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They spend money that way because they subconsciously have an understanding of the following facts.
Once they spend all of their money and/or eventually get to a point where they are broke:
01 The state and federal government will still be there to keep them alive by using other people's money (taxes) to fund it all.
02 At whatever income level they are at - they realize they will never be in the top 5% of earners and those that posses most of the nation's wealth (real estate, stocks, mutual funds, government bonds, cash, etc) and that they might as well spend what they have, when they have it.
03 The paper-fiat money printed by the Federal Reserve and released into the system (most of the time not even money: just additional ' 0s ' added to accounts at banks and loan paperwork) does not really exist in any objective way and is not linked to anything of value. And the continued printing of it just diminishes the purchasing power of the money that is already in circulation. So they spend it anyway they want and at least have something when they do.
04 Life is short and you can't take the money with you
They spend money that way because they subconsciously have an understanding of the following facts.
Once they spend all of their money and/or eventually get to a point where they are broke:
01 The state and federal government will still be there to keep them alive by using other people's money (taxes) to fund it all.
02 At whatever income level they are at - they realize they will never be in the top 5% of earners and those that posses most of the nation's wealth (real estate, stocks, mutual funds, government bonds, cash, etc) and that they might as well spend what they have, when they have it.
03 The paper-fiat money printed by the Federal Reserve and released into the system (most of the time not even money: just additional ' 0s ' added to accounts at banks and loan paperwork) does not really exist in any objective way and is not linked to anything of value. And the continued printing of it just diminishes the purchasing power of the money that is already in circulation. So they spend it anyway they want and at least have something when they do.
04 Life is short and you can't take the money with you
05 They realize that money is an unlimited, recirculated resource in the US. Running out of money is like running out of water. You can increase and decrease the flow as you wish.
Your immediate goal is to have an emergency fund or "e-fund" of at least 6 months of living expenses. That is rent, utilities, insurance, whatever; in a highly liquid FDIC - insured or NCUA (national credit union association) insured savings account. Don't touch this money for anything but an actual emergency. No, polishing your nails or buying a new pair of shoes is not an emergency.
Your secondary goal is to invest your money in a manner that lets you sleep at night but will have the potential for future growth. Unfortunately here, a bank account will not do the trick unless you do have $10 million to your name, now. Think of things like a balanced mutual fund - holds both stocks and bonds and will give you the opportunity to get a higher return over time. Buy a no-load (that means you don't need to pay a financial charlatan, ah um, I mean financial adviser with your hard earned money) - no sales charge, means all your money goes to work for you TODAY! Look at TRowe Price and/or Vanguard, depending on the ability for you to meet the minimum entry investment amount. Go on their websites and read/learn before investing any money.
Better yet, go to the library, rent a book and read up on mutual funds. Think of this fund as "your retirement account or "go to hell fund", just in case things get really bad, you will have a secondary fallback in addition to your e-fund. Again, this account is not to be used to buy clothes, gifts, nail polish, cars, trucks or airplane tickets to Tahiti!
I already had an quote emergency fund. I use to have 1000s a dollars just sitting in bank account. I am now realizing that is pointless. I was quite versed in money management while in my 20s to point where I did not have that much fun with my money because it was not enough for me. So I made a bad money trade, first time and debt and then everything just spinned out of control. If I would have just did what I wanted to do with my quote "emergency fund", build a portfolio and travel. I do not think I would have the urge to grow my money as such a quick rate and make risky moves instead doing what I want to do with my money.
But everyone told me, you need an emergency fund ! Agh, people and there simple minds.Also, I was of those people who knew how to make money outside of a full time job independent contracting. So this six months for emergencys is for regular people who do not think outside the box and do not know how produce money without an employer.
So I always had money coming in just getting paid every two weeks, so it was not necessary for me to keep all that money in the bank. I could be out of work and get some independent contractor jobs in a matter of a few days, and I was working a steady part time job. So yes I big emergency fund is not for everyone especially for people who think outside the box.
This actually perfect. A lot of people would say that this guy is overspending and he should cut back. But in reality, you should choose your life and then support that life. People who travel, drive fancy cars and send their children to good schools don't do it by making $20/hr. He should raise his rate to $60/hr. Choosing to increase your income is a better alternative.
This is true, but it's usually easier said than done.
05 They realize that money is an unlimited, recirculated resource in the US. Running out of money is like running out of water. You can increase and decrease the flow as you wish.
Great analogy. Let me add to it. Our current monetary system in the US is in fact like water. Essentially free and therefore the money has no real value as long as the government decides to rain more down on everyone oblivious (or not) to the fact that artificial increases in the amount of money in circulation ultimately devalues existing currency. And combined with the fact that the government finances some of it's spending through the printing of money (to avoid having to increase taxes on existing money and wealth) - the end result of that is a percentage of citizens that recieve and spend money they never earned while those that are working/producing see the value of the money they earned depreciated. It is possibly the most vile and at the same time subtle form of theft ever invented by those in power.
Wow, good point. When I started this thread, I was thinking of the "micro" things people do to keep themselves poor. But if they keep voting in people who support increasing government spending, printing money, monetizing the debt, QE-1,2,3, then all that inflation makes us all poorer, but hits the already-poor even more. But I guess they count on getting some kind of redistribution in exchange for their vote.
I already had an quote emergency fund. I use to have 1000s a dollars just sitting in bank account. I am now realizing that is pointless. I was quite versed in money management while in my 20s to point where I did not have that much fun with my money because it was not enough for me. So I made a bad money trade, first time and debt and then everything just spinned out of control. If I would have just did what I wanted to do with my quote "emergency fund", build a portfolio and travel. I do not think I would have the urge to grow my money as such a quick rate and make risky moves instead doing what I want to do with my money.
But everyone told me, you need an emergency fund ! Agh, people and there simple minds.Also, I was of those people who knew how to make money outside of a full time job independent contracting. So this six months for emergencys is for regular people who do not think outside the box and do not know how produce money without an employer.
So I always had money coming in just getting paid every two weeks, so it was not necessary for me to keep all that money in the bank. I could be out of work and get some independent contractor jobs in a matter of a few days, and I was working a steady part time job. So yes I big emergency fund is not for everyone especially for people who think outside the box.
What happens if for some reason you cannot work at all?
What happens if for some reason you cannot work at all?
It is not like I would never keep money in an account. My goal is get around 5000-6000 dollars. I am single btw no kids. I use to have way more than that just sitting there and there was so many other avenues I wanted to do with it. But after that is wasting especially if you are creative. You can use your extra quote emergency for other things and investment that will go better in the long term.
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