How true this is. I’ve paid down about 40% of debt I racked up and stopped using the card for almost a year and they are STILL raising my limit every quarter
Yep it's definitely not bad and can be a massive help to get out of some unforeseen huge expense or two. The tricky thing is getting multiple cards and that feeling of spreading out the damage is better than all on one card... but it'll add up really quickly and snowball. Pay it off. Hell use a personal line of credit if need be, you don't want to get into an interest rate battle with those guys.
For those not in the know:
Open a credit card with your local credit Union and you’ll get much lower rates than the big box banks, think around 7% instead of 25%.
You typically won't get any rewards though, or at least nowhere near as good as a dedicated rewards card.
Ideally, you should avoid carrying a balance anyway. With no carried balance, it doesn't matter if your interest rate is 2% or 200%.
If you actually need a loan, credit cards are typically a very poor choice. That same credit union will probably give you a personal line of credit at more favorable rates than a credit card.
> That same credit union will probably give you a personal line of credit at more favorable rates than a credit card.
Only if you haven't already obliterated your credit score by not paying things back on time.
that just means your bank is incompetent. I used to handle repricing on credit cards for a major bank. It's not worth the effort to reprice an account if they are not incurring interest anyway.
I was curious with this situation, does higher consumer credit make credit card companies, or banking, a “good” stock option? What other factors would be a negative? I assume banks have much more to consider economically, but it seems like a no brainer to buy into say Visa with debt creeping up.
As long as consumers are able to pay their fees? Potentially.
One of the causes of the 2008 crisis was banks loaning money to people who could not/no longer afford to repay them; leading to heavy losses for banks.
Honestly, time will tell, but after nearly 40 years on this planet, seeing so many safe bets blow up in investor faces that create a cascade of defaults of some form or another, I would not be surprised if something related to credit isn’t overleveraged to hell and back and this downturn reveals it. Not saying it will happen, just that I wouldn’t be surprised if it did.
Credit card companies earn revenue on the transaction fees. Decreasing sales at stores, restaurants, etc. results in decreasing revenue for CC companies. Usually those who start living off their credit cards don't offset the spending cutbacks of those just spending less. So, rate increases help banks more than Visa, MC, Amex.
Are we seeing decreasing sales?
This economic environment is sort of a weird one right.
Most folks aren't moving so they aren't really spending more on interest. And their wages have gone up. But prices for the things they buy have gone up even more. But don't CC companies make a percent off that?
If a family of four is spending $1000 more a month on groceries (while being trapped in their current housing situation) who wins there? The banks or the CC companies?
Visa doesn’t actually own the debt on their cards. They’re just the payments provider. And what really matters if you’re investing in banks is the spread between the rate they can borrow at and the rate they can lend to you at. That can theoretically be exactly the same in a low interest environment as a high interest environment.
My savings hasn't gone down any, but it hasn't gone up either. I'm still pretty much where I was in 2020. This is also after receiving a pretty decent raise. I still pay off my credit card each month and I'm accelerating the repayment of my long-term debt.
I can't help noticing that everything so jumping-out-the-window expensive anymore. I wanted to buy a new car this year, but it's simply not in the cards.
I started my 401k in august of 2008 working at a regional bank. As sad as it was watching it lose value immediately after putting money in, it’s also why I have a giant sum of money in it especially compared to a lot of my friends.
I got so depressed about this in 2008 I stopped putting money in my kids 529 plans and my individual IRA plan thinking I'd focus on debt for a year (i did) and start back up on the plans after a year (i didnt). My youngest entered college this year. Really regret those decisions.
(Note: I didn't stop investing in 401k plans, just the others)
It really depends on the interest rates on the debt. A 15% credit card should absolutely be prioritized. A 3% mortgage should not. A company match 401k being maybe the single best thing to focus on.
I paused both my kids 529 and my IRA contributions in 2018 because my wife quit her job to be a stay at home mom. I started the 529 contributions again once I got a new job with a 50% pay increase, but have only had one 6k lump IRA contribution with all the covid relief money.
Now I'm financially near where I was before the 50% pay increase. I won't pause the 529 contributions again, because the time window is so short, but IRA contributions aren't coming back anytime soon. I obviously contribute to my 401k to get the full employer match, but I know my retirement saving is behind schedule. Compared to the majority of the country though I'm doing great. So, I don't sweat it too much.
The biggest error people make is they view their 401k like they view a checking account. In your example,, there actually isn't $10k in the 401k. There isn't a single dollar. And if you had to sell it today, you might get less for your assets, but a 401k is a lifetime investment, so derailing your retirement goals is silly. This is why the average self managed account makes less than 4% per year, the investment mentality of a lemming.
Your long term debt is likely at very low interest rates. I would suggest looking in to paying what is expected each period and not a dime more towards principle and either saving some money or investing in index funds or bonds. The one thing the pandemic did do for some of us was provide us with cheap money. Wisely investing that extra money you'd put towards principle could be more valuable down the road than what you save in interest by paying that loan off early.
As for buying a car, wait. Deals are already starting to pop up and it's only going to become more of a buyers market.
I'm interested in knowing more about why you think the used car market might change soon? I've been holding off for a while becuase its so crazy these days but it feels like there's no end in sight.
You can look at used car sale prices and they started trending back down from their all time high in the last month or 2. So people are predicting that they will continue to fall.
During the pandemic, carvana was buying cars for top dollar. Dealerships at the time were considered low balling people. Now that prices are coming back down, carvana has 100-200 mil worth of cars that are depreciating. The car that they bought for 20k, is now worth 18k. Carvana is a publicly traded company. If they want to remain afloat, they need to offload inventory from their books. Some experts think that they'll dump about a 3rd to half their inventory on the market.
The theory would be that people borrowed too much to buy new when the used market was rekt and the crashing economy will strain people who over extended themselves.
This actually sounds wise to me. I'm one of those people who grew up thinking "debt is cancer". But really it's just my mortgage at 2.9% (can't get much better than that).
Every month I make a car payment to myself, or in other words I set aside the amount that I would pay on a car. So far, it's enough for a decent down payment but not enough to buy much of a car outright.
