Tag Archives: Saving

Reversing the American trend of borrowing and spending too much

Average college debt is now up to $35,000 and usually for a useless non-STEM degree
Average debt is now up to $35,000, often for a useless non-STEM degree

First, the problem, using this article from New Zealand. It is authored by a self-made millionaire to young people.

Excerpt:

A young property tycoon has hit out at Generation Y claiming they need to stop travelling and spending money on overpriced food if they want to save for their first home.

Tim Gurner, 35, is worth nearly half a billion dollars since buying his first investment property at the age of 19.

The Melbourne millionaire believes it’s time his generation change their spending and lifestyle habits.

“When I was trying to buy my first home, I wasn’t buying smashed avocado for $19 and four coffees at $4 each,” he told Channel Nine’s 60 Minutes program.

“We’re at a point now where the expectations of younger people are very, very high. They want to eat out every day, they want travel to Europe every year.

“This generation is watching the Kardashians and thinking that’s normal – thinking owning a Bentley is normal.”

And how did the millennials respond? With immature, ignorant rebellion:

Gurner’s comments have been met with a backlash on social media will many criticising how he started out in the property – with a loan from his grandfather.

One social media comment read: “Maybe the new home buyers would stand more of a chance if they were given 34K by their grandad… that’s a fair few smashed avos.’

Another added: ‘Nice if you can get it,’ while one commented: ‘Much like Trump’s dad gave him a “small loan of $1Mil.’

Of course, the average college graduate HAS actually borrowed that much money (see graphic above), but they just preferred to blow it all on alcohol, birth control and a degree in English literature.

Speaking of a degree in English literature…

This woman complained to her boss because she wasn’t making enough money. She graduated with a non-STEM degree (English literature), and lives in one of the most expensive cities in America. (The cities that are all run by leftist Democrats who love to spend money on public works and welfare). She didn’t even have roommates to split the rent!

I see this in so many young people – complete disregard for the future in order to have fun, thrills and frivolous travel right now. And all their same-age friends support their decision-making. Young people don’t listen to grown-ups who have experience and real achievements. They listen to their friends. I know one woman who literally flew off to be a missionary in Europe for two years, on the advice of two Christian students, neither of which had ever worked a full-time job or saved money. They were proudly living off their parent’s incomes into their late-20s, and she looked to them for advice on education, career and finances.

Low-income earners can still save money

You don’t have to have a great job to make choices that lead to growing your wealth.

Here is an article from Business Insider about how to build wealth on a minimum wage salary.

Excerpt:

Here are the key expenses that someone on minimum wage can consider cutting, to make an immediate impact:

  • Moving to a more affordable city can cut living expenses considerably. It’s hard to accumulate wealth in Manhattan or San Francisco, but is much more likely in Buffalo or Memphis.
  • Eliminate commuting. Cars are expensive, and it is possible to get a place close enough to work to bike.
  • Cut some wires, particularly cable. After all, it’s 2017 – just go with internet and Netflix.
  • Don’t eat out, unless it’s absolutely necessary.
  • Skip most purchases of new clothes. Instead, make thrift stores your new best friend, and don’t be afraid to mend holes in clothing.
  • Cut expensive activities, and rediscover that the best things in life are free. Playing many sports can be free (or cheap), and public libraries are free (or cheap).

Once that’s done – it’s all about investing in yourself.

The Obama administration set interest rates low for the last eight years, encouraging people to borrow more and more money – money that they could not pay back. Thankfully, the private sector has ways of encouraging people to save money.

This article is from the far-left The Atlantic.

Excerpt:

Late last summer, Dawn Paquin started keeping her money on a prepaid debit card from Walmart instead of in a traditional checking account. The wages from her factory job—she works from 9 p.m. to 5 a.m., inspecting blades on industrial bread-slicing machines—now go directly onto the Visa-branded card, which she can use like a regular debit card, though unlike most debit cards, it is not linked to a checking or savings account.

[…]The card is more convenient, Paquin said, and she doesn’t have to worry about monthly statements; she tracks her money, and pays all her bills, with the card’s associated phone app.

[…]In a 2015 Federal Reserve Board survey, 46 percent of respondents reported that they would have trouble coming up with $400 in an emergency; living paycheck to paycheck is now a commonplace middle-class experience. So while Paquin noticed that her Walmart MoneyCard app asked her from time to time whether she wanted to “stash” some money, she didn’t bother to figure out what that actually meant, let alone respond.

