(this is not an example of what your responses should be...)
(I'll write more later today about your questions on PPC's, etc)
Blog example:
http://money.cnn.com/magazines/moneymag/moneymag_archive/2007/02/01/8398768/index.htm
Is it time for a new, New Deal?
Author Pat Regnier talks about the New Economy (the “Anxiety Economy”) and how, although we may have more toys & gadgets than ever, we as a society are still having a problem paying our bills, saving for retirement & the kids’ college tuition, and are living paycheck to paycheck. He suggests that the new Democratic Congress should install programs to help people out, similar to FDR’s “New Deal” to get out of the Depression.
Personally, I think this guy is a nutcase. The economy is in much superior condition to anything we saw in the 1930’s. People need education, not handouts. This ties to discussions on the class blog dealing with the question of opportunity cost and competition (from the Naked Economics book). A few people wrote in asking if we were better off than our parents, and what that has to do with competition. Perhaps competition has helped to cause some of the problems listed in the article – how many credit cards does one person need, even if they are offering free stuff or special rates? How many iPods does a person need, or TV’s, or…anything? Does competition encourage us to spend our money rather than save, which can cause the decrease in the US savings rate? (Did you know that some economists say that the US now has the lowest savings rate in the world? As a percentage of disposable income, we now save about –2%. Yes, that’s a minus. In comparison, Japan has a savings rate of about 18%, and China’s is over 30%. What’s up with that?)
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7 comments:
Maybe our parents weren't better off, but our parent's parents might have been. I know economy is boosted by credit, but it seems to ruin a lot of people's economic status. Now, I'm not saying credit is bad. I'm all for credit. Most businesses wouldn't exist if it weren't for credit... but, in my opinion, the average American does not know how to handle their credit, resulting in massive debt.
I think that it is compleatly crazy that the United States savings rate is so low. I cannot believe that of our disposable income we only save -2%. That is bad.
I think our saving rate being so low is largely due to our cultural values. Whether we want to admit it or not we are a spending society that places enormous value on wealth, I believe increasingly so as the years go on. Everyone wants to be upper-class, and when they arent they want to appear upper-class (yes-im stereotyping and its not true for everyone). Often times when choosing between installing a backyard pool and buying a fancy car, or saving for college, we choose the thing that satisifies our need for luxuries. We buy things we cant afford instead of saving to impress others as well as to feel better at the current time. Maybe we should re-think societial values on wealth and luxury.
There's an amazing economic term that applies here - "keeping up with the Joneses". yeah, tough, huh?
We are a luxury-driven society. With the death of Social Security, though, I'm not sure how many people realize that their pensions are gone (not many jobs actually offer real pension plans anymore - you are encouraged to save your own in 401k's or 403b's with matching funds...if that's all Greek, let me know, I can talk more about it) - but the days of counting on your job to give you a secure retirement are gone.
Personally, I'd rather not be a Wal*Mart greeter or asking "will you have fries with that?" when I'm 70. Maybe I'll just write books instead. :)
The -2% savings rate is beyong crazy...it's scary!I look around and I see all these people with nice things but I never thought about them not saving money before. I think that credit has a big part of this and people maybe need to be more educated on how to resist the urge to splurge and maybe save their money for future needs not wants.
I have no idea what a 403b is
A 401k and a 403b are both retirement vehicles. It's kind of like the umbrella that a company offers. If you work for a for-profit company, they may offer 401k's. If you work for a non-profit (a hospital, school, charity, etc), they may offer 403b's.
You invest a percentage of your income, and can choose where you want it to go - usually in mutual funds, which limits your risk. There are about 50,000 different mutual funds from hundreds of "families" (companies) that you can choose, so sometimes it seems overwhelming.
The cool part about MOST (not all) 401k and 403b plans is a company match. Since many companies got rid of pension plans (called defined benefit plans, where you are guaranteed $x after you retire every year until you die), they are now putting it on you. These are called defined contribution plans, but the company will MATCH certain percentages of what you put it. This usually happens after you've been at the company for a certain number of years (called "vesting").
So - if you decide to put 5% of your income into a 401k and your company will match your investment up to 4% of your income, technically, you are getting a raise. IT'S FREE MONEY, and that's cool!
'Course, you can't touch it until you retire, but that's okay. Albert Einstein said that compound interest was the world's best invention. :)
And you can take it with you and re-invest if you leave a company.
Good deal. Do it if it's offered (if the company matches your funds). Even if you don't know how you can possibly live without that 5% - it's a good deal.
If they don't match...well, then there might be better investment options for you. For example, our district doesn't match, so I have a better tax deal with a Roth IRA. We can deal with that in another post if you're interested. :)
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