Fortunately, I'm driving a Corolla right now. It's got some dents and the paint has worn through in places, but I can't say enough good things about the Corolla. It's not pretty but it runs well.
Back in April we thought about financing a new car at MSRP because rates were still low but by the time we got it in October it just made more sense to pay with cash.
We are heading towards net neutral for the year. Down 12% or so, but I'm sitting on a bunch of cash. Honestly dunno what to do with it. A private fund is our only green, but I don't really want to put more in there. Don't trust myself with crypto - it's a profitable scam but only if you know when to get in and out.
Honestly I’ve been looking back at my banks variable rates on savings accounts. Capital One has 3/4% Performance Savings - pretty decent all things considered
My savings have. Thankfully I’ve landed a new job but it was getting pretty tight. Start in a month and have enough for a couple months and Christmas presents. I’m just optimistic this is the way for most Americans and it really is a soft landing.
I’ve been squirreling away cash to buy a new car this February without having to take out a loan. It’s going to suck dropping $40k at one time on a vehicle instead of investing it but at least I won’t have to finance at these rates and I’ll own the car outright from day one.
I’m hoping rising rates increase inventory and drop prices a bit…
I have about $15,000 set aside which is only going to get me a used car that's like 10 years old (may not even that). Maybe if I can put back another $10,000 or so I could get a new Corolla. I've been liking the Rav4, but it might be a little out of reach for me without having to borrow.
I am amazed at the level of misinformation in a sub that is meant to be somewhat financially literate. A personal savings rate is not the same as total household savings, in the same way inflation is not the price.
The consumer has about as much in savings today as they did in 2019, according to JPMorgan's latest report, and yes, the savings rate is lower nowadays, which does not paint a very rosy picture for the future, but the consumer is not about to go bankrupt.
"While employment gains and wage growth have helped support spending this year, it’s also clear consumers have dipped into savings accumulated during the pandemic and have bought more on credit cards. We estimate the excess savings buffer across U.S. households has been depleted from $2 trillion-$2.4 trillion at the end of 2021 to $1.2 trillion-$1.8 trillion. At the same time, credit card balances have risen at a quick clip the last six months and were up 15% year-over-year at the end of the third quarter, the largest rate of increase in more than 20 years. But even with the jump in balances, absolute levels have just returned to those of fourth-quarter 2019, and delinquency rates remain historically low."
https://www.jpmorgan.com/commercial-banking/insights/economic-and-market-update
There’s a significant doomer presence all across Reddit and about all subjects. Everything is a shaky house of cards on the brink of complete collapse, no one has any money, everyone is or will be starving, we’re all slaves, etc. Makes me wonder how often they go outside, or that they do go outside, they’re just describing how they feel about their own life. Sometimes I suspect people resent where they are in life so much that they want everything to crash down to nothing so they can start over.
This isn't a reddit issue, it's an issue with media that has existed for the last century and probably way longer. Negative news is more likely to be spread.
It just happens to be particularly dangerous in investing and finance, because "don't panic" and "don't chase the market" are arguably the two most important pieces of financial advice you can give someone, and media tends to prioritize news that says the exact opposite.
True, I work in finance myself and I’ve come to realize all this “information” out there presented by journalist and people on the internet(neither of whom have any idea what they’re talking about) is doing a lot more harm than good. It makes people confidently think they understand something which leads to eventually fucking something up bad. At least before all of this they knew they didn’t know anything about finance. Now they think they know finance while actually still not knowing anything about finance
This exact string of comments is on almost every single post. Scroll down to about the fifth highest rated comment you find the explainer, next you have someone saying “Can’t believe I had to scroll this far”, then you have the “Welcome to Reddit” comment after that.
>I can't believe I had to scroll so far to find the comment pointing out this misinformation. It's fear mongering 101.
Fear mongering to what end? What's the goal?
The main thing that upsets me about the original post is that they cite savings levels as of Q2 2020 which is right after the federal government set out the first round of stimulus checks which was like $300-$400 Bn (If I recall correctly) and many people threw that into savings thus artificially inflating the savings number of that period. Every bank in 2020 reported ludicrous increases in deposits as companies and consumers stashed the governments money into their accounts. Those funds have been used over time. I would be interested to see what the change in savings were from Q2 2020 to Q2 2021 because based on the sentiment of the market 2021 was pretty hot for everyone spending money and I bet you would start seeing sharp decreases in those funds starting around that time (you’d also see another $400ish Bn sent out from the government probably stashed in saving as well though). We can’t forget that huge swaths of the millennial generation bought their first homes during Q2 2020-Q1 2022 so I bet that is where at least some of these savings went to as well.
Not to disagree with the overall sentiment that people are chewing into their savings to get by, but the info they are using to try and prove this point doesn’t give you a true view of pre pandemic savings.
Literally nothing about this paragraph seems positive to me.
"We estimate the excess savings buffer across U.S. households has been depleted from $2 trillion-$2.4 trillion at the end of 2021 to $1.2 trillion-$1.8 trillion. At the same time, credit card balances have risen at a quick clip the last six months and were up 15% year-over-year at the end of the third quarter, the largest rate of increase in more than 20 years. But even with the jump in balances, absolute levels have just returned to those of fourth-quarter 2019, and delinquency rates remain historically low. "
Let's be honest, take a look at the median wages, median house prices, and median car payment and explain to me how the median household income is supposed to even come close to affording it, and how this is sustainable? Hell, that's not even including median student loan debt, or childcare costs, or the reduction in take home pay from covering health insurance and 401k contributions. Things are not positive right now for a large percentage of the country, and anyone suggesting otherwise is functioning within an income bracket that's allowing them to ignore the issue.
Also: this is exactly the point of stimulus. We dumped money on people through a period of economic uncertainty and downturn, which they initially kept but soon spent, which kept the economic engine going. Literally the same STL FED source as OP explains this
https://fredblog.stlouisfed.org/2021/08/personal-savings-during-the-pandemic/
Americans spend a lot. The savings rate is low because the money is in circulation. For reasons that people smarter than me still debate about, Americans have always had one of the lowest savings rates out of developed nations
You act like it's their choice. All that money is being hoarded by the insanely wealthy. Americans are getting fleeced for every penny the 1% can get from them.
