We're not really poor if we're drinking bottled water.
When I was advising clients on pensions etc, I'd go through the usual regulatory rigmarole on affordability, and on paper they would only be able to do £20 or £50 per month. I'd be putting myself at risk recommending more than they could "afford".
But in many cases, next time I saw them, they'd done one of the following: (a) bought a new car on credit; (b) allowed their partner to give up work, and/or started a family; (c) moved house and massively increased their mortgage. It's amazing what you can afford, when you're motivated.
So while taking a benevolent interest in the government's mishandling of the economy, why don't we get radical? "Action direct": get out of debt and save money for the challenges, and opportunities, to come.
My challenge: if you're in a steady job now, what percentage of your gross income could you save, if absolutely necessary? For if my hunch about deflation now, and inflation later, proves right, you could make an absolute killing in the next 10 years.
11 comments:
So what's your full picture? Inflation at present to be followed sharly by severe deflation, to be followed by inflation as the Central Banks try to defeat the deflation? I can see that the banks will attempt a rescuing burst of inflation, but is it certain to succeed? It didn't for the Japanese, did it?
You should perhaps have made a list of the easier targets as encouragement. So, may I start one with cigarettes, which to my mind is simply burning money pointlessly.
Over the years my motto has always been : Cash is king. I have not had, nor sought, ultra brilliant results/returns but regular drip feeding a few pounds here and there adds up to reasonable financial security come the day and there is not the worry of your shares going down the pan to worry about.
Nomad: correct, though the State has a vested interest in maintaining our addictions, which it taxes heavily. I have warned my clients about intenational debt and the markets, for some 10 years, though there are periods when my warnings certainly sounded ninnyish. I still think this Chicken Little is right, in the medium term.
DM: wish I had a detailed picture. My instinct is to hoard cash now, and then start looking for bargains in all sorts of ways.
Many consumer goods are already on special offer. The inflation we have at the moment seems to be partly externally created - e.g. in respect of food and fuel - and is of the type that hits the poor worse than the rich. So in a sense, we have both deflation and inflation going on at the same time, depending on how well-breeched you are.
But the thrust of my post is that almost nobody here is poor like the unemployed of the Thirties. Most of us could be saving substantially more than we are. I think one of the effects of the current crisis will be to make the general public realize this fact. And the switch to a saver culture will prolong and deepen the recession.
I wish that I could pass on my hard earned lessons, but everyone refuses to listen, and prefer to learn the hard way - by their own personal experience. Still, I can't complain because I was just the same, and didn't come to my senses until my late forties.
I paid off my mortgage, cut up my credit cards, and paid off all of my debts. We all know this is the thing to do, and taking the first step in this direction was difficult, but once the mindset was fixed I was amazed at the change in my lifestyle. From paying £100+/month in interest on max-ed out cards to earning £100+/month in interest on savings is a no brainer.
However, maybe it's a good thing that no one listens. If they did the economy would probably collapse overnight.
Good twist at the end, John, though to some degree that's what may happen!
Bottled water? We don't even drink bottled wine. This morning was given over to hauling in 20 litre plastic tanks of red and white from the local cooperative and the children are down on the ground floor now washing out emptied bottles and filling them up again. From the laughing, the suck on the plastic feeder tube to start the flow from tank to bottle is beginning to get longer.
In the local supermarket everyone hates being behind the English in the queue. They will offer their beastly little plastic cards, holding us all up, and must have seen that the whole world pays in cash here.
How much does that work out per bottle? Go on, maximise my jealousy.
So while taking a benevolent interest in the government's mishandling of the economy, why don't we get radical? "Action direct": get out of debt and save money for the challenges, and opportunities, to come.
Yes but we can't. Even if we rein in the 'up with the Joneses' and admit to the shopaholicism, there is still the pesky problem of unit cost of goods versus hourly wage.
The banks broke the nexus there long ago.
"The banks broke the nexus there long ago."
Don't quite get that, too gnomic for me (can you help?); but I'm positive most of us could save substantially. We've lived well for so long we have little idea what strict necessity is. I'm speaking for those in steady employment, of course, especially in public services. Unemployment, and bad patches in self-employment, quickly burn up your savings.
It looks like our outlook is well aligned. Currently I save 40% of my income on average, I have always been a cautious fellow.
HG collects wine; EK stocks up on beans. Like Blue Eyes, I got a couple of extra bags of rice in. Come the revolution we'll be well prepared.....
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