Author Topic: Hoarding your money is selfish! Get it out there (spend it) to help society!  (Read 6251 times)

DMoney

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Conversation with a colleague, while discussing salaries:

Her: Isn't it just ridiculous that some people make $400k-500k!  And you know they don't spend it.  They just hoard it all.
Me:  Actually, I tend to think most people who make that much DO spend it.  I think most people tend to expand their lifestyles incrementally, so that they are manage to spend most of their paychecks.
Her: You think so?  I think they hoard  it all.
Me: Well, that's what we plan plan to do.  "Hoard" it and save.  But I think most people spend the majority of what they earn on bigger houses, fancy cars, private schools, etc.
Her:  I think that's not good for society.  People should spend the money to get it out there into the economy. Where it benefits EVERYONE.  They shouldn't just hoard it all for themselves.  Unless you just want to benefit yourself.

<sigh>  Having trouble articulating why I disagree with her.  Friends??  Help me out here

slugline

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Obligatory link to related MMM blog post:

http://www.mrmoneymustache.com/2012/04/09/what-if-everyone-became-frugal/

Or, as I took this to mean: Spending more money in absolute terms isn't as important as what you choose to spend it on.

seanc0x0

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I both hoard my money, and get it out there to help the economy. I do this buy buying little bits of companies that use that money to produce useful things, then pay me a bit of what they made from that. Win-win! :)

Norioch

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http://prudentinvestornewsletters.blogspot.com/2012/12/quote-of-day-nobody-is-more-generous.html

Quote
In this whole world, there is nobody more generous than the miser—the man who could deplete the world’s resources but chooses not to. The only difference between miserliness and philanthropy is that the philanthropist serves a favored few while the miser spreads his largess far and wide.

If you build a house and refuse to buy a house, the rest of the world is one house richer. If you earn a dollar and refuse to spend a dollar, the rest of the world is one dollar richer—because you produced a dollar’s worth of goods and didn’t consume them.

Who exactly gets those goods? That depends on how you save. Put a dollar in the bank and you’ll bid down the interest rate by just enough so someone somewhere can afford an extra dollar’s worth of vacation or home improvement. Put a dollar in your mattress and (by effectively reducing the money supply) you’ll drive down prices by just enough so someone somewhere can have an extra dollar’s worth of coffee with his dinner. Scrooge, no doubt a canny investor, lent his money at interest. His less conventional namesake Scrooge McDuck filled a vault with dollar bills to roll around in. No matter. Ebenezer Scrooge lowered interest rates. Scrooge McDuck lowered prices. Each Scrooge enriched his neighbors as much as any Lord Mayor who invited the town in for a Christmas meal.

Saving is philanthropy, and—because this is both the Christmas season and the season of tax reform—it’s worth mentioning that the tax system should recognize as much. If there’s a tax deduction for charitable giving, there should be a tax deduction for saving. What you earn and don’t spend is your contribution to the world, and it’s equally a contribution whether you give it away or squirrel it away.

Norioch

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I just copied that entire quote, but for the record I don't agree with the last part. I think a tax credit for savings (a reverse wealth tax) would be a terrible idea.

gimp

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There is a tax deduction for saving. There are tons. Apart from the obvious (401k, IRA, etc) there's also this, if you're below a threshold: http://www.irs.gov/uac/Get-Credit-for-Your-Retirement-Savings-Contributions

Shor

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I just copied that entire quote, but for the record I don't agree with the last part. I think a tax credit for savings (a reverse wealth tax) would be a terrible idea.
We saw that instead of spending your money irresponsibly, you decided to save for a rainy day. So we're gonna rain on your day Now! =3

For the OP, the problem your conversation is having is that you're trying to pigeon hole an entire class of earners in to a very particular behavior, which would be difficult to prove to anyone. Let me propose the following example: the majority of high income earners save a mere (ex.) 10% of their income, which in money terms comes out to be far more than the average middle or low income earner will ever hope to save, or earn within the same amount of time. In such a frame, both of your statements come out correct from your own perspectives! Whether it's true or not will depend on the measured statistic, your category, and how the heck you would determine that data.. blah blah details.

At any rate, it's probably true that those with a large degree of spending money have a higher degree in freedom on what they choose to spend it on, including savings, investing, or luxuries. It is also reasonably accurate to say that as a person's income increases, their spending habits also has the freedom to move up with it. With a higher income, they can also hoard more money, and even if it is a smaller percentage of their income, it can still be higher than what the average worker can produce. These are people, like you or I, and they make decisions on what they buy or don't buy just like everyone else does, and they make the decision to come up with a savings plan or not just like many other mid and low income earners out there.
The higher incomes simply gives them the freedom to do these things more easily due to differences in scale.

mjs111

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Unless you're actually taking that money and hiding it under your mattress instead of in the bank, it IS out there helping society.  Banks lend that money on deposit out to businesses seeking loans to expand, people seeking mortgages, etc.

