by lowem » Tue 24 Aug 2004, 23:18:51
$this->bbcode_second_pass_quote('Leanan', 'T')hat's one of the ironies that emerges from The Two-Income Trap. It's the people who do everything right: conserve, don't spend money on frivolous things, work hard, etc., who suffer most when times get tough. Because unlike the person who is spending his money on luxuries, they have nowhere to cut back.
Ah, you've read that book, too. Good book, though it's quite American-centric (from my perspective).
That's not to say that one should spend all the money on a luxurious lifestyle and hope to cut back when crunch time comes, right?
It's a matter of being able to save, it's a matter of available cashflow. It's also a matter of attitude.
Myself, I'm pretty comfortable right now, though I know, and I know very well that my burn rate is relatively high. Crunch time comes, I'll scrap the car (and get back the govt rebate + scrap value), unplug the PC's, dryer, second fridge, cancel the cable modem subscription, mobile phones, turn off the aircon master switch.
That will leave room for food, water, gas, lights, the bare basics. Whatever puny reserves I have will last a lot longer at a much lower burn rate.
Unfortunately the house cannot be immediately paid for, but that comes from a separate, govt-mandated account, and we've got some reserves for that, and the govt so far hasn't been known to foreclose all that much as compared to bank loans (only 5 cases out of 25,000 default cases, and those 5 were voluntary abandonments).
As for the suggestion in the book to "save the second paycheck", damn that's quite hard at the current (high) burn rate, but we're trying all we can.