Monday, August 24, 2015

Saving Up

Sometimes trying to live a low debt or debt free lifestyle can make one feel rather lonely in today's world.

So it was wonderful for Marcus and Agata to hear from a dear friend who is saving up to buy them-self the above HP Pavilion Notebook.

As you can see, at about 370 GBP this is not a high specification laptop but it's not the price we are discussing.

Let's call my anonymous friend Ricard.

- looked at their weekly disposable income
- started putting some money aside each week
- set themselves a goal to buy the laptop, when cash funds have been accumulated.

They did not
- Bung it on the credit card
- Hoped that he could pay it back later, but made no attempt to check beforehand.

When Marcus and Agata considered buying a motorhome

- we did the research  taking over 18 months
- we did a test hire, in fact two
- we started saving
- we actually made a wallchart, colouring in squares when each section of money was saved up
- when we had the purchase price in bank deposits we visited the dealer in Switzerland
- It took over 2 years from start to finish

What about the Real World?
Some uncomfortable truths are

- Many people use debt as a longterm strategy to buy the things or support a lifestyle they know they cannot afford.

(I am not talking about people having difficulty maintaining a subsistence lifestyle here)

- Such people have no plan on how to repay this debt.  Effectively they don't care.
- Private Banks  (especially in the UK and USA) have lent money to people who can't repay it.   Subprime mortgages and the like.  This bad debt has been exchanged by governments for good debt, the government taking on this 'junk debt'.   This has to be covered eventually by taxpayers.  That is you and I.
- Worse, extended loans to individuals, institutions and now even countries are now supported by artificially low interest rates.  Governments are [shit] scared that people can't repay their debt, so continues to make their outstanding debt artificially easy to service.

The downside is that this encourages more debt

What about the Stock Market?
A few NSSS stunning facts 
(NSSS: No Shit Sherlock Syndrome)

- Stocks can go up as well as down, well in theory
- Markets have been going up, and up, and up since the 2008 Lehman, subprime mortgage crisis
- Anybody with an actual working job could instead have taken a 5 year+ holiday.  Just by making an investment in your local exchange fund. The sitting back and counting on the cowardly nature of governments who believe that the irresponsible financial actions of the many including people, banks and corporations should not be allowed to fail.
- On the back of this financial guarantee markets have spiralled as cheap money, borrowed money, fuels everything.

Show me the charts then? Okay ...

China last 5 years

China 1 year
Note: Year to date the Chinese Index is still in the positive

US Dow Jones 5 Years

US Nasdaq 5 years

UK FTSE 5 years

German DAXX 5 years


It has to crash (cash out) sometime, just when exactly?

Saving Up
Saving up used to be the default method for all purchases in your life, perhaps except the mortgage on your house  (where you only saved up for a deposit, which enabled the mortgage).

Today saving up is not in fashion.  Banks don't even need our money anymore, the Government is printing money and making it available wholesale to Private Banks at almost zero cost.

What a state we are in.   This will surely not end well.

Don't buy stuff you can't afford

I have some more debt articles to come,  for now search our archive

BBC Market Data