Mike

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Maybe you can talk to you coworker about the ultra rich hoarding jobs.  It would help a hole line of people if those at the top saved enough to retire and then let other people have those jobs.

GrayGhost

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The argument that investment is bad for society is really without any merit at all, as far as I can see. So if I earn a hundred thou a year, I should spend it on stuff that I can do without? Instead of investing in businesses and countries? It's ridiculous.

odput

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The argument that investment is bad for society is really without any merit at all, as far as I can see. So if I earn a hundred thou a year, I should spend it on stuff that I can do without? Instead of investing in businesses and countries? It's ridiculous.

Yeah...MMM debunks this one pretty thoroughly in http://www.mrmoneymustache.com/2012/04/09/what-if-everyone-became-frugal/

Quote from: MMM
Newspaper reporters often repeat the phrase that consumers are the engine of economic growth in the United States. They say it so often that most people believe it, as witnessed by the quotes above. But when you read books written by economists (who in general know more about economics than newspaper reporters), they tell you that consumers are not the engine of economic growth. They are actually the caboose.

What is the engine of growth, then? It is the savers and investors. Only by sacrificing current consumption, can people put money into banks or share offerings, which end up in the hands of new and existing businesses who can then use that money to create new technology, factories, or human capital, allowing them to increase their productivity. Capital creates productivity, and productivity is the driver of our standard of living.

To express the same ideas on a smaller scale: Imagine an ancient fisherman who catches five fish per day with a spear. If he eats all the fish each day,  he is saving and investing none. But if he can survive on four, and use the body of the fifth one to invent a fishing hook (or trade it with someone else in exchange for a net), he has invested in capital instead of current consumption – this builds his future productivity.

The fisherman analogy is beautiful because it illustrates the point perfectly and is accessible to just about everyone.

boarder42

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Hoarding jobs worse than hoarding money. I work for an employee owned company. And our stock is great after 15 years its not out of the question to retire BC of the value that provides. Some people stick around 30 years. Just annoying.

RapmasterD

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I would suggest your friend take a basics economics course from iTunesU. The rationale has no merit.

Lyssa

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How dare you doing what you want with your money rather than what people expect you to?

I really have zero patience for this. Usually anyone who is making six figures has worked his or her ass of in the past to get a good education and is doing so at the moment to make the kind of money he or she is making (there are a few exeptions, but not too many). After paying your taxes I just don't see how its anybody's business what you do or don't do with your money.

Also: Haters are going to hate. Either for flaunting your wealth or for hoarding. Take your pick.

Personally, I view my savings as "stored energy". I'm putting in a lot more energy into my work now than I would need to to support my standard of living in order to be able to stop a lot sooner than most. How would society be better of if I either bought boatloads of useless crap each month or get a cozier job that pays a lot less instead of being a passive investor (would you rather like your employer to be owned by index funds or by a private equity investor trying to squeeze out as much cash as possible during the next five years?) who will free up a high paying job in ten years, then available to younger folks who need it more?

libertarian4321

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Conversation with a colleague, while discussing salaries:

Her: Isn't it just ridiculous that some people make $400k-500k!  And you know they don't spend it.  They just hoard it all.
Me:  Actually, I tend to think most people who make that much DO spend it.  I think most people tend to expand their lifestyles incrementally, so that they are manage to spend most of their paychecks.
Her: You think so?  I think they hoard  it all.
Me: Well, that's what we plan plan to do.  "Hoard" it and save.  But I think most people spend the majority of what they earn on bigger houses, fancy cars, private schools, etc.
Her:  I think that's not good for society.  People should spend the money to get it out there into the economy. Where it benefits EVERYONE.  They shouldn't just hoard it all for themselves.  Unless you just want to benefit yourself.

<sigh>  Having trouble articulating why I disagree with her.  Friends??  Help me out here

I "hoarded" and invested my money starting at an early age.

Because of that, my "salary" is not (and has not for many years) been my primary source of income.

I spend money, though only a fraction of what I earn- and probably a lot less than most people with a mere fraction of my net worth.  I also give a shit ton to charity- something I would not be able to do had I not "hoarded" (can I say "saved" instead?" and invested. And that ability to give significant sums to charity, which I would not be able to do without the "hoarding," does far more to help society than if I took my paycheck every month and blew it on cheap Chinese made crap at Walmart.

So tell her to shut up, get educated, and thank the "hoarders" like us... :)