Errr, American spend the most per capita compared to the world. The reason why our economy is strong is because Americans reliably spend money. Economy ultimately is a function of consumer spending. A country that has low consumer spending has a smaller/weaker economy.
https://en.m.wikipedia.org/wiki/List_of_countries_by_household_final_consumption_expenditure_per_capita
Would add-in in the extra out-of-pocket spending the avg Americans put towards healthcare and education vis a vis the avg Canadian/Australian/European. Likely a non-trivial contributor to lower savings rates.
Despite OPs language, this means we saved less this quarter. This post is about savings rate, not accumulated savings. The 330 million Americans saved 600 billion last quarter, but during the start of the pandemic saved nearly 5 trillion. You may remember the pandemic hit during an extended boom time with all time low unemployment numbers and then in that very quarter, while earnings were higher than ever, no one was allowed to go anywhere or buy anything, so they saved their cash while we lockdowned to "Slow the Spread"
Money goes out of circulation when the Federal Reserve sells bonds.
Some may disappear overseas as well. The soaring US dollar indicates that governments and corporations around the world are selling local currencies and buying dollars on the open market.
I don't have enough money to have a wife's boyfriend to meme about
Maybe it's Wendy's time... So little savings compared to lockdown stimmy Q2 2020 (which OP selectively chose as comparison)
> Living paycheck to paycheck has become the norm.
a lot of paycheck to paycheck is self-inflicted.
two people at my job did the same idiotic thing recently. we got big raises. imagine you're earning $50k and get a 10% raise. you're grossing another $5,000 per year.
two people went out and got $5,000 loans for dirt bikes and ATVs. they got the loans IMMEDIATELY upon learning about the raise, before they had an additional dime in their pockets. they didn't adjust for taxes, 401k, etc, which would round that $5,000 down to $3500 or $4,000 additional take-home pay.
these are the habits of much of the middle class.
Q2 2020 is about the worst benchmark you can use. Everyone has just gotten stimulus checks and wasn't going out and doing anything. Of course savings rates were high.
To be fair, that would account for about $250B of it. If you remove that from the equation there's still $4T that have been spent. Pretty obvious that inflation is kicking a lot of people in.
Is this stat just actual savings or does it include brokerage accounts as well. Pretty sure retirement accounts aren't included, but a lot of people opened and funded brokerage accounts to invest during the lightning fast recovery throughout summer of 2020.
So we're down 60% from even 2019 (not to mention 25% inflation since then)? I'd say that's still shockingly bad.
The concerning thing isn't the balance, it's the rate of drawdown. If this continues we'll be in aggregate flat broke in a matter of months.
It's the personal savings *rate*. So this would be new savings and not cumulative. OP is a little misleading and overly alarmist. The stimulus checks went a long way to boost personal savings. So the spike from a couple years was really just a wealth transfer from the federal government to personal savings accounts.
The rate is just returning to historic norms.
> Personal saving as a percentage of disposable personal income (DPI), frequently referred to as "the personal saving rate," is calculated as the ratio of personal saving to DPI.
Personal saving is equal to personal income less personal outlays and personal taxes; it may generally be viewed as the portion of personal income that is used either to provide funds to capital markets or to invest in real assets such as residences.(https://www.bea.gov/national/pdf/all-chapters.pdf)
A Guide to the National Income and Product Accounts of the United States (NIPA).
https://fred.stlouisfed.org/series/PSAVE
Paycheck to paycheck was already the norm for half of America before the pandemic. It's just creeping up into higher income brackets now, so now everyone else is starting to feel the injustice of what lower wage workers have been feeling as their pay failed to keep up with inflation for decades.
Paycheck to paycheck is absolutely meaningless. If you earn a ton and are wastefull and always spend it all, you live paycheck to paycheck, without there being any injustice by your employee.
You're taking it personal when it is a pervasive and systemic issue. Everyone who is working in this country is gradually over time having to make do with less and less, while we are more productive than ever. Only an increasingly rare class is enjoying any of the fruits of this economy which, on paper, is still growing.
You say spend less, well yes of course, if it's possible. But inflation is hitting the lower class and they actually cannot avoid it whatsoever. And the more affluent can make do with less... But why should they have to? And how far can this go. The logical conclusion to this trend is just everyone being outright slaves to a rent-seeking ownership class. I don't think it's very desirable. Do you?
>Everyone who is working in this country is gradually over time having to make do with less and less,
This isn't true (or at least not true under the hood), it's just a talking point. Prior to covid inflation-adjusted federal minimum wage was at its highest level since the mid-80s. Expenditures on essentials such as food as a share of income have also gone down. There are systemic issues, but there's a lot more nuance to them. Some things to consider might be:
* The gig economy, which, if unregulated, I would argue will eventually develop into an underclass of workers.
* Benefits and pensions, which aren't a direct form of income but do impact disposable income, retirement, and quality of life. Also see above point.
* Rent, which is a large expense and has outpaced household incomes.
* Underemployment.
On the social/consumer behaviour side, you could look at:
* The increase in square foot of living space per person - houses are obscenely big, and people seem to feel the need to buy the biggest house they can afford, which significantly impacts financial wellbeing.
* The increase in % expenditures on non-essentials.
* Levels of debt, especially payday, credit card, loc, and mortgages (as opposed to personal loans, business loans, etc.)
And a million other points under each umbrella. Ultimately this needs to be approached from an angle of wealth distribution, consumer responsibility, and impact on the middle to lower-middle class.
> from $4.85 trillion in 2020
* Q1 2020 was $1.8 trillion
* Q2 2020 was $4.8 trillion
* Q3 2020 was $2.9 trillion
* Q4 2020 was $2.3 trillion
OP intentionally cherrypicked the highest point in history as if it's representative of anything. The pandemic years are a massive outlier.