Then, late last year, she got an email saying that a “prize savings” feature had been added to her card. If she kept some of her balance in a virtual “vault,” meaning that it would not show up in her available funds, she would be eligible to win a cash prize in a monthly drawing—up to $1,000. Every dollar in the MoneyCard Vault would equal an entry in that month’s drawing. This caught her interest. A prize would go a long way toward her being able to buy a car. It also made her focus on what all those “stash” requests were about. “Oh, cool, this can work as a savings account, too,” she remembers realizing. So when she got paid, she started setting aside “10 bucks, 20 bucks, whatever I could.”’

[…]The program was launched to a limited number of MoneyCard holders in August, offering 500 prizes a month—one for $1,000, the rest $25 each. In December, the company reported that the number of Vault users had grown more than 130 percent, to more than 100,000, and that the average savings had grown from $413 to $572, a 38 percent increase.

Paquin actually did end up winning the $1000 prize for stashing some of her earnings. And she saved most of it, of course. Because she learned from the incentives.

Can blacks and Hispanics blame their troubles on racism by whites?

Does government provide incentives for people to get married?
The success of children is due to their parents’ choices, not from outside racism

If the underperformance of blacks and Hispanics in America were caused by racism by whites, then it follows that Asian-Americans would be underperforming as well. But Asian-Americans are outperforming whites. Let’s look at three reasons why, and see if blacks and Hispanics can learn how to succeed by looking at the Asian example.

Here is the summary of this post:

  1. Asian Americans marry before they have children
  2. Asian Americans save more of what they earn
  3. Asian Americans monitor their children’s educational progress

Now let’s take a look at each of these in order.

Asians marry before they have children, so the kids have two parents
Asians marry before they have children, so the kids have two parents

1. Asian Americans marry before they have children

This article is from Family Studies.

It says:

Eight in ten Asian-American kids live with married birth parents, compared with about seven in ten European-American kids, five in ten Hispanic-American kids, and only about three in ten African-American kids. Half of black children live with their mothers only, compared to three in ten Hispanic children, less than two in ten white children and less than one in ten Asian children.

Naturally, children who have two parents to look after them do better, because one parent alone cannot work and do household chores and monitor the children as easily as two parents can. The decision about whether to have sex before marriage is entirely under the control of the grown-ups. It cannot be blamed on racism, poverty and other non-moral pre-occupations of the secular left. Marriage is a moral issue, and Asian-Americans do the moral thing, and marry before they have children.

Asian household wealth set to surpass whites
Asian household wealth set to surpass whites

2. Asian Americans save more of what they earn

This article from CNN Money explains:

Asians have had higher median incomes than their white counterparts, according to a new study by the Federal Reserve Bank of St. Louis. The typical Asian family has brought home more money for most of the past two decades.

[…][Asians] will surpass whites in net worth in the next decade or two, Fed researchers said.

[…]In 1989, the median Asian family had about half the net worth of its white peer. By 2013, they had more than two-thirds.

The gap between whites and blacks and Hispanics, meanwhile, remained little changed over that time period.

Asians have similar financial habits to whites, in terms of investing and borrowing. Both groups are more likely than blacks and Hispanics to invest in stocks and privately-owned businesses and to have more liquid assets, which serves as a buffer against financial shocks. And, on average, the former have about half as much debt as the later.

As a result, Asians and whites have more financial stability than blacks and Hispanics, which also allows the former to build more wealth.

Everyone has to earn and save money, but in some cultures, it becomes normal to not save part of what you earn. That needs to stop. But it has nothing to do with discrimination due to skin color. In Asian culture, there is no glorification of consumer spending on sparkles, bling and other ostentatious wealth. Asians don’t want to appear to be wealthy, they want to actually be wealthy – by saving money.

Composite SAT scores by race and income levels
Composite SAT scores by race and income levels: Asians outperform at every income level

3. Asian Americans monitor their children’s educational progress

This article from Investors Business Daily explains how Asian parents don’t just make demands on their kids to learn, they actively monitor their progress and talk to their kids’ teachers:

Asian-American parents tend to oversee their children’s homework, hold them accountable for grades and demand hard work as the ticket to a better life. And it pays off: Their children are soaring academically.

