Should You Save or Spend?
Discussion
I found an interesting Sky news clip regarding Britain's saving/spending habits:
https://www.youtube.com/watch?v=5F-ClOxVVWY
The lady in turquoise talks complete sense imo ... eg. "paying yourself before anything else".
... but what do you make of the point made by the guy next to her? His advice feels somewhat reckless?
https://www.youtube.com/watch?v=5F-ClOxVVWY
The lady in turquoise talks complete sense imo ... eg. "paying yourself before anything else".
... but what do you make of the point made by the guy next to her? His advice feels somewhat reckless?
It all depends on whether you think you will live to an old age or die at an early one.
You don't have to save money either, you can build up and pass on a source of income (as opposed to a lump sum).
The answer is going to be different in every case, but saving for your own retirement is always going to be vital.
You don't have to save money either, you can build up and pass on a source of income (as opposed to a lump sum).
The answer is going to be different in every case, but saving for your own retirement is always going to be vital.
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.
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.
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.
<metaphorically> depending on what's in that etc, etc... possibly yes </metaphorically>
It's all to easy to borrow money to buy something,
it's only another monthly payment" - if you look at if the purchase is actually worth the total cost you'd blanch, but like boiling a frog, a bit at a time doesn't trigger the "I'm not spending that much on _that_" response.
It's all to easy to borrow money to buy something,
it's only another monthly payment" - if you look at if the purchase is actually worth the total cost you'd blanch, but like boiling a frog, a bit at a time doesn't trigger the "I'm not spending that much on _that_" response.
Simpo Two said:
Money buys you choices. And after a while, money makes more money. .
That's pretty much exactly an exact quote from my parents, and it worked very well for them.It's very pleasant going into a meeting with an arsey boss knowing that if you want to you can say "you clearly don't want me here, shall we not waste either of our time with a notice period?" as you can afford to quit work, and watching him deflate like a child's balloon.
xeny said:
That's pretty much exactly an exact quote from my parents, and it worked very well for them.
It's very pleasant going into a meeting with an arsey boss knowing that if you want to you can say "you clearly don't want me here, shall we not waste either of our time with a notice period?" as you can afford to quit work, and watching him deflate like a child's balloon.
Damn right. It's very pleasant going into a meeting with an arsey boss knowing that if you want to you can say "you clearly don't want me here, shall we not waste either of our time with a notice period?" as you can afford to quit work, and watching him deflate like a child's balloon.
I do understand that some folks believe in living for the moment, etc, but these are also the people that have, deep-down, resigned themselves to the fact that they’ll either essentially never retire or get by on state pension and state handouts.
ETA, in a way, it’s probably shrewd retirement planning on their part, as a huge factor in reducing life expectancy is working into your late 60’s. At least in my profession it is.
p1stonhead said:
Spend what you have after saving, not the other way around.
Indeed. And while it’s easy to say as a decent earner; it’s quite alarming to read the stats on what typical folks are putting away for retirement. I know laws have changed to make pension savings mandatory for employees, but obviously it hasn’t it home for most, what you need in your pot to generate a half-decent retirement income.
Testaburger said:
Indeed. And while it’s easy to say as a decent earner; it’s quite alarming to read the stats on what typical folks are putting away for retirement.
I know laws have changed to make pension savings mandatory for employees, but obviously it hasn’t it home for most, what you need in your pot to generate a half-decent retirement income.
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.I know laws have changed to make pension savings mandatory for employees, but obviously it hasn’t it home for most, what you need in your pot to generate a half-decent retirement income.
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.
Personally I'm going to try and save as much as I can, I live a fairly simple life without many expensive luxuries, so I'm hoping I have the balance about right.
I realise I'm probably never going to be filthy rich, but I'm content with what I have and don't want to stress myself out by over stretching my budget to keep up with the jones's
I’ve never really understood the desperation to retire and especially to sit around doing nothing, I quite enjoy work and if I did want to give it up I’d be doing something as a hobby which could probably easily be converted into making a modest income anyway. Out of the “retired” people I know, perhaps 10% are actually retired in the traditional sense, the rest returned to work by choice or have some workshop type hobby that also pays the bills for them. The ones who are actually retired are now beginning to be affected by old age health problems anyway, which has never been an existence with much appeal to me...
