Yes. I was shocked the first time I had real fresh-grated (on a sharkskin grater — TMI?) wasabi. I had expected it to be really hot but unlike its ersatz version, the real thing had only an initial heat, which then faded to reveal a complex of multi-layered flavors and aromas, "nutty" among them.
> The secret to having more money is not to earn more, it's to spend less.
I honestly thought it was the complete opposite? The whole "being poor is expensive" thing? That buying expensive shoes is economically better longer term vs buying cheap shoes?
You're both right, but you're both speaking casually so it's hard to understand precisely what you're saying. Here's my take on it:
At least from a perspective of early retirement, if you can change your lifestyle so you can sustainably spend less, then (i) while you are working, you can save more money, due to lower expenses, and (ii) provided you are willing to continue living frugally after retirement, you don't need to build up as much capital to fund retirements from investment returns, as your post-retirement expenses are also lower. I think the second factor makes a bigger impact than the former one.
The point you make is also a good one: people with more wealth and resources are in a better position to make longer-term investments, which can help them save or make even more money in the long run.
The two heuristics "spend less" and "earn more" aren't always in conflict, you can often find opportunities that strictly improve one without damaging the other one.
I'm not the GP, but spending less is not the same as being poor. The former is about having options, the latter is lack of options. Poor people have to buy the cheaper shoes because that's all they have enough money for (compared to a wealthier person who made the decision based on average cost over time, even if the initial outlay was more).
If you were making $50,000/year you might be able to save $10,000-$20,000 a year by cutting spending. However you'd be able to save infinity more by increasing earnings. If you were making $50,000 and got a raise and were now making $100,000/year a year that would let you save $50,000/year. You aren't going to save $50,000/year by cutting expenses.
There's no theoretical limit to your earnings, however, you can only save at most 100% of your salary.
It's also a LOT (and I mean a lot) easier to cut spending when you earn more.
I think what the GP meant to say was if you increase spending when you increase earnings you'll never save any money.
> If you were making $50,000 and got a raise and were now making $100,000/year a year that would let you save $50,000/year.
These are the kind of simplifications that get thrown around all the time that are simply wrong.
You're forgetting all the extra tax you'll have to pay to earn that extra $50,000, so right from the start you are not getting anywhere near $50k extra into your account. You're forgetting it will cost you more to earn that extra (better work clothes, longer hours means buying more food, require better phone, on call, etc. etc.) and you're forgetting that when you earn more you'll spend more.
Certainly if you get a pay rise from $50k to $100k you have the potential to save more, but I still stand by the statement that it's not the best way to go about it, if in fact your goal is to work less (reduced hours or retirement). That's a very important point to keep in mind - the goal here isn't to save as much money as humanly possible, the goal here is to work less.
this is where you're failing to understand the frugal mindset. People with a frugal mindset rarely if ever buy more food (if you mean, not make their own meals), no matter their work hours.
You wind up spending more on food because you're utterly exhausted from working longer hours. It's not that you want to, it's that you get backed into a corner and don't have a choice.
When you have more money, you won't fall into poverty traps, even if you spend less.
For example, suppose you were a middle-to-high earner and you lived well below your means. If you face financial burdens like health issues, accidents or layoffs, you'll have a liquid cushion to fall back upon.
Those without liquidity will need to find the funds elsewhere. Elsewhere is an entire debt and rent-seeking industry that tends to prey upon people that do not have the means to defend themselves legally, nor do they have the means to escape that market into one with terms that are a bit more fair.
Of course BIFL is better if you can afford it. It also means not keeping up with the Joneses, spending money out all the time, buying more than you need.
The reason that earning more never works out is because the more you work (and attempt to earn) your actual money in hand asymptotes and you're not getting reward for your effort & time.
Taxes go up the more you earn. You'll spend more on food and stuff the more you work because you're more tired, you'll spend more when you earn more (b/c the goldfish fills the bowl), you will be surrounded by people who earn more, so you'll live the "high life", etc. etc.
Also it's a bit of a play on words, because when you spend less, you'll realize you need less, and so it will appear you have more.
Of course you're not going to achieve FIRE if you spend all the money you earn, the whole point is to save the most you can, if you can earn more of course, go for it, but for a lot of people it's out of reach, so it would be pointless to recommend that.
Socrates was right in some ways, but there are differences. Writing has caused damage to memory abilities (I work in a related field), but it has large benefits for cultural knowledge. Offloading our thinking about email responses or decisions about what we do with our time into AI doesn't have any real benefits for society. Having computers do your routine thinking for you is like refined sugar for the brain -- it can be attractive and addictive, but I think it's a bad idea in most cases.
That's a bit harsh. I moved to London in 2013 and I remember I had to order flat white off-menu most of the time back then. Most places knew how to make it but just charged capuchino on the bill. Today it's everywhere.
“Flat White opened its doors in 2005 because it was nigh impossible to get a flat white; the strong, delicious creamy coffee of our namesake.
London lacked a strong independent café/coffee culture so we set out to be beacon & inspiration for other people who loved coffee, independent spirit and good old-fashioned hospitality.
