the £300 becomes over £400.
The younger generation can't afford it, whether they understand it or not. So if you want to retire at say 60, and you are currently 20 you have 40 working years to contribute to your pot.
As a bare minimum you are going to have to contribute around 50% of the target pot in cash to ensure you get anywhere close to the target assuming tax relief and growth.
So, if someone wants £10k income (roughly speaking the current tax free allowance), very roughly speaking they will need to contribute around £300 a month over 40 years.
And that's the problem, I think a lot of young people just don't see the value in that.
It gets worse because a lot of younger people now start work later with them only getting onto full time work into their late 20s. So this then reduces their time to save to only 30 years. Suddenly the £300 becomes over £400.
Take an average 25-year-old on, say £23k/year somewhere in the Midlands.
£1500 take-home.
- £450 rent for a room in a 2- or 3-bed place with friends
- £100 bills (Water, gas, electricity, broadband, council tax)
- £150 food for the month
- £150 savings (whether a holiday, replacement tyres on the car, general rainy-day or Christmas fund etc)
= £650 left
Are they running a car? Even fuel, insurance, tax and servicing would be £100+ per month all-in. A social life with a meal out, a few drinks, or a cinema ticket once a month? That's easily £60 a month. Nevermind birthday gifts for family/friends, saving for a house deposit, new clothes.
And that's a single person with no dependents. Throw a child in the mix and frankly saving for a pension goes right out the window. £300 just isn't realistic.
I would not concentrate on the numbers, they are just examples.
I think the main thing is young people have to do something, and the government are not helping IMHO as the WPP is not enough.
I employ a few younger people and they are much better off financially than I was at the same age. But their attitude to how they spend their money is very different. But its their money so its not for me to comment. It would be good if there was some kind of education plan put in place though. Most younger people are looking at 50 years of employment. That's a lot of time and compound interest over that kind of time frame can be quite powerful.
I think the main thing is young people have to do something, and the government are not helping IMHO as the WPP is not enough.
I employ a few younger people and they are much better off financially than I was at the same age. But their attitude to how they spend their money is very different. But its their money so its not for me to comment. It would be good if there was some kind of education plan put in place though. Most younger people are looking at 50 years of employment. That's a lot of time and compound interest over that kind of time frame can be quite powerful.
romeogolf said:
The younger generation can't afford it, whether they understand it or not.
Take an average 25-year-old on, say £23k/year somewhere in the Midlands.
£1500 take-home.
- £450 rent for a room in a 2- or 3-bed place with friends
- £100 bills (Water, gas, electricity, broadband, council tax)
- £150 food for the month
- £150 savings (whether a holiday, replacement tyres on the car, general rainy-day or Christmas fund etc)
= £650 left
Are they running a car? Even fuel, insurance, tax and servicing would be £100+ per month all-in. A social life with a meal out, a few drinks, or a cinema ticket once a month? That's easily £60 a month. Nevermind birthday gifts for family/friends, saving for a house deposit, new clothes.
And that's a single person with no dependents. Throw a child in the mix and frankly saving for a pension goes right out the window. £300 just isn't realistic.
I think that outlines very well the problem.Take an average 25-year-old on, say £23k/year somewhere in the Midlands.
£1500 take-home.
- £450 rent for a room in a 2- or 3-bed place with friends
- £100 bills (Water, gas, electricity, broadband, council tax)
- £150 food for the month
- £150 savings (whether a holiday, replacement tyres on the car, general rainy-day or Christmas fund etc)
= £650 left
Are they running a car? Even fuel, insurance, tax and servicing would be £100+ per month all-in. A social life with a meal out, a few drinks, or a cinema ticket once a month? That's easily £60 a month. Nevermind birthday gifts for family/friends, saving for a house deposit, new clothes.
And that's a single person with no dependents. Throw a child in the mix and frankly saving for a pension goes right out the window. £300 just isn't realistic.
I've witnessed so called 25-30yr olds being grilled by their parents for 'not having/delaying' giving them grandchildren. When they tell them it's because they can't afford it right now, the parents look at them with contempt and disgust, as to how 'money' could get in the way of having a child.
I can see both sides, but I don't think you can blame the younger generation having to take into account such costs.
red_slr said:
I would not concentrate on the numbers, they are just examples.
I think the main thing is young people have to do something, and the government are not helping IMHO as the WPP is not enough.
I employ a few younger people and they are much better off financially than I was at the same age. But their attitude to how they spend their money is very different. But its their money so its not for me to comment. It would be good if there was some kind of education plan put in place though. Most younger people are looking at 50 years of employment. That's a lot of time and compound interest over that kind of time frame can be quite powerful.
...a question I have long wondered myself too.... why is there no education on money management in our schools? Improve financial literacy for all from an early age?I think the main thing is young people have to do something, and the government are not helping IMHO as the WPP is not enough.
I employ a few younger people and they are much better off financially than I was at the same age. But their attitude to how they spend their money is very different. But its their money so its not for me to comment. It would be good if there was some kind of education plan put in place though. Most younger people are looking at 50 years of employment. That's a lot of time and compound interest over that kind of time frame can be quite powerful.
Perhaps such a thing is actually dangerous in the real world... the economy probably wouldn't work as well if everyone was 'clued' up about money and saving (not spending).
As JaredVannett pointed out above we fall in to that category where the wife and I are constantly asked when we are producing offspring, and the answer is always “we aren’t”. We don’t really want to, plus we couldn’t bloody afford to! Definitely has been a few choice comments by older family and friends/colleagues. To do that now at this stage of our lives would be totally irresponsible.
Camelot1971 said:
What do you plan to do with your money if you don't want to spend it? Serious question
That is an incredibly pertinent question. The answer is that when we save money we do plan to spend it but not today as we have income from work to live from but tomorrow when we have no income from work to live from.
It’s very common to hear people chuck remarks about not being able to spend when dead but these types of comments are missing the point which is that people who save are people who recognise that there will come a time when companies stop wanting to exchange your time for their money and that you have to replace that lost income with your own via the savings that you have made during the short period that companies had an interest in paying you some of their money.
Few people want to die rich, savers are people who don’t want to live poor.
At the same time, we must recognise that if someone is earning at the lower end of the spectrum and has no desire to move up from there then they are in a bracket that can spend whatever they want, borrow whatever they want as they will be able to not only work far longer at that income level but also when falling back on the State at the end of life their lifestyle won’t actually change that much.
On the other hand, an average or higher income earner will typically cease being of interest to companies at an earlier age and their earning power has a high chance of diminishing strongly any time from 55 but also they have a higher standard of living and so must save a much, much higher percentage of their income if they wish to maintain their standard of living.
Where we. Have gone slightly out of step in the U.K. is the enormous growth of white collar earners still living the blue collar spending habits of their past or family’s past. In other words, a comprehensive failure to either recognise that they have moved into a different section of society which requires different economic planning or they have recognised this but are not able to self regulate against the marketing onslaught of fake lifestyles to sell goods.
Over that you obviously have the natural element that some people feel happy saving and others spending.
Savers aren’t people who want to be buried in a gold lined coffin but people who don’t want to spend 20 years sitting in urine being beaten by their State carers.
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