Emergency Savings
Good article in the strib on savings, one link at
http://www.startribune.com/148/story/1031572.html
And references:
http://www.americasaves.org/ America Saves is a nationwide campaign in which a broad coalition of nonprofit, corporate, and government groups helps individuals and families save and build wealth. Through information, advice, and encouragement, we assist those who wish to pay down debt, build an emergency fund, save for a home, save for an education, or save for retirement.
Considering the recent reports of a negative savings rates, seems a good goal to promote!
The strib article dealt with keeping a savings for covering emergencies, contrasted the advice to keep 3-6 months of income for emergencies, accepting it may not be practical for everyone. Also it say certain expenses shouldn't be considered emergencies.
I don't quite see the point of a special category for "emergencies", just see keeping a level of savings as good, so like my good minimum is $5000, originally from what was left over from life insurance when my mom died, and I only went below that limit once when I was self-employed, when I didn't renew a CD investment for a few months until things got settled.
Admittingly what my actual savings is a tricky thing with seriously thousands of dollars following around every month with a mortgage and a rental property. I track monthly balances, and "precount" mortgage payments at the beginning of the month on the last month balances, so my bank statements always exceed my own balances.
I've supported the idea of holding savings for some period of expenses, rather than a period of income, since ideally expenses can decrease on times of hardship. That "ideal" is a luxury of course, and it can be some people can't cut back a majority of their expenses no matter what - without like selling a car or home or something drastic.
At the moment, I've cut extra payments to my mortage to save for a new driveway, so with luck by late spring I can pay cash.
I understand there is a sense of security having credit cards there to cover short term unexpected bills, and I'm not against holding a balance short term, just been lucky to not have had to do it myself so far. I understand the danger exists - to LEAN on a card a few tough months and convince myself perhaps things will smooth out later, and then find it not working out. I've heard of people using credit cards to pay medical bills, and then falling behind. I mean I heard that was the biggest reason for bankruptsy apparently.
I have some sympathy, and no great love for credit card companies for their marketing that encourages debt, but really I think it is inexcusable to use a credit card to cover expenses unless you have strong reason to believe you'll have money available soon to cover it. I think it is better to try to negociate with paying a bill than to just pass it off onto a credit card to end harressment by bill collectors. CREDIT is NOT MONEY, and it is just asking for trouble to treat it that way.
A couple years ago I accepted a 6-month interest free loan for getting a new furace/AC installed. I took it because it seemed to have no strings. I got more than a little paranoid by the terms. Incidentally it was through Wells-Fargo. So the terms had minimum monthly payments such that the principle would be repaid in 12 months. Second on 6months+1 day, ALL of the accumulated interest from the last 6 months is added to the loan (at some rather ugly interest rate), plus new interest of course until it is all paid. So I imagined EVEN if I calculated how to pay in 6 months, perhaps 1 day late and a multihundred dollar interest charge would be added. Who knows? It was a total scam to me - encouraging people to pay it too slow, offering NO help for how much to pay to finish in 6 months (like a suggested payment amount), or a clear due-date when the interest charges would begin. So I divided the amount by 5, and paid that every month to be safe.
In contrast I also bought a Sears Clothes driver for $400 with a 12 months, zero interest, and it seemed honest. After 12 months, a normal Credit card interest would be charged from that day on if not paid. And there was NO required payments either. I still felt guilty over it and paid it off after 6 months so I wouldn't have to worry about it.
Overall I get pissed by all the credit card offers, the equity loan offers, and fear too many people get suckered into good deals - like the zero interest credit card deals which jump to 20% with one late payment on a DIFFERENT bill! It's horridly dishonest. And of course there's refinancing your home with a second mortgage to cover credit card debt - like taking candy from a baby from some people who haven't learned yet.
I am glad credit card usage allowed me to get a history to get a good mortgage interest rate, and so I can't despise the completely. I don't even know what laws if any ought to be made to protect people. I'm paternalistic enough to believe many people are not emotionally capable of dealing with temptation. People ought to be accountable BUT mostly I'd say "one stike, you're out" - owning a credit card should be banned from people who declare bankrupsy at least. You'd think the CC companies would learn anyway, but maybe the risks are still worth it.
I suppose the BIG GAME is there's so much money out there looking for investment. It's crazy to me how easy some sorts of credit is now. We're lucky, but I fear there's too much money thrown around for greed over investing in things that support a better world.
I fear the idea our economy is lifted too much by leveraged debt and too much faith that the powers above (Federal reserve) will save us from our excesses. It's really a form of corruption when you're so powerful that you can't fail because if you DO fail too many people are hurt. I mean that the government will bail you ought.
It's a scary world and I recommend to everyone:
1. Keep debt down as you can.
2. Keep expenses down as you can.
3. If you have money to invest, invest it closer to home.
4. If you have more to invest, find other like-minded people and collect your power to bigger projects. I can't condone any investing in the stock market unless you really are sure you're willing to throw it all away (i.e. take the loss when things fall)
The reality that our economy can be wrecked because of fearful selling is insane.