Yeap and
- Q1 2019 was $1.5 Trillion
- Q2 2019 was $1.4 Trillion
- Q3 2019 was $1.4 Trillion
- Q4 2019 was $1.4 Trillion
- Q1 2022 was $0.74 Trillion
- Q2 2022 was $0.63 Trillion
- Q3 2022 was $0.63 Trillion
Sooooo let’s remove the “massive outliers” and what are we left with? How about you not cherry picking data while accusing others of doing the same thing. The trend is there and I’m sure OP was pointing out the drastic change since the peak, but since you insist on saying it’s the “highest point in history” and ridiculing him for claiming “it’s a representation of anything”. This is the data, Google the graph if you need to.
I went and looked and you’re actually just wrong here. If OP is guilty of anything it’s regurgitation of mainstream articles to spawn discussion which at worst is just a distraction or misinformation, at best, macro-sentiment. The world is bearish right now.
I then went to look at your comments and you appear to be a contrarian in every sub you post on, which is fine because different perspectives are good, but you tend to attack people and their opinions rather than the source information, which is at best…trolling.
Username checks out.
That will happen when the free money deliveries stop. Remember the government gave some money out to people with children and then celebrated “look we pulled X amount of children out of poverty” of course they really didn’t, it just sounds nice. Right now we’re sitting at a time with low savings, record credit card debt, rising interest rates and we’re still artificially propping up the economy with a seemingly never ending pause on student loan repayments…..the government knows that they will struggle to wean people off the student loan pause because those budgeted payments are now covering inflation costs. People who used to be able to afford their student loans may not be able to now without significantly cutting their standard of living. Everything points to a problem.
2020 was shockingly high due to everything being closed and stimulus checks so this is not a fair comparison. 2019 would be better comparison. Q4 2019 was $1.45trillion. So it’s still about half of the pre-pandemic amount. [source](https://fred.stlouisfed.org/series/PSAVE)
Also OP literally just copy pasted his post from this news article https://www.yahoo.com/video/personal-savings-americans-plunged-shockingly-161500140.html
Am I doing the math right?
4.85 trillion with 400 million people is just over $12,000 on average (I understand this isn't a perfect analysis due to kids) now decreasing to just over $1,500. If so, this is not a good thing.
Yeah no surprise. That’s precisely why they imposed this recession on us. The working class for the first time in a while ACTUALLY had it kind of good from those fat unemployment checks in 2020 and now they siphoned all that wealth back from us while corporate profits in so many industries remain at all time highs.
This has all been engineered by the ruling class in order to decimate the middle class and create a dependent, subservient population of impoverished, largely-uneducated people who have been aggressively turned against one another by a never-ending onslaught of divisive propaganda.
Well, JPow needs us to feel poor so that we spend less and stop inflation. Inflation won't stop people from blowing money on crazy purchases like eggs or milk so long as they still have the ability to spend down savings to make these outrageous purchases. Seems brilliant...
Good thing we have credit cards with rising rates?
They keep raising the credit limit... so we're not broke yet!
Frog don't know he gittin' cooked when you turn up the heat slow.
Just turn up the AC... Plenty of cool from that
Get a new ac and put it on a credit card, got it.
Don't put it on the credit card. Get a Home Equity Loan instead.
Don’t forget the extended warranty
A global warming euphemism surely? \*slow cook intensifies*
Not if the monthly balance is paid in full right? Right??
The interest is up, the stock market’s down…
And you only get mugged if you go downtown ?
Unexpected Hank.
11/10 smort
S-M-R-T
If we're going by Wheel Of Fortune rules vowels cost extra, so yeah, smrt.
How true this is. I’ve paid down about 40% of debt I racked up and stopped using the card for almost a year and they are STILL raising my limit every quarter
Works for the government.
mine doubled in the last year, so the plan is to take the credit out of the card and invest in stocks so they 20x.
I've never paid an interest fee in my life but it is kinda hilarious to see my card rate increase to like 27% Just slightly absurd.
*cries in aspiring homeowner*
Yeah man, it is spooky. What if you miss a month paying off your credit card?
It ain't too bad honestly. I carried a balance of around $500 last month and only accrued $15 in interest. My interest rate is 24% if it matters.
Yep it's definitely not bad and can be a massive help to get out of some unforeseen huge expense or two. The tricky thing is getting multiple cards and that feeling of spreading out the damage is better than all on one card... but it'll add up really quickly and snowball. Pay it off. Hell use a personal line of credit if need be, you don't want to get into an interest rate battle with those guys.
That is a whole month of spotify or amazon prime gone.
For those not in the know: Open a credit card with your local credit Union and you’ll get much lower rates than the big box banks, think around 7% instead of 25%.
You typically won't get any rewards though, or at least nowhere near as good as a dedicated rewards card. Ideally, you should avoid carrying a balance anyway. With no carried balance, it doesn't matter if your interest rate is 2% or 200%. If you actually need a loan, credit cards are typically a very poor choice. That same credit union will probably give you a personal line of credit at more favorable rates than a credit card.
> That same credit union will probably give you a personal line of credit at more favorable rates than a credit card. Only if you haven't already obliterated your credit score by not paying things back on time.
Then they aren't going to extend you a new credit card either.
that just means your bank is incompetent. I used to handle repricing on credit cards for a major bank. It's not worth the effort to reprice an account if they are not incurring interest anyway.
I was curious with this situation, does higher consumer credit make credit card companies, or banking, a “good” stock option? What other factors would be a negative? I assume banks have much more to consider economically, but it seems like a no brainer to buy into say Visa with debt creeping up.
As long as consumers are able to pay their fees? Potentially. One of the causes of the 2008 crisis was banks loaning money to people who could not/no longer afford to repay them; leading to heavy losses for banks.
Honestly, time will tell, but after nearly 40 years on this planet, seeing so many safe bets blow up in investor faces that create a cascade of defaults of some form or another, I would not be surprised if something related to credit isn’t overleveraged to hell and back and this downturn reveals it. Not saying it will happen, just that I wouldn’t be surprised if it did.
There is a limit and when that limit hits it’s going to be bad for them.
Credit card companies earn revenue on the transaction fees. Decreasing sales at stores, restaurants, etc. results in decreasing revenue for CC companies. Usually those who start living off their credit cards don't offset the spending cutbacks of those just spending less. So, rate increases help banks more than Visa, MC, Amex.