[…]As a group, Americans need to take a page from the Asian parents’ playbook. American teens rank a dismal 28th in math and science knowledge, compared with teens in other countries, even poor countries.

Singapore, Hong Kong, South Korea, Japan and Taiwan are at the top. We’ve slumped. For the first time in 25 years, U.S. scores on the main test for elementary and middle school education (NAEP) fell. And SAT scores for college-bound students dropped significantly.

[…]Many [Asian students]from poor or immigrant families, but they outscore all other students by large margins on both tests, and their lead keeps widening.

In New York City, where Asian-Americans make up 13% of overall students, they win more than 50% of the coveted places each year at the city’s eight selective public high schools, such as Bronx Science and Stuyvesant.

What’s at work here? It’s not a difference in IQ. It’s parenting. That’s confirmed by sociologists from City University of New York and the University of Michigan. Their study showed that parental oversight enabled Asian-American students to far outperform the others.

No wonder many successful charter schools require parents to sign a contract that they will supervise their children’s homework and inculcate a work ethic.

You can see an updated image with the latest scores here.

It’s not enough to just outsource the education of your children to a bunch of non-STEM education-degree-holding teachers. Teachers can be good, and some work very hard. But the Democrat teacher unions prevent the firing of teachers who underperform. This is especially true in non-right-to-work states (Democrat states). So, you cannot depend on teachers to educate your children, and Asian parents don’t. That’s why their kids learn. Performance of children in school is not affected by discrimination against skin color, it’s affected by the level of involvement of parents.

Conclusion

We have learned that the success of Asian-Americans in America is all earned. And this proves that there is no such thing as “racism” that holds back non-whites. If blacks and Hispanics imitated the behaviors of Asians (not whites, but Asians), then they would achieve just as well as Asians do. It’s not a race problem, it’s a behavior problem. It’s not a “racism” problem, it’s a behavior problem. It’s an us problem, it’s not a them problem.

Can blacks and Hispanics blame their troubles on racism by whites?

Does government provide incentives for people to get married?
The success of children is due to their parents’ choices, not from outside racism

If the underperformance of blacks and Hispanics in America were caused by racism by whites, then it follows that Asian-Americans would be underperforming as well. But Asian-Americans are outperforming whites. Let’s look at three reasons why, and see if blacks and Hispanics can learn how to succeed by looking at the Asian example.

Here is the summary of this post:

  1. Asian Americans marry before they have children
  2. Asian Americans save more of what they earn
  3. Asian Americans monitor their children’s educational progress

Now let’s take a look at each of these in order.

Asians marry before they have children, so the kids have two parents
Asians marry before they have children, so the kids have two parents

1. Asian Americans marry before they have children

This article is from Family Studies.

It says:

Eight in ten Asian-American kids live with married birth parents, compared with about seven in ten European-American kids, five in ten Hispanic-American kids, and only about three in ten African-American kids. Half of black children live with their mothers only, compared to three in ten Hispanic children, less than two in ten white children and less than one in ten Asian children.

Naturally, children who have two parents to look after them do better, because one parent alone cannot work and do household chores and monitor the children as easily as two parents can. The decision about whether to have sex before marriage is entirely under the control of the grown-ups. It cannot be blamed on racism, poverty and other non-moral pre-occupations of the secular left. Marriage is a moral issue, and Asian-Americans do the moral thing, and marry before they have children.

Asian household wealth set to surpass whites
Asian household wealth set to surpass whites

2. Asian Americans save more of what they earn

This article from CNN Money explains:

Asians have had higher median incomes than their white counterparts, according to a new study by the Federal Reserve Bank of St. Louis. The typical Asian family has brought home more money for most of the past two decades.

[…][Asians] will surpass whites in net worth in the next decade or two, Fed researchers said.

[…]In 1989, the median Asian family had about half the net worth of its white peer. By 2013, they had more than two-thirds.

The gap between whites and blacks and Hispanics, meanwhile, remained little changed over that time period.

Asians have similar financial habits to whites, in terms of investing and borrowing. Both groups are more likely than blacks and Hispanics to invest in stocks and privately-owned businesses and to have more liquid assets, which serves as a buffer against financial shocks. And, on average, the former have about half as much debt as the later.