So on balance given the evidence in front of me, that many people die before retirement anyway, those that do retire don’t seem to stop working unless they’re ill, and knowing myself as a fairly driven and creative person who’d never be happy sitting on my arse anyway, I’m fairly content with living life as I go. I try to make smart choices with the bigger purchases where I can, so I’m not just pissing away - I have assets I can cash in if I ever wanted to. I just don’t see that day ever coming in the sense that the generation before me seem to be obsessed with.
So on balance given the evidence in front of me, that many people die before retirement anyway, those that do retire don’t seem to stop working unless they’re ill, and knowing myself as a fairly driven and creative person who’d never be happy sitting on my arse anyway, I’m fairly content with living life as I go. I try to make smart choices with the bigger purchases where I can, so I’m not just pissing away - I have assets I can cash in if I ever wanted to. I just don’t see that day ever coming in the sense that the generation before me seem to be obsessed with.
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.
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 think that, more than a lot of areas in life, our family circumstances/attitudes affects are outlook here. Also when you are young with no commitments we all tend to be less frugal or can't be a saver for a time, thinking Uni and loans here or if working on a low paid wage then getting a car and insuring it etc saps up a youngsters money quickly, then a holiday with your mates etc etc. I don't blame them, who doesn't have memories from such escapades!
I think though that sometimes changing your view point/outlook is important, ie not be a slave to saving or spending, treat yourself or others but don't keep up with the Jones to the detriment of financial stability. We can become set in our ways be that frugal or spendthrift.
Money giving you options is true but if you never take the options it's a shame, but saying that you still have that security/comfort blanket of not having your back up against the wall immediately if you suffer a loss of income for whatever reason, something that a lot of people never have.
I think though that sometimes changing your view point/outlook is important, ie not be a slave to saving or spending, treat yourself or others but don't keep up with the Jones to the detriment of financial stability. We can become set in our ways be that frugal or spendthrift.
Money giving you options is true but if you never take the options it's a shame, but saying that you still have that security/comfort blanket of not having your back up against the wall immediately if you suffer a loss of income for whatever reason, something that a lot of people never have.
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...
https://en.wikipedia.org/wiki/Stanford_marshmallow...
xeny said:
That's pretty much exactly an exact quote from my parents, and it worked very well for them.
It's very pleasant going into a meeting with an arsey boss knowing that if you want to you can say "you clearly don't want me here, shall we not waste either of our time with a notice period?" as you can afford to quit work, and watching him deflate like a child's balloon.
It's very pleasant going into a meeting with an arsey boss knowing that if you want to you can say "you clearly don't want me here, shall we not waste either of our time with a notice period?" as you can afford to quit work, and watching him deflate like a child's balloon.
... that made me laugh.I think there is something to be said for at the very least having a financial buffer (six months salary). It helped me a when I was made redundant a few years back, I enjoyed a having a few months off without having to worry about bills etc, until beginning my search for the next opportunity.
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.
Part of the lack of understanding I think (or confusion at least) is that people are not clued up financially and in recent times annuity rates have become so low that the investment needs to now be 3 - 4 times what it did only a few years ago. A £500k pension pot 15 years ago would have positioned you quite nicely for retirement if you could lock in those annuity rates, whereas now the figures have become scary and seemingly unachievable to your average salary worker. Of course they do reap the benefits of said interest rates when buying houses, buying cars and having latest iphones on finance but thats another discussion entirely. 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 think some of the lethargy towards saving/buying property/pensions/grown up s
t is partly driven by a desire for shiny st, partly by wanting to have what everyone else on Instagram does, but also partly because its just not seen as achievable by many so why attempt to bother. When people talk of a million quid pension pot buying a £30k PA pension not much above national average wage I think many have resigned themselves to the idea they simply won't retire and tuned out. At the very least they seem to have now targeted other forms of passive income rather than even considering that level of investment for what they deem a modest income in retirement. 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. Gassing Station | Finance | Top of Page | What's New | My Stuff