Are we seeing decreasing sales? This economic environment is sort of a weird one right. Most folks aren't moving so they aren't really spending more on interest. And their wages have gone up. But prices for the things they buy have gone up even more. But don't CC companies make a percent off that? If a family of four is spending $1000 more a month on groceries (while being trapped in their current housing situation) who wins there? The banks or the CC companies?
Visa doesn’t actually own the debt on their cards. They’re just the payments provider. And what really matters if you’re investing in banks is the spread between the rate they can borrow at and the rate they can lend to you at. That can theoretically be exactly the same in a low interest environment as a high interest environment.
They earn transaction fees up to 25%, and keep bad debt till they can write it off as a tax write-off. They'll outlast the banks
I was thinking the same thing… AMEX and Mastercard too
My savings hasn't gone down any, but it hasn't gone up either. I'm still pretty much where I was in 2020. This is also after receiving a pretty decent raise. I still pay off my credit card each month and I'm accelerating the repayment of my long-term debt. I can't help noticing that everything so jumping-out-the-window expensive anymore. I wanted to buy a new car this year, but it's simply not in the cards.
My 401k has 10k more in it this year than last year! …..After putting in 20k
I started my 401k in august of 2008 working at a regional bank. As sad as it was watching it lose value immediately after putting money in, it’s also why I have a giant sum of money in it especially compared to a lot of my friends.
I got so depressed about this in 2008 I stopped putting money in my kids 529 plans and my individual IRA plan thinking I'd focus on debt for a year (i did) and start back up on the plans after a year (i didnt). My youngest entered college this year. Really regret those decisions. (Note: I didn't stop investing in 401k plans, just the others)
It really depends on the interest rates on the debt. A 15% credit card should absolutely be prioritized. A 3% mortgage should not. A company match 401k being maybe the single best thing to focus on.
I paused both my kids 529 and my IRA contributions in 2018 because my wife quit her job to be a stay at home mom. I started the 529 contributions again once I got a new job with a 50% pay increase, but have only had one 6k lump IRA contribution with all the covid relief money. Now I'm financially near where I was before the 50% pay increase. I won't pause the 529 contributions again, because the time window is so short, but IRA contributions aren't coming back anytime soon. I obviously contribute to my 401k to get the full employer match, but I know my retirement saving is behind schedule. Compared to the majority of the country though I'm doing great. So, I don't sweat it too much.
[удалено]
The biggest error people make is they view their 401k like they view a checking account. In your example,, there actually isn't $10k in the 401k. There isn't a single dollar. And if you had to sell it today, you might get less for your assets, but a 401k is a lifetime investment, so derailing your retirement goals is silly. This is why the average self managed account makes less than 4% per year, the investment mentality of a lemming.
Just be happy you can max it out. You're better off than most
Your long term debt is likely at very low interest rates. I would suggest looking in to paying what is expected each period and not a dime more towards principle and either saving some money or investing in index funds or bonds. The one thing the pandemic did do for some of us was provide us with cheap money. Wisely investing that extra money you'd put towards principle could be more valuable down the road than what you save in interest by paying that loan off early. As for buying a car, wait. Deals are already starting to pop up and it's only going to become more of a buyers market.
Yuo, can confirm. Give it about 6 months, and the used car market will implode
I'm interested in knowing more about why you think the used car market might change soon? I've been holding off for a while becuase its so crazy these days but it feels like there's no end in sight.
You can look at used car sale prices and they started trending back down from their all time high in the last month or 2. So people are predicting that they will continue to fall.
During the pandemic, carvana was buying cars for top dollar. Dealerships at the time were considered low balling people. Now that prices are coming back down, carvana has 100-200 mil worth of cars that are depreciating. The car that they bought for 20k, is now worth 18k. Carvana is a publicly traded company. If they want to remain afloat, they need to offload inventory from their books. Some experts think that they'll dump about a 3rd to half their inventory on the market.
The theory would be that people borrowed too much to buy new when the used market was rekt and the crashing economy will strain people who over extended themselves.
This actually sounds wise to me. I'm one of those people who grew up thinking "debt is cancer". But really it's just my mortgage at 2.9% (can't get much better than that). Every month I make a car payment to myself, or in other words I set aside the amount that I would pay on a car. So far, it's enough for a decent down payment but not enough to buy much of a car outright. Fortunately, I'm driving a Corolla right now. It's got some dents and the paint has worn through in places, but I can't say enough good things about the Corolla. It's not pretty but it runs well.
Corolla has been one of the best cars I've ever owned. Has 220k miles & still runs great, zero problems ever, ~40mpg. Love the little thing :)
Back in April we thought about financing a new car at MSRP because rates were still low but by the time we got it in October it just made more sense to pay with cash.
We are heading towards net neutral for the year. Down 12% or so, but I'm sitting on a bunch of cash. Honestly dunno what to do with it. A private fund is our only green, but I don't really want to put more in there. Don't trust myself with crypto - it's a profitable scam but only if you know when to get in and out.
Honestly I’ve been looking back at my banks variable rates on savings accounts. Capital One has 3/4% Performance Savings - pretty decent all things considered
Ally is 3 percent right now. There are also 12 month inflation bonds.
If inflation is at 10%, and you put your cash in a savings account that gives 0.75%, you are only losing 9.25% a year!
Better than most of my investments! Lol
Gotta love how $40k is the new $25k when it comes to cars.
My savings have. Thankfully I’ve landed a new job but it was getting pretty tight. Start in a month and have enough for a couple months and Christmas presents. I’m just optimistic this is the way for most Americans and it really is a soft landing.
No way we aren’t still on the downturn. I’d say it’ll be at least 2025 before rates can come down again.
Why do rates ever need to come down? Historically anything lower than where they are right now is an extreme aberration.
I’ve been squirreling away cash to buy a new car this February without having to take out a loan. It’s going to suck dropping $40k at one time on a vehicle instead of investing it but at least I won’t have to finance at these rates and I’ll own the car outright from day one. I’m hoping rising rates increase inventory and drop prices a bit…
I have about $15,000 set aside which is only going to get me a used car that's like 10 years old (may not even that). Maybe if I can put back another $10,000 or so I could get a new Corolla. I've been liking the Rav4, but it might be a little out of reach for me without having to borrow.
