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Why bother saving money?

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November 25, 2008 – Comments (2)

Don't talk to them about a rainy day fund, the three to eight months of living expenses that financial advisers recommend everyone set aside as a cushion. Goldman burned through his in a few months. "Oh my God, is that even realistic?" Alenia Johnson asked, laughing at the idea. "Who can afford to do that?"

I hope this isn't the state of the nation.

2 Comments – Post Your Own

#1) On November 25, 2008 at 2:29 PM, EverydayInvestor (< 20) wrote:

I love the family that sold their house for a big profit and bought a $600k house and new cars and still had nothing saved up. Imagine if they had bought a nice $300k McMansion for cash and kept $200k in cash!

Maybe it is just me, but I think my security and sense of well-being are much more important than junk. While I could go out to the Lamborgini dealer tomorrow and buy one of their cars for cash, that money makes me a lot happier by sitting in my bank accounts. While I may not live like a king, I am sure I will not have to live like a pauper.

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#2) On November 25, 2008 at 5:16 PM, tdoodler (24.56) wrote:

I agree.  But imagine that they saw the housing bubble coming and thought - let's sell our house - downsize - take our $200,000 profit - put it in the stock market take our "10% annual gain" (per the pundits) and save half of it and use the remaining $10,000 to go on a couple of really nic e vacations everyyear.  Then, the conservative couple bought the following decent diversified "blue chip" stock portfolio.  3 years later they would have lost over half of their money even though they bought a well diversified "blue chip" basket of stocks.  ...   INTC (-50%), GE (-60%), C (-90%), T (+ 10%) WM (-100%) FCX (-60%), SPY (-33%) QQQQ (-33%), MER (-85%), GM (-85%).   Furthermore, they are faced with a new President and Congress that may be saying we are going to have to hike your taxes.  Now, even though they appeared to be wiser that their counterpart who overextended themselves,  they are left with a house (that they bought for $300,000 - and now is worth $250,000) and about $100,000 in stock - that they dont want to sell (because its too low).   In the mean time, they other couple can no longer afford their monthly payments - so the government has asked their mortgagee to "work out/reduce their mortgage".  - So they keep their big house, fancy cars etc. and look at the conservative couple and say, "why would you want to own stocks?"   

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