Author Topic: Savings won't make you rich  (Read 3187 times)

MgoSam

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Savings won't make you rich
« on: November 03, 2014, 01:21:30 PM »
http://www.huffingtonpost.com/2014/11/03/saving-wont-make-you-rich_n_6094802.html

The crux of their argument seems to be that everyone lost their savings during the recession, I'm sure that there are many more eloquent people here that will destroy this article.

MDM

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Re: Savings won't make you rich
« Reply #1 on: November 03, 2014, 01:40:34 PM »
It is quite true that saving - alone - won't make you rich, if by "saving" one means "let the excess accumulate in a checking account."

What the article glosses over is that one needs to "save" (i.e., spend less on "stuff" than one earns) in order to buy those stocks, bonds, and real estate.  That's how it worked for us: we started with negative net worth, saved, bought investments with those savings, and are now wealthy (enough).

Static Void

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Re: Savings won't make you rich
« Reply #2 on: November 03, 2014, 01:41:40 PM »
I'm trying to parse this article but I can't. They seem somehow to be distinguishing between "saving" and "investing", I think?

EricL

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Re: Savings won't make you rich
« Reply #3 on: November 03, 2014, 02:01:51 PM »
Following the link trail to the original blog doesn't help. The author doesn't get or perhaps deliberately muddles "savings" vs "investment". Apparently, money "invested" (in real estate, index funds, etc) = "savings" is too hard a concept for him to grasp. But even money that's invested in a mattress according to a MMM style budget can get insanely large after a while.

slugline

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Re: Savings won't make you rich
« Reply #4 on: November 03, 2014, 02:41:32 PM »
Can we deduce that what the article author is really trying to say is "get rich by using leverage to buy assets"?

4alpacas

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Re: Savings won't make you rich
« Reply #5 on: November 03, 2014, 03:23:52 PM »
Quote
Spending less than you make is not the path to riches. Instead, wealth comes and goes as asset prices -– real estate, stocks, and bonds -– rise and fall.

This is why most Americans have no shot at ever being wealthy, while the already-wealthy people who own those assets just keep getting wealthier.

....so use your savings to buy assets.  I'm confused by the logic of this article, so I went to the article by Steve Roth. 
Quote
What does this say about our understandings of how the economy works? Does economists’ fixation with “saving” provide a useful picture of macro flows in the economy? Since asset ownership is hugely concentrated among the wealthy (even real estate), can we think about the economy’s workings at all without looking at distribution?
I'm frustrated that neither article points to the major issue.  People, not just the wealthy, need to focus on buying assets in order to make long term gains. 

Runge

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Re: Savings won't make you rich
« Reply #6 on: November 03, 2014, 03:49:09 PM »
A penny saved (and invested in the stock market) is a penny and a half earned (after 10 years).

A penny saved (and stuck under your mattress) is 1/4 of a penny wasted (after 10 years).


Jon_Snow

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Re: Savings won't make you rich
« Reply #7 on: November 03, 2014, 04:46:05 PM »
Not sure I qualify as rich, but savings (admittedly of the extreme variety) was the biggest factor in getting where I am today.

And yes, Canada managed to sidestep the worst of the Great Recession (as compared to U.S.) so that could also factor in.

HoneyBadger

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Re: Savings won't make you rich
« Reply #8 on: November 03, 2014, 06:42:25 PM »
A penny saved (and invested in the stock market) is a penny and a half earned (after 10 years).

A penny saved (and stuck under your mattress) is 1/4 of a penny wasted (after 10 years).



In my case, a penny saved is a penny and a half earned immediately because I'd have to earn a third more to pay income taxes on that earned penny!