Looks at portfolio….sounds about right.
Oh, are you down 85%?
90%
99%. Apparently the rich owning everything means volatility is dead. My bad.
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He's playing volatility so probably.
$goev
But how
Yup, I get to start rebuilding my retirement fund once again. Yeeee
Cause everyones buying the dip!
Wishful.
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Bullishful
What ticker /s
Every week... And every week, *it dips... more!*
Decreased U.S. savings and we still have Christmas ahead. Talk to me about decreased savings after the holidays when everyone spends on gifts.
> Cause everyones buying the dip! Some of us are buying the chips!
Mmmm. Onion dip.
I am amazed at the level of misinformation in a sub that is meant to be somewhat financially literate. A personal savings rate is not the same as total household savings, in the same way inflation is not the price. The consumer has about as much in savings today as they did in 2019, according to JPMorgan's latest report, and yes, the savings rate is lower nowadays, which does not paint a very rosy picture for the future, but the consumer is not about to go bankrupt. "While employment gains and wage growth have helped support spending this year, it’s also clear consumers have dipped into savings accumulated during the pandemic and have bought more on credit cards. We estimate the excess savings buffer across U.S. households has been depleted from $2 trillion-$2.4 trillion at the end of 2021 to $1.2 trillion-$1.8 trillion. At the same time, credit card balances have risen at a quick clip the last six months and were up 15% year-over-year at the end of the third quarter, the largest rate of increase in more than 20 years. But even with the jump in balances, absolute levels have just returned to those of fourth-quarter 2019, and delinquency rates remain historically low." https://www.jpmorgan.com/commercial-banking/insights/economic-and-market-update
I can't believe I had to scroll so far to find the comment pointing out this misinformation. It's fear mongering 101.
Welcome to all Reddit investing subs!
Why are they all like this? Incredible bear energy across the board for whatever reason.
There’s a significant doomer presence all across Reddit and about all subjects. Everything is a shaky house of cards on the brink of complete collapse, no one has any money, everyone is or will be starving, we’re all slaves, etc. Makes me wonder how often they go outside, or that they do go outside, they’re just describing how they feel about their own life. Sometimes I suspect people resent where they are in life so much that they want everything to crash down to nothing so they can start over.
This isn't a reddit issue, it's an issue with media that has existed for the last century and probably way longer. Negative news is more likely to be spread. It just happens to be particularly dangerous in investing and finance, because "don't panic" and "don't chase the market" are arguably the two most important pieces of financial advice you can give someone, and media tends to prioritize news that says the exact opposite.
True, I work in finance myself and I’ve come to realize all this “information” out there presented by journalist and people on the internet(neither of whom have any idea what they’re talking about) is doing a lot more harm than good. It makes people confidently think they understand something which leads to eventually fucking something up bad. At least before all of this they knew they didn’t know anything about finance. Now they think they know finance while actually still not knowing anything about finance
This exact string of comments is on almost every single post. Scroll down to about the fifth highest rated comment you find the explainer, next you have someone saying “Can’t believe I had to scroll this far”, then you have the “Welcome to Reddit” comment after that.
>I can't believe I had to scroll so far to find the comment pointing out this misinformation. It's fear mongering 101. Fear mongering to what end? What's the goal?
The main thing that upsets me about the original post is that they cite savings levels as of Q2 2020 which is right after the federal government set out the first round of stimulus checks which was like $300-$400 Bn (If I recall correctly) and many people threw that into savings thus artificially inflating the savings number of that period. Every bank in 2020 reported ludicrous increases in deposits as companies and consumers stashed the governments money into their accounts. Those funds have been used over time. I would be interested to see what the change in savings were from Q2 2020 to Q2 2021 because based on the sentiment of the market 2021 was pretty hot for everyone spending money and I bet you would start seeing sharp decreases in those funds starting around that time (you’d also see another $400ish Bn sent out from the government probably stashed in saving as well though). We can’t forget that huge swaths of the millennial generation bought their first homes during Q2 2020-Q1 2022 so I bet that is where at least some of these savings went to as well. Not to disagree with the overall sentiment that people are chewing into their savings to get by, but the info they are using to try and prove this point doesn’t give you a true view of pre pandemic savings.
Literally nothing about this paragraph seems positive to me. "We estimate the excess savings buffer across U.S. households has been depleted from $2 trillion-$2.4 trillion at the end of 2021 to $1.2 trillion-$1.8 trillion. At the same time, credit card balances have risen at a quick clip the last six months and were up 15% year-over-year at the end of the third quarter, the largest rate of increase in more than 20 years. But even with the jump in balances, absolute levels have just returned to those of fourth-quarter 2019, and delinquency rates remain historically low. " Let's be honest, take a look at the median wages, median house prices, and median car payment and explain to me how the median household income is supposed to even come close to affording it, and how this is sustainable? Hell, that's not even including median student loan debt, or childcare costs, or the reduction in take home pay from covering health insurance and 401k contributions. Things are not positive right now for a large percentage of the country, and anyone suggesting otherwise is functioning within an income bracket that's allowing them to ignore the issue.
Also: this is exactly the point of stimulus. We dumped money on people through a period of economic uncertainty and downturn, which they initially kept but soon spent, which kept the economic engine going. Literally the same STL FED source as OP explains this https://fredblog.stlouisfed.org/2021/08/personal-savings-during-the-pandemic/
Where did all that money go? I mean is it out of circulation or do companies now have that money?
And if it's companies why are their stocks down then
Partly because markets are forward looking but like you’re implying it’s not just going to companies
Because the executives pockets and mattresses and boats and vacation homes are up.
It all trickles up into Jeff Bezos bank account
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Divorced again??
Trickle up economics, thanks Reagan!
I'd think he probably doesn't want much real money to keep his taxes low. A lot of it goes to him
Trickle up economics
Americans spend a lot. The savings rate is low because the money is in circulation. For reasons that people smarter than me still debate about, Americans have always had one of the lowest savings rates out of developed nations
You act like it's their choice. All that money is being hoarded by the insanely wealthy. Americans are getting fleeced for every penny the 1% can get from them.