As a result, Asians and whites have more financial stability than blacks and Hispanics, which also allows the former to build more wealth.

Everyone has to earn and save money, but in some cultures, it becomes normal to not save part of what you earn. That needs to stop. But it has nothing to do with discrimination due to skin color. In Asian culture, there is no glorification of consumer spending on sparkles, bling and other ostentatious wealth. Asians don’t want to appear to be wealthy, they want to actually be wealthy – by saving money.

Composite SAT scores by race and income levels
Composite SAT scores by race and income levels: Asians outperform at every income level

3. Asian Americans monitor their children’s educational progress

This article from Investors Business Daily explains how Asian parents don’t just make demands on their kids to learn, they actively monitor their progress and talk to their kids’ teachers:

Asian-American parents tend to oversee their children’s homework, hold them accountable for grades and demand hard work as the ticket to a better life. And it pays off: Their children are soaring academically.

[…]As a group, Americans need to take a page from the Asian parents’ playbook. American teens rank a dismal 28th in math and science knowledge, compared with teens in other countries, even poor countries.

Singapore, Hong Kong, South Korea, Japan and Taiwan are at the top. We’ve slumped. For the first time in 25 years, U.S. scores on the main test for elementary and middle school education (NAEP) fell. And SAT scores for college-bound students dropped significantly.

[…]Many [Asian students]from poor or immigrant families, but they outscore all other students by large margins on both tests, and their lead keeps widening.

In New York City, where Asian-Americans make up 13% of overall students, they win more than 50% of the coveted places each year at the city’s eight selective public high schools, such as Bronx Science and Stuyvesant.

What’s at work here? It’s not a difference in IQ. It’s parenting. That’s confirmed by sociologists from City University of New York and the University of Michigan. Their study showed that parental oversight enabled Asian-American students to far outperform the others.

No wonder many successful charter schools require parents to sign a contract that they will supervise their children’s homework and inculcate a work ethic.

You can see an updated image with the latest scores here.

It’s not enough to just outsource the education of your children to a bunch of non-STEM education-degree-holding teachers. Teachers can be good, and some work very hard. But the Democrat teacher unions prevent the firing of teachers who underperform. This is especially true in non-right-to-work states (Democrat states). So, you cannot depend on teachers to educate your children, and Asian parents don’t. That’s why their kids learn. Performance of children in school is not affected by discrimination against skin color, it’s affected by the level of involvement of parents.

Conclusion

We have learned that the success of Asian-Americans in America is all earned. And this proves that there is no such thing as “racism” that holds back non-whites. If blacks and Hispanics imitated the behaviors of Asians (not whites, but Asians), then they would achieve just as well as Asians do. It’s not a race problem, it’s a behavior problem. It’s not a “racism” problem, it’s a behavior problem. It’s an us problem, it’s not a them problem.

A third of Americans who have a savings plan have less than $1000 in it

National Debt and Deficit 2007-2013
National Debt and Deficit 2007-2013

Let me start with the facts from Breitbart News, and then I’ll comment on the part in bold.

Excerpt:

Study after study shows that Americans are not saving for retirement like they should, and a new survey finds that nearly one third of people who have some sort of savings plan have amassed less than $1,000 for retirement.

The survey titled “Preparing for Retirement in America,” by Employee Benefit Research Institute (EBRI) and Greenwald and Associates, finds that only 65 percent of workers have any savings for retirement, a number that fell below the 75 percent figure from 2009.

But 28 percent of workers report that they have saved less than $1,000 for retirement, and almost 6 in 10 Americans say that their financial planning needs improvement.

Additionally, 34 percent say they have made no effort at all to saving anything or make a retirement plan. Still, most say that they intend to start saving at some point.

But intentions may not be enough. “Intending one thing and doing another is human, but it’s an impulse we should all fight hard to resist,” Rebekah Barsch, vice president of planning and sales at Northwestern Mutual, said in a press statement. “Intentions only get us so far. And when the stakes are high, it’s taking action that’s critical.”

Many say that the average person needs to save one million dollars for retirement, but a recent piece by David Marotta, president of Marotta Wealth Management in Charlottesville, VA, noted that a 20-year-old in 2015 may have to amass up to $7 million to retire comfortably.