Flash forward and over ten years on London is thriving with many varied and different coffee offerings- a vibrant and exciting scene of excellence and commitment to excellence.”
And to add some more context. A New Zealander I know wrote a London coffee map app around 2010 to teach himself iOS app development. He curated the list of coffee shops he added to the map (they had to serve a proper flat white) and at time of release he’d added over 150 coffee shops.
In 2007 and then again in 2009 the world barista champions hailed from London.
All this should give you an idea of how quickly the London artisan coffee scene exploded in the late “noughties”.
So if you’re claiming to be a coffee nerd who couldn’t find a flat white in London in 2014, I’m going to say you didn’t look very hard.
Note: Not one chain ever featured on that app. I only mentioned Starbucks above to illustrate how ubiquitous the Flat White was at that time (2010) that Starbucks felt they had to add it to their menu to stay relevant/competitive.
Sorry, I should have mentioned I'm not OP you replied to.
I moved to London in early 2013, and it definitely wasn't that popular. I had my own group of coffee buddies but I was the only one drinking it.
Even today only 1 in 10 coffee drinkers have it [0].
Note that I did drink flat white all the time back then, it just didn't always appear on the menu. You just had to ask nicely and most people would make you one (or try anyway).
Note that Starbucks and Costa do not make flat white IMO, even if they sell a drink called that.
That said, today is way different and flat whites are everywhere.
OP here. Yeah, I arrived in 2012 and left in 2014. I also roast my own coffee, so I don't drink in cafes very often. When I wanted good espresso (no way I can afford a decent set up), there were a couple of good shops near where I worked, but they were very small and they served black espresso only :-) I am surprised, but then I should have realised that I was never hooked into mainstream coffee culture in London (which is not nearly as nerdy as I am).
> 200 years later, with a population that's multiplied several magnitudes over - would you expect to still see a completely equal people? I wouldn't
I would. South Koreans are 2-3 inches taller than North Koreans, plus a miriad of other biological differences, in a relatively short span of time. This is for the same ethnicity, yet alone race.
For me, that alone is proof we are much more similar than we think, and environmental factors, which your hypothetical scenario accounts for perfectly, has a much greater impact on us compared to genetics.
Which is why, for perfectly randomly selected humans raised identically for 200 years, I would not expect significant differences.
Haha, honestly, this is so common that when someone at work wants to talk about a product and starts with a compliment, my mind immediately tries to figure out what could be wrong with it.
Good question. EG Why doesn’t everyone default on a loan? This is asking “how do loans work”.
Typically, a loan with interest is a gamble. You want to get your money back with a return. If you loan money you want to ensure you will get your money back by qualifying the applicant. There is a risk though because they might not pay it back, thus you increase the interest rate according to how qualified the loan is. Good investors really focus on getting a qualified applicant (one that can pay it back). Sometimes they don't get their money back and they are forced to write it off - it is apart of the loan business.
Basically, I am not trying to be insulting but I will end up explaining how a loan works - so I will stop there.
With college loans ALL basic loan concepts are wrong. You cannot default on a college loan by law. It follows you through marriage, bankruptcy, or even service in Afghanistan. The people which made these poor loans know they made poor loans backed by the US government. Thus, they have lobbyists pushing congress to ensure student loans are 'unforgivable'. SO! Investing in a student loan is a damn good deal. You have 0 chance of someone defaulting because it is illegal to default. The loan has zero risk. This is why tuition has exploded and why we have a crisis.
So, if you want to major in 18th century French Dance at Yale for 190k - there isn't an investor willing to stop you.
Tuition in your country has not expanded because of cheap loans.
People need jobs and you have a job shortage.
College is seen to be the best/only option for a middle class life - which is driving people to college.
College is not free in America. So people need to pay, but job pay is concentrated in certain fields, and any hitch in the process means that payment schedule gets extended.
To a certain extent, the problem is of course having loans.
But that would just make the main problem obvious - life is expensive and there’s now fewer ways to make a middle class life.
This is like the Indian job market- You are either a STEM / law/ CA / or bust.
How do you propose funding poor people's education then? Keep in mind education is not like a house where you generally pay 20% down and the bank gets to keep your house if you default which they can then resell to recoup some/most of their loan. Poor people have very little money to pay for education and all of the value goes towards their brain which a bank cannot just reposses which is why the government takes ownership of said loans and effectively repossesses your future earnings.
I propose that the government should have an anti NEET law (for 'working age' people), that is, someone should always be in Employment, Education or Training. It was either to complete the acronym, or the latter two are differentiated between theory education and trade-school education.
The education/training parts are pretty simple; a minimum 'living wage' (for ACTUAL living, not fake numbers) and housing near the education/training site will be provided in exchange for participating in the education/training. This payment also applies to child student dependents of legal guardians (usually parents) and is their "tax credit" replacement.
The employment part is a combination of publicly paid internships and/or work directly for the public good. In both cases the employee is a civil servant and any "works" they create become the public domain; unless the median pay rate for that job is paid to the government as a "temp" placement fee.
While I'm at it, part time workers receive pro-rated benefits funding and the option to buy from (any of) their employer's benefits pool(s). Partial work shouldn't be an excuse to deny benefits.