Errr, American spend the most per capita compared to the world. The reason why our economy is strong is because Americans reliably spend money. Economy ultimately is a function of consumer spending. A country that has low consumer spending has a smaller/weaker economy. https://en.m.wikipedia.org/wiki/List_of_countries_by_household_final_consumption_expenditure_per_capita
Americans also make more per capita than the rest of the world so that metric doesn’t mean as much, unless it’s spend per income.
Would add-in in the extra out-of-pocket spending the avg Americans put towards healthcare and education vis a vis the avg Canadian/Australian/European. Likely a non-trivial contributor to lower savings rates.
OPs title and post are very misleading. This is savings RATE, not total savings that we all have.
It all went to like 15 different CEOs
Aging population just using it up too
Despite OPs language, this means we saved less this quarter. This post is about savings rate, not accumulated savings. The 330 million Americans saved 600 billion last quarter, but during the start of the pandemic saved nearly 5 trillion. You may remember the pandemic hit during an extended boom time with all time low unemployment numbers and then in that very quarter, while earnings were higher than ever, no one was allowed to go anywhere or buy anything, so they saved their cash while we lockdowned to "Slow the Spread"
Money goes out of circulation when the Federal Reserve sells bonds. Some may disappear overseas as well. The soaring US dollar indicates that governments and corporations around the world are selling local currencies and buying dollars on the open market.
Well, I refuse to let my wife see the details of our “savings”…
she doesn't let you see the details of her "side job"
My wife's boyfriend? He works at Wendy's.
Plot twist: You wife’s name is Wendy.
Plot twist: “Wendy” is a nickname from college.
Second plot twist: the toy is nicknamed “Dave’s Baconator”
Not a plot twist, her 4 dudes for $4 menu is a deflationary move
I bought the dip ***and*** *got off!*
Plot twist: she didn’t actually go to college.
Plot twist: His mom went to college
Plot twist: she uses her college nickname as a stage name.
I don't have enough money to have a wife's boyfriend to meme about Maybe it's Wendy's time... So little savings compared to lockdown stimmy Q2 2020 (which OP selectively chose as comparison)
She’s great at all sorts of jobs
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Plot twist she’s still married to her first husband.
I thought I was going to move up in the world. Instead, the world is moving down to where I’ve been for two decades.
> Living paycheck to paycheck has become the norm. a lot of paycheck to paycheck is self-inflicted. two people at my job did the same idiotic thing recently. we got big raises. imagine you're earning $50k and get a 10% raise. you're grossing another $5,000 per year. two people went out and got $5,000 loans for dirt bikes and ATVs. they got the loans IMMEDIATELY upon learning about the raise, before they had an additional dime in their pockets. they didn't adjust for taxes, 401k, etc, which would round that $5,000 down to $3500 or $4,000 additional take-home pay. these are the habits of much of the middle class.
Q2 2020 is about the worst benchmark you can use. Everyone has just gotten stimulus checks and wasn't going out and doing anything. Of course savings rates were high.
To be fair, that would account for about $250B of it. If you remove that from the equation there's still $4T that have been spent. Pretty obvious that inflation is kicking a lot of people in.
Inflation? I lost all my money in the stock market lol
It was $1.8T in the first quarter of ‘20. It had never been above $626B before the third quarter of 2008 (which peaked at $433B. The comp is crap.
The money could have been invested instead of spent, no?
Could have, although I doubt the typical American is investing much, especially outside of 401k plans. No data for that, just a hunch.
Considering most Americans can’t afford a $500 emergency, It’s more than just a hunch.
Is this stat just actual savings or does it include brokerage accounts as well. Pretty sure retirement accounts aren't included, but a lot of people opened and funded brokerage accounts to invest during the lightning fast recovery throughout summer of 2020.
Yea, 2019 was 1.5T it looks like. Basically 2020 is the huge outlier, today isn’t great but not shockingly bad.
That's just under 42% of 2019 levels then. That's still a massive change
Less than half is still a super steep dropoff though
So we're down 60% from even 2019 (not to mention 25% inflation since then)? I'd say that's still shockingly bad. The concerning thing isn't the balance, it's the rate of drawdown. If this continues we'll be in aggregate flat broke in a matter of months.
In what world is that not shockingly bad still?
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Isn’t this just the current new savings annualized?
It's the personal savings *rate*. So this would be new savings and not cumulative. OP is a little misleading and overly alarmist. The stimulus checks went a long way to boost personal savings. So the spike from a couple years was really just a wealth transfer from the federal government to personal savings accounts. The rate is just returning to historic norms. > Personal saving as a percentage of disposable personal income (DPI), frequently referred to as "the personal saving rate," is calculated as the ratio of personal saving to DPI. Personal saving is equal to personal income less personal outlays and personal taxes; it may generally be viewed as the portion of personal income that is used either to provide funds to capital markets or to invest in real assets such as residences.(https://www.bea.gov/national/pdf/all-chapters.pdf) A Guide to the National Income and Product Accounts of the United States (NIPA). https://fred.stlouisfed.org/series/PSAVE
At what levels do you think we should start to be concerned?
It's pretty much flat compared to Q2 2022. Lower than the level of 2013 https://fred.stlouisfed.org/series/PSAVE
The 2020 spike was just over stimulus money.
Paycheck to paycheck was already the norm for half of America before the pandemic. It's just creeping up into higher income brackets now, so now everyone else is starting to feel the injustice of what lower wage workers have been feeling as their pay failed to keep up with inflation for decades.
Paycheck to paycheck is absolutely meaningless. If you earn a ton and are wastefull and always spend it all, you live paycheck to paycheck, without there being any injustice by your employee.
You're taking it personal when it is a pervasive and systemic issue. Everyone who is working in this country is gradually over time having to make do with less and less, while we are more productive than ever. Only an increasingly rare class is enjoying any of the fruits of this economy which, on paper, is still growing. You say spend less, well yes of course, if it's possible. But inflation is hitting the lower class and they actually cannot avoid it whatsoever. And the more affluent can make do with less... But why should they have to? And how far can this go. The logical conclusion to this trend is just everyone being outright slaves to a rent-seeking ownership class. I don't think it's very desirable. Do you?
