Should ordinary Americans save, spend or invest their discretionary income?

What should Americans do re: discretionary income (money left over after taxes and expenses)?

It really depends on what your goals are, how much discretionary income you have, what you'll be spending it on, what your time horizon is, etc. If you are just looking to maximize your lifetime wealth, you'll get the best ROI by spending your money on an education, investing in an aggressive stock portfolio while you are young, and investing in a more conservative portfolio when you are older.

Personally I think it's possible to go overboard with "deferred life" though. As far as spending goes, I prefer to live below my means, but I have no problem with spending my money on things that I truly think are important. So I drive a cheap car and live in a crappy apartment...but I live in a nice neighborhood in a great city, I spend money on a gym membership, and I go on nice vacations. To me, life experiences are more important than having a lot of crap.

Whatever they want.

I don't tell other people what to do.

I pretty much agree with kandahar here... live below but not too much below... and invest what you can... in bonds mainly. So option 2.

Saving in the USA is pointless anyway, as soon as you have any sickness or accident, the Hospital takes all you have........

274ina said:

Saving in the USA is pointless anyway, as soon as you have any sickness or accident, the Hospital takes all you have........

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Health insurance is commonly considered one of the bills, I think, hence ordinary Americans have (or could have) discretionary income after paying their health insurance premiums and other bills. This question is about what they ought to do with that discretionary (i.e. extra) income.

Neomalthusian said:

Health insurance is commonly considered one of the bills, I think, hence ordinary Americans have (or could have) discretionary income after paying their health insurance premiums and other bills. This question is about what they ought to do with that discretionary (i.e. extra) income.

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yes but insurance does not cover all, as the $85,000 scorpion sting shows, (latest phoenix news) she got a bill for ~$25,000.
Assuming they just dont dump you entirly......

So yes, I am correct in saying saving in USA is pointless........

274ina said:

yes but insurance does not cover all, as the $85,000 scorpion sting shows, (latest phoenix news) she got a bill for ~$25,000.
Assuming they just dont dump you entirly......

So yes, I am correct in saying saving in USA is pointless........

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You hear about someone falling on hard times and say the entire act of planning for the future is pointless? That's quite the reasoning there, given how much money you are likely to need in old age.

Neomalthusian said:

You hear about someone falling on hard times and say the entire act of planning for the future is pointless? That's quite the reasoning there, given how much money you are likely to need in old age.

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No it applies to every one. Because EVERYONE will have some sort of accident or injury before retirement.......
so saving is useless unless you have rock solid (executive) Health insurance.

274ina said:

No it applies to every one. Because EVERYONE will have some sort of accident or injury before retirement.......
so saving is useless unless you have rock solid (executive) Health insurance.

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So you blend an absolutist idea with a non sequitur and call it an argument? The prediction that everyone will get sick or injured is precisely a reason to save for options in the event of unforseen contingencies.

You recommend people keep themselves poor so that they are reduced to begging when something bad happens?

In a perfect world, everyone who works would have the financial ability to consider what they might do with their discretionary income, but in reality very few even have such a thing these days. So asking what "ordinary" Americans should do with their extra money is sort of absurd question.

We'll pretend for a moment that isn't the case. Considering that your average American is not especially economically well-versed, it is probably better for them to live below their means and save or invest in low-risk ways.

Save until financial security is obtained, then partion between investing for the future and enjoying excess income.

Neomalthusian said:

So you blend an absolutist idea with a non sequitur and call it an argument? The prediction that everyone will get sick or injured is precisely a reason to save for options in the event of unforseen contingencies.

You recommend people keep themselves poor so that they are reduced to begging when something bad happens?

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But you can never save enough to pay the hospital bill(even if you have a $50k job).......................So my facts remain

And you dont beg. You die.

Over 26,000 annual deaths for uninsured: report | Reuters

They should do whatever they feel safest doing. I had a 401K before the collapse that literally lost everything (wasn't a LOT in it at that point) and I'm still not sure exactly what happened. I'd like to start another 401K eventually (my current employer doesn't offer them), but for now I just put my savings in a low-yield savings account that I can pull from as needed without penalty.

I think it's absolutely insane to avoid saving SOMETHING if you can afford to do so. So many of my friends have $500+ car payments, $1200+ rent obligations, go on shopping sprees on a monthly basis....but don't even have $1000 in savings to cover an emergency. Meanwhile, boyfriend and I each have car notes under $350, our mortgage is only $874, and we always have 3-months income in savings at minimum. That isn't always easy for us to do, but we'd rather have the cushion than buy steak or $100 jeans, so we live well below our means to ensure we're not likely to be caught unaware.

After living well below the poverty line from the ages of 9 to 14, I'll never allow myself to be there again. I obsessively plan for the worst, but most of my friends are of the mentality that they'll just do it "later"...whenever that is.

SmokeAndMirrors said:

In a perfect world, everyone who works would have the financial ability to consider what they might do with their discretionary income, but in reality very few even have such a thing these days. So asking what "ordinary" Americans should do with their extra money is sort of absurd question.

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Then in those people's case, the question should be "what sorts of things should ordinary Americans do to start living below their means (so that they have discretionary income)?

We'll pretend for a moment that isn't the case. Considering that your average American is not especially economically well-versed, it is probably better for them to live below their means and save or invest in low-risk ways.

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So is living below one's means a function of one's choices?

274ina said:

But you can never save enough to pay the hospital bill(even if you have a $50k job).......................So my facts remain

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Of course. You call your blind, sweeping generalizations facts. Looks like this discussion with you was pointless before it even started.

And you dont beg. You die.

Over 26,000 annual deaths for uninsured: report | Reuters

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It doesn't change the fact that you seem apathetic about people keeping themselves poor and having no options when bad things happen. You seem to half-encourage it. Talk about compassion. Why do you wish people to be poor?

274ina, to the poor: "Don't bother trying to improve your lives. Spend everything you get, and ham it up, so that I may reference your suffering later when I go lobby for more handouts."

Neomalthusian said:

What should Americans do re: discretionary income (money left over after taxes and expenses)?

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Depends on how much they have. A decent amount should be saved for future troubles. The rest (if any) should be spent to stimulate the economy or on charitable causes (or in whatever other way you choose to enrich your life). JMO.

Neomalthusian said:

Then in those people's case, the question should be "what sorts of things should ordinary Americans do to start living below their means (so that they have discretionary income)?

So is living below one's means a function of one's choices?

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Yes and no. Looking at your means and situation right now, you can decide to live below it.

However, once you've decided, certain expenses are obligatory or long-standing. If your means change, it is not always easy to re-adjust your spending so that you are below it. And of course, that's what savings and low-risk investments are for.

But plenty of people have never been in a situation where it was possible to save, and plenty of people have had such a colossal shift of means that no logical amount of spending for an average person could ever cover it.