“Someone retiring now in 2014 with $1 million at age 65 can safely withdraw $43,600 a year,” Marotta wrote last May. “However, [because of inflation], today’s 20-year-olds will need over $7 million to have that same lifestyle when they retire. In 1970, they would only have needed $166,000 in retirement to have a similar purchasing power for the rest of their life.”

Many Americans save for retirement using the 401K plans provided through their employer, but according to the federal government, around 50 million Americans don’t have the ability to enroll in such a savings plan.

Here’s a helpful article from CNBC that answers the question “how much do I need to retire?”.

It says:

You can’t feel secure in retirement if you don’t have a good idea of how much money you’ll need.

But if you believe a new Legg Mason survey, you may have to save far more than you think. Investors surveyed by the global investment management firm said they will require an average of $2.5 million in retirement to enjoy the quality of life they have today.

That’s about $2.2 million more than the average balance of $385,000 those investors actually had in 401(k)s and similar retirement plans, which might help explain why only 40 percent of the 458 investors surveyed said they are “very confident” in their ability to “retire at the age I want to.” (And the investors surveyed have set more aside than the average retirement saver. At Fidelity, the nation’s largest retirement plan provider, the average 401(k) balance was $91,300 at the end of 2014.)

[…]Fidelity estimates most investors require about eight times their ending salary to increase the chances that their savings will last during a 25-year retirement. But every retirement is different. People also tend to spend lavishly in their first years of retirement before their spending declines in later years.

Health care is the wild card in retirement planning, especially as Americans live longer. Fidelity projects a 65-year-old couple retiring will need an average of $220,000 to cover medical expenses in retirement.

So, according to Fidelity’s rule, if you are single and making $50K after taxes, then you need $400,000 to retire at age 65. You’ll need more the earlier you retire. That seems about right to me. The important thing to do when planning for the future is not to imagine a higher income than you have right now, though. Imagining that things will be better than they are right now is a terrible mistake. You can’t make the world change just by imagining things that make you feel good, or by looking at cherry-picked examples from people you know who got lucky.

The trouble with young people today is that they think that things tomorrow will be the same as they were yesterday. They don’t see the future implications of running our national debt up to $18.5 trillion dollars. They think entitlement programs will be solvent when they are ready to retire. They aren’t aware of what’s going on in the economies of other countries that we trade with. They aren’t aware of what’s going on in Greece, and how that will affect the European Union. They aren’t aware of the demographic crisis in Europe, and especially in Japan. They aren’t thinking about the implications for future wars as America withdraws from the world stage. And so on. And since they are not aware, they are delaying making a plan to save, so they can have more fun now. Their retirement plan is all future sunshine and rainbows, but no actions are being taken right now.

If I could give young people one piece of advice, it’s this. It’s much easier to shift your life out of a position of financial security to something lighter but more meaningful in the second half of your life. It’s harder to work back to earning and saving if you have squandered your early life on fun, thrills, travel, non-STEM degrees, etc. If you’re 30 years old and don’t have any savings, you are in serious, serious trouble. You need to get focused on a regular career as soon as possible, and start saving. Get those debts paid off now. Still think that your rosy picture of the future will obtain? Usually, you can tell how good you are at strategic forecasting by looking at your past decisions. Have you been wise before, or have you chosen poorly? If you’ve chosen poorly, then it’s a good idea to defer to people who haven’t made the same mistakes. If you’re an optimistic person who is always being surprised and disappointed, that’s a good sign you need to start saving now.

Republicans propose expansion of 529 college savings plans

I guess by now everyone has heard about Obama’s plan to eliminate college savings plans.

The left-leaning New York Times reported on it:

President Obama is proposing a radical change to the 529 college savings plans held by millions of families, which would require those who use them to rethink their approach to college savings.

As part of his plan to simplify the tax code and help the middle class, one of the 529 plan’s most attractive benefits would be eliminated: Money could no longer be withdrawn tax-free. (The new rules would apply only to new contributions.)

The accounts, many of which are run by the states, allow people to make contributions that grow tax-free. The money can be withdrawn without the paying of capital gains taxes as long as the proceeds are used for education expenses. Many states provide state income tax deductions for contributions as well.

The proposal has now been withdrawn after a huge uproar. The real question is, why would he propose such a stupid thing?