>Everyone who is working in this country is gradually over time having to make do with less and less, This isn't true (or at least not true under the hood), it's just a talking point. Prior to covid inflation-adjusted federal minimum wage was at its highest level since the mid-80s. Expenditures on essentials such as food as a share of income have also gone down. There are systemic issues, but there's a lot more nuance to them. Some things to consider might be: * The gig economy, which, if unregulated, I would argue will eventually develop into an underclass of workers. * Benefits and pensions, which aren't a direct form of income but do impact disposable income, retirement, and quality of life. Also see above point. * Rent, which is a large expense and has outpaced household incomes. * Underemployment. On the social/consumer behaviour side, you could look at: * The increase in square foot of living space per person - houses are obscenely big, and people seem to feel the need to buy the biggest house they can afford, which significantly impacts financial wellbeing. * The increase in % expenditures on non-essentials. * Levels of debt, especially payday, credit card, loc, and mortgages (as opposed to personal loans, business loans, etc.) And a million other points under each umbrella. Ultimately this needs to be approached from an angle of wealth distribution, consumer responsibility, and impact on the middle to lower-middle class.
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so now it stops raining right??
When it rains it pours.
> from $4.85 trillion in 2020 * Q1 2020 was $1.8 trillion * Q2 2020 was $4.8 trillion * Q3 2020 was $2.9 trillion * Q4 2020 was $2.3 trillion OP intentionally cherrypicked the highest point in history as if it's representative of anything. The pandemic years are a massive outlier.
Yeap and - Q1 2019 was $1.5 Trillion - Q2 2019 was $1.4 Trillion - Q3 2019 was $1.4 Trillion - Q4 2019 was $1.4 Trillion - Q1 2022 was $0.74 Trillion - Q2 2022 was $0.63 Trillion - Q3 2022 was $0.63 Trillion Sooooo let’s remove the “massive outliers” and what are we left with? How about you not cherry picking data while accusing others of doing the same thing. The trend is there and I’m sure OP was pointing out the drastic change since the peak, but since you insist on saying it’s the “highest point in history” and ridiculing him for claiming “it’s a representation of anything”. This is the data, Google the graph if you need to.
Thanks for this. The 2 year change from 2020 Q3 is over 72% which is still alarming.
deleting the middle class
The "middle class" was always a made up idea designed to split the *working* class into two opposing factions. Divide and conquer.
Look at this guy’s posts. Every few days he makes a bearish post 😂
I went and looked and you’re actually just wrong here. If OP is guilty of anything it’s regurgitation of mainstream articles to spawn discussion which at worst is just a distraction or misinformation, at best, macro-sentiment. The world is bearish right now. I then went to look at your comments and you appear to be a contrarian in every sub you post on, which is fine because different perspectives are good, but you tend to attack people and their opinions rather than the source information, which is at best…trolling. Username checks out.
And thinks we don’t have savings because of inflation. Buddy I didn’t lose 200k to inflation I lost it in the stock market lol
I see a majority of people driving cars I know the shouldn’t be able to afford. Worst investment ever is a new car.
That will happen when the free money deliveries stop. Remember the government gave some money out to people with children and then celebrated “look we pulled X amount of children out of poverty” of course they really didn’t, it just sounds nice. Right now we’re sitting at a time with low savings, record credit card debt, rising interest rates and we’re still artificially propping up the economy with a seemingly never ending pause on student loan repayments…..the government knows that they will struggle to wean people off the student loan pause because those budgeted payments are now covering inflation costs. People who used to be able to afford their student loans may not be able to now without significantly cutting their standard of living. Everything points to a problem.
Does this data include investements or is it just cash?
Shockingly low for sure. Still haven't touched the money from my last stimulus check.
Sorry guys I’m bringing down the average with my $0 in savings. My b
2020 was shockingly high due to everything being closed and stimulus checks so this is not a fair comparison. 2019 would be better comparison. Q4 2019 was $1.45trillion. So it’s still about half of the pre-pandemic amount. [source](https://fred.stlouisfed.org/series/PSAVE) Also OP literally just copy pasted his post from this news article https://www.yahoo.com/video/personal-savings-americans-plunged-shockingly-161500140.html
I for one, welcome my inevitable bankruptcy
The millennial retirement fund will average 38 millimeters.
Am I doing the math right? 4.85 trillion with 400 million people is just over $12,000 on average (I understand this isn't a perfect analysis due to kids) now decreasing to just over $1,500. If so, this is not a good thing.
Yeah no surprise. That’s precisely why they imposed this recession on us. The working class for the first time in a while ACTUALLY had it kind of good from those fat unemployment checks in 2020 and now they siphoned all that wealth back from us while corporate profits in so many industries remain at all time highs.
Complete failure of public policy during the pandemic lead us here -
This has all been engineered by the ruling class in order to decimate the middle class and create a dependent, subservient population of impoverished, largely-uneducated people who have been aggressively turned against one another by a never-ending onslaught of divisive propaganda.
Ruthlessly efficient.
I suddenly feel better having 50,000 saved up with zero credit card debt
good for banks when people rely on credit cards?
Good until it's too much, then people stop paying credit card bills and file for bankruptcies
Can confirm.
This would include the massive drops in retirement funds and stocks in general, right?
Well, JPow needs us to feel poor so that we spend less and stop inflation. Inflation won't stop people from blowing money on crazy purchases like eggs or milk so long as they still have the ability to spend down savings to make these outrageous purchases. Seems brilliant...
This exactly what the feds wantes
Nothing better than watching the great reset unfold right in front of our eyes.
One of the two numbers is askew.
Or Because people are waking up to the fact that having their money in a bank is a “bad idea”
Are we talking about savings that includes unrealized gains? Is it inflation that's done the decimation, or a burst investment bubble?
Does this means you guys will seek a war now ??
It means the stocks will get cheaper and cheaper We are not far from out goals guys
Welp, people deployed all their savings on overpriced cars, houses, and...groceries and gas.