Lots of thoughts from savings, and I still don't know how much to save - enough to buy nearly everything on cash, including emergency spending. That's clear right?!
http://www.startribune.com/148/story/1031572.html
And references:
http://www.americasaves.org/ America Saves is a nationwide campaign in which a broad coalition of nonprofit, corporate, and government groups helps individuals and families save and build wealth. Through information, advice, and encouragement, we assist those who wish to pay down debt, build an emergency fund, save for a home, save for an education, or save for retirement.
Considering the recent reports of a negative savings rates, seems a good goal to promote!
The strib article dealt with keeping a savings for covering emergencies, contrasted the advice to keep 3-6 months of income for emergencies, accepting it may not be practical for everyone. Also it say certain expenses shouldn't be considered emergencies.
I don't quite see the point of a special category for "emergencies", just see keeping a level of savings as good, so like my good minimum is $5000, originally from what was left over from life insurance when my mom died, and I only went below that limit once when I was self-employed, when I didn't renew a CD investment for a few months until things got settled.
Admittingly what my actual savings is a tricky thing with seriously thousands of dollars following around every month with a mortgage and a rental property. I track monthly balances, and "precount" mortgage payments at the beginning of the month on the last month balances, so my bank statements always exceed my own balances.
I've supported the idea of holding savings for some period of expenses, rather than a period of income, since ideally expenses can decrease on times of hardship. That "ideal" is a luxury of course, and it can be some people can't cut back a majority of their expenses no matter what - without like selling a car or home or something drastic.
At the moment, I've cut extra payments to my mortage to save for a new driveway, so with luck by late spring I can pay cash.
I understand there is a sense of security having credit cards there to cover short term unexpected bills, and I'm not against holding a balance short term, just been lucky to not have had to do it myself so far. I understand the danger exists - to LEAN on a card a few tough months and convince myself perhaps things will smooth out later, and then find it not working out. I've heard of people using credit cards to pay medical bills, and then falling behind. I mean I heard that was the biggest reason for bankruptsy apparently.
I have some sympathy, and no great love for credit card companies for their marketing that encourages debt, but really I think it is inexcusable to use a credit card to cover expenses unless you have strong reason to believe you'll have money available soon to cover it. I think it is better to try to negociate with paying a bill than to just pass it off onto a credit card to end harressment by bill collectors. CREDIT is NOT MONEY, and it is just asking for trouble to treat it that way.
A couple years ago I accepted a 6-month interest free loan for getting a new furace/AC installed. I took it because it seemed to have no strings. I got more than a little paranoid by the terms. Incidentally it was through Wells-Fargo. So the terms had minimum monthly payments such that the principle would be repaid in 12 months. Second on 6months+1 day, ALL of the accumulated interest from the last 6 months is added to the loan (at some rather ugly interest rate), plus new interest of course until it is all paid. So I imagined EVEN if I calculated how to pay in 6 months, perhaps 1 day late and a multihundred dollar interest charge would be added. Who knows? It was a total scam to me - encouraging people to pay it too slow, offering NO help for how much to pay to finish in 6 months (like a suggested payment amount), or a clear due-date when the interest charges would begin. So I divided the amount by 5, and paid that every month to be safe.
In contrast I also bought a Sears Clothes driver for $400 with a 12 months, zero interest, and it seemed honest. After 12 months, a normal Credit card interest would be charged from that day on if not paid. And there was NO required payments either. I still felt guilty over it and paid it off after 6 months so I wouldn't have to worry about it.
Overall I get pissed by all the credit card offers, the equity loan offers, and fear too many people get suckered into good deals - like the zero interest credit card deals which jump to 20% with one late payment on a DIFFERENT bill! It's horridly dishonest. And of course there's refinancing your home with a second mortgage to cover credit card debt - like taking candy from a baby from some people who haven't learned yet.
I am glad credit card usage allowed me to get a history to get a good mortgage interest rate, and so I can't despise the completely. I don't even know what laws if any ought to be made to protect people. I'm paternalistic enough to believe many people are not emotionally capable of dealing with temptation. People ought to be accountable BUT mostly I'd say "one stike, you're out" - owning a credit card should be banned from people who declare bankrupsy at least. You'd think the CC companies would learn anyway, but maybe the risks are still worth it.
I suppose the BIG GAME is there's so much money out there looking for investment. It's crazy to me how easy some sorts of credit is now. We're lucky, but I fear there's too much money thrown around for greed over investing in things that support a better world.
I fear the idea our economy is lifted too much by leveraged debt and too much faith that the powers above (Federal reserve) will save us from our excesses. It's really a form of corruption when you're so powerful that you can't fail because if you DO fail too many people are hurt. I mean that the government will bail you ought.
It's a scary world and I recommend to everyone:
1. Keep debt down as you can.
2. Keep expenses down as you can.
3. If you have money to invest, invest it closer to home.
4. If you have more to invest, find other like-minded people and collect your power to bigger projects. I can't condone any investing in the stock market unless you really are sure you're willing to throw it all away (i.e. take the loss when things fall)
The reality that our economy can be wrecked because of fearful selling is insane.
Lots of thoughts from savings, and I still don't know how much to save - enough to buy nearly everything on cash, including emergency spending. That's clear right?!
posted by Ares Olympus at 2:25 AM
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