First, it’s important to understand that government raises the cost of higher education with subsidies, which the Democrats favor:

A new study by Dennis Epple, Richard Romano, Sinan Sarpca and Holger Sieg for the National Bureau of Economic Research suggests that the impact of these aid programs is clearly different from what federal policy makers intended. “We show that private colleges game the federal financial aid system,” they conclude. Every dollar in new financial aid to students leads to about 40 cents less spent by the colleges on institutional financial aid — so students benefit far less than federal policy makers intended.

In 1987, Secretary of Education William Bennett argued that more federal aid leads to higher tuitions, enabling schools to increase spending. This seems broadly consistent with the latest research results. The net attendance impact of these federal programs, according to the study for NBER, is “modest.” In short, these programs haven’t substantially spurred student access to colleges, all the while burdening taxpayers and student borrowers.

The ballooning federal aid increases schools’ spending. The researchers don’t analyze changes in university spending, but an examination of other evidence suggests that money isn’t going primarily into improving instruction. Colleges have gone on a building spree (financed in part by amassing large debt — more than $220 billion at schools whose bonds are rated by Moody’s alone), and pay and perquisites for top university administrators has risen sharply.

The Democrats already want higher education to be out of reach – that’s why they keep increasing subsidies. So, eliminating college savings plans is in line with this goal of putting higher education out of reach. It’s another way to cause people to have fewer children, something that Democrats are very passionate about. After all, if you can’t pay for higher education for four kids, you’ll only have two. Democrats have this terrible fear of over-population, and it drives a lot of their policies, including abortion.

But that’s not all – there’s another reason to stop people from saving for college.

Second, it stops people from saving their own money:

Megan McArdle suggests, quite reasonably, that this is a desperate move by those who need to finance ever bigger government and are simply going where the money is: the vast American middle class. You can understand why the champions of big government would be slavering over the very thing that defines the middle class, its savings. As she points out, 529s are not the first target. There have already been trial balloons about raiding 401(k)s and IRAs. The truly committed leftist looks upon our private savings as a vast reserve of capital unfairly withheld from its proper function of servicing the needs of the state.

I think that’s the real explanation. This is not so much a rational calculation about how to finance the behemoth state. This is an admission by a man who has no more election campaigns to run, and therefore no pragmatic constraints, about his real outlook and real preferences. A president who just a few weeks ago hailed the triumph of a supposed “middle-class economics” is revealing his hatred and contempt for the middle class.

Republicans would like to see people saving more and more money so that they are less and less dependent on the government. This is because the more independent you are, the more fre you are – and Republicans are for personal liberty.

This is GOP Congressman Lynn Jenkins:

Kansas Congresswoman Lynn Jenkins
Kansas Congresswoman Lynn Jenkins

Here is her Republican response to Obama’s proposal to eliminate 529s:

Good morning. I’m Lynn Jenkins, Congresswoman from the Second District of Kansas and Vice-Chair of the House Republican Conference.

This is the time of year when high school seniors are putting the final touches on their college applications. That means it’s also the time when families are preparing to start paying for that education — whether it’s a 4-year college, community college, or a technical school. (Scroll down for video of these remarks.)

As a parent with two children in college, I know this can be one of the most rewarding, and at the same time challenging, aspects of being a parent — particularly at a time when costs are going up while wages stay about the same. All told, Americans now owe more than $1 trillion in student loan debt.

And so in the new Congress, Republicans are working to lower costs for middle-class families and empower folks with bottom-up solutions that help prepare you for the future.

That’s why, this week, I introduced a bipartisan plan to expand popular 529 college savings accounts.

As you know, these 529 plans were created to help middle-class families save and plan for college. Many parents open them not long after their children are born. And ever since Congress allowed folks to withdraw from these accounts tax-free for college expenses, 1 million account holders have turned into 12 million.

Unfortunately, instead of expanding 529s, the president recently proposed raising taxes on college savings. If implemented his scheme would have turned back the clock on middle-class families, and taken money from your savings to pay for more government. This would have discouraged families from using 529s, meaning less savings, more debt, and more government dependence.

This proposal increases middle-class independence from the government, and makes people more free to work, earn, save and chart their own course. It’s different from the Democrat proposals which increase dependence on government and reduces liberty.