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The term has been part of Fedspeak since at least the mid/late 2000s, probably before that.
"We start by deriving the aggregate amount of excess savings. The flow of household savings, as defined by the Bureau of Economic Analysis (BEA) in the national income and product accounts (NIPA), can be written as:
Flow of savings = Disposable personal income (DPI) – Consumption (PCE) – Other outlays
We use a simple approach to calculate excess savings: We add the amount that the components of DPI exceed their trend with the amount that PCE and other outlays are below their trend. We then cumulate these flows over time to calculate the stock of excess savings."
So, in the simplest of terms, if folks usually (trend) save 4% of their income but during a certain period save 10% of their income - without any spending/outlay changes - then the 6% is what's called "excess savings".
There's a very clear - and concerning - chart out their which lays savings and credit card debt during the last couple of years over each other. The first has dropped like a rock while CC debt has swollen by multiples.
Are you simply asking what we did with our stimulus checks (which I personally wasn't in favor of, BTW, but of course wasn't going to turn down)? Mine went into savings, along with all my other income. When I need something - but ONLY when I need something - I buy it. The money is there. I never allocate particular monies for particular expenses...
People get so excited planning what to spend their tax refunds (which I don't get) on as if it's a gift or a windfall... I'm not sure they realize they made a free loan to Uncle Sam and that's their own hard-earned money they're getting back!
Are you simply asking what we did with our stimulus checks...
Not just stimulus checks but since you brought it up some of the talking heads I have been watching including Powell have attributed excess savings, at least to some extent, to this big bunch of money many of us received in '20' an '21'. I think that is stretching it a little, hence my poll questions.
Now I know how they figure excess savings but like many here I have never considered a dime I saved as excess.
I got all the stimulus checks based on 2019 income. I filed on a nose under $75k that year. I got a promotion the following year, then changed jobs at the start of 2022. I'm a finalist for a government position, and am semi-expecting a job offer in the next couple of weeks, but even if I don't get it, I'm going back to my original place of employment at the first of the year.
If you look at what I'm making now vs. 3/2020, inflation has left me worse off. My income will be up 9% from when I start the job in January. I'd make a bit less with the government job, but that has many other perks.
From my experience, the big wage gains have gone to people at the bottom of the income scale. Someone making $9/hr in 2019 in retail or food service might be making $15/hr, but it's still a low income.
I don't have a bunch of excess savings - I had to pay a $5k back tax bill earlier in the fall. I had to buy a car in 2020, so that's where the stimulus money went. I have about four months of living expenses saved right now - probably five to six months if I really cut back. I'm fine to not work for six weeks, but I'd be strained in another three months.
Stimulus money went straight to savings/extra debt repayment because I didn't "need it". You will probably not get the best representation of the situation for the average American on this forum though. If they follow this forum they are most likely above average in financial literacy.
Such a great point. I love this forum and the posters on here, but we are NOT representative of the average American. Of course there are exceptions, but people who spend time reading personal finance articles/blogs/forums are generally going to be the same types of people who are smart with money, save a lot, etc. It's like if you're on a weight lifting forum asking how much people bench press - I absolutely assure you that the numbers will be far more impressive than if you asked people like me who throw out their back doing a jigsaw puzzle with their daughter.
Such a great point. I love this forum and the posters on here, but we are NOT representative of the average American. Of course there are exceptions, but people who spend time reading personal finance articles/blogs/forums are generally going to be the same types of people who are smart with money, save a lot, etc. It's like if you're on a weight lifting forum asking how much people bench press - I absolutely assure you that the numbers will be far more impressive than if you asked people like me who throw out their back doing a jigsaw puzzle with their daughter.
Oh we already know that from polls done on other posts. The posters on the Econ forum skew older and skew towards people in the top 10% of net worth for their ages.
Such a great point. I love this forum and the posters on here, but we are NOT representative of the average American. Of course there are exceptions, but people who spend time reading personal finance articles/blogs/forums are generally going to be the same types of people who are smart with money, save a lot, etc. It's like if you're on a weight lifting forum asking how much people bench press - I absolutely assure you that the numbers will be far more impressive than if you asked people like me who throw out their back doing a jigsaw puzzle with their daughter.
People forget this.
Message boards are going to skew more affluent than something like TikTok or Snapchat. The user base is likely older. They're likely professionals. If they have financial issues, they're likely trying to learn from them.
It's just a massively difference user base than what you'd see on the street.
Forum posters can be like space aliens landing on earth , walking into a hospital as their first contact and reporting back that earthlings are sickly .
Forums tend to attract those either it applies to or those who have an interest in becoming one it applies to .
So usually participants in forums about personal finance , investing , retirement finances or economics are going to be better situated financially.
Some forums though are a mixed bag like here .
The retirement forum here is made up of those who have an interest in retirement investing and planning , those who don’t , and those who just chime in to comment now others are bragging without adding anything of value to the conversation.
So it is made up of more varied interests .
Other forums on other websites are geared for better sharing of financial planning ideas than here .
Once actual numbers are used here , those with no interest chime in about how others are bragging ,so the forums here are less helpful in my opinion then forums geared solely for financial planning purposes where people can use their own numbers and get and share ideas .
My opinion is that the retirement should have two separate sub forums .
One for social security related discussions and one for retirement financial planning , since planning for retirement is very different then just investing ..
So yep , depending what the forum is about it will tend to be skewed to those who have an interest.
But it also is helpful to have the forums skewed like that …that way you may not get so many posters who just disrupt discussions with their insults about the other posters and add nothing of value …the most common , is when they post in a discussion to say how it doesn’t apply to them .
Like maybe no one else should post things that don’t apply to them personally
Location: East of Seattle since 1992, 615' Elevation, Zone 8b - originally from SF Bay Area
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Quote:
Originally Posted by amil23
Not just stimulus checks but since you brought it up some of the talking heads I have been watching including Powell have attributed excess savings, at least to some extent, to this big bunch of money many of us received in '20' an '21'. I think that is stretching it a little, hence my poll questions.
Now I know how they figure excess savings but like many here I have never considered a dime I saved as excess.
I would consider "Excess Savings" to be the savings above and beyond what you normally have going into your savings accounts on a regular basis. For example, if you normally direct deposit $400 of every paycheck
into a credit union savings account, for a total of about $9,600 year, but you got stimulus checks or a bonus at work and added those as additional deposits. I'm at the point where any pay raise gets added to the savings, if I don't see it I won't spend it. We are getting a 6% cost of living raise in February, and 0-5% performance based raise in March, so more than the '20 & '21 raises, and these will be going into one of our savings accounts.
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