If benefits are fully socialized (E.G. single payer primary health cost coverage) then the above can still apply to over the top benefits.
Income-based repayment has to be codified through some kind of legislature, similar to no-default guarantees of the current regime.
Bad news for art history departments and copious law schools, but good news for nursing, aircraft maintenance, computer science, chemical engineering areas.
Wait, why is this a good question? I mean the OP said “it’s not that simple” which says he/she has a DEEPER understanding of loans that the previous post.
The answer to the OPs question is obvious to someone who understands loans (“the same things that keep everyone from defaulting on every loan”).
So, isn’t it actually a dumb question? Or rhetorical, and since its obvious and adds nothing, it seems best to just ignore it.
The original US student loan program gave loans which could be defaulted on just like any other loan. So, maybe a better question would be “why did the US congress change the rules just for student loans?”
If student loans can be defaulted, it doesn't matter what the investor thinks or what interest you get or if you're backed up by the government or not.
Even if you study [insert profitable degree], the rational action to do after graduating is to default, since students typically don't have much to lose.
And then lenders won't make the loans. That's exactly the point. Student loans were a bad idea in the first place. The ready availability of tuition money has lead to schools raising tuition FAR faster than inflation for the last 20-30 years. Most of that money isn't even going to education.
Except without those loans, poor people will have to grind out low paying jobs trying to save up enough money to go to college and get a higher paying job that requires a degree because they have no money to pay for it. Then, when they finally get through college, they will be years behind the kids of wealthy people and to make matters worse, every year you delay putting off a degree decreases the future value of said degree since you generally have a limited amount of working years and thus less years to earn money from said degree.
This argument makes sense if student loans were a novel concept, but we've seen the movie and know how the story ends.
When those same poor people are crushed with insurmountable amounts of undefaultable debt that follows them for life, they don't fondly think "well, at least I didn't have to grind out a low paying job back in the day".
Exactly. It is a poor investment option. So less investments are made, so less students attend, tuition plummets, community colleges spring back to life, people focus on degrees that offer pay, kids exit with no unforgivable debt, on and on.
It seems to lead to the sort of situation where the only kind of success a poor kid can hope for in life is the kind where they get into the kinds of degrees that offer pay, whereas privileged rich kids have the luxury of getting to go into "useless" humanities degrees and curate our culture and history and whatnot. Only enabling the leisurely well-to-do to enter the latter kind of career path is generally considered a bad thing.
It's not bad. But it doesn't matter how much tuition costs or what degrees offer pay or not. Everyone will study whatever they want, borrow at 1000% interest if necessary or 1% interest for "profitable" degrees, and then dump the dept as soon as they graduate.
Or am I missing something? Original question, what's stopping everyone from defaulting right after graduation?
What's to stop people defaulting on other unsecured loans, like credit cards? Some people do, but most people don't. Why? Because defaulting on a loan means a bad credit score and suddenly modern society becomes hard - no mortgage, no car loan, no more credit cards etc.
The difference is that other unsecure loans are only given out with some degree of expectation/evidence that the person will be able to repay them. A person with $10k/yr income does not get a $40k credit limit.
On the other hand, college loans are given out with zero consideration of that. You're just as eligible to take out tons of loans as a poor person majoring in underwater basket weaving as you are are getting a CS degree from Stanford. Even though those have very different probabilities of being able to repay them.
To default on a credit card you have to qualify for a credit card. Which generally requires some history with a bank that for youngsters involves a secured credit card to build credit - e.g. a credit card with $500 monthly limit paired with a $500 savings account that allows no withdrawals.
What happens when a lender decides you're unqualified for a student loan?
The main difference is a bank can repossess your house/car/possessions for normal loans thus making back some of the money they leant you (and you losing all of the stuff you bought with that debt). They cannot repossess any bit of the money spent on your education. This is why the federal government steps in because they legally can repossess some of your education by extracting it out of your future earnings.
You're describing the difference between unsecured and secured loans. The parent explicitly stated that they were talking about unsecured loans (where there's no tangible thing to repossess).
Oh wow, reading more into it, some credit cards are actually unsecured (but some aren't [0]). However, credit card companies can still sue you even if it is an unsecured loan and then repossess some of your stuff depending on the state [1].
Nothing would stop everyone from defaulting. There would just be less student loans to default on in the first place. If defaulting was an option, student loans would either not exists or nearly not exist. If student loans didn't exist, colleges would have to drop their cost or not be able to fill seats. If colleges drop their cost, students don't need loans. The cycle ends.
> If student loans didn't exist, colleges would have to drop their cost or not be able to fill seats.
For lots of colleges, I agree. However, lots of people who come from well to do families have their entire colleges paid for by their parents even today with high tuition costs and thus top colleges could still increase feas as rich parents can afford it whereas poor people would have to grind out for years in low paying jobs just to afford the chance to go to the rich schools. Without guaranteed loans, poor students would practically never have the opportunity to go to rich schools.
The entire premise is based on a questionable foundational assumption. The argument goes that you pay for an education but that can’t be taken back in bankruptcy proceedings or recovered when defaulted on. I’ll agree that what people pay for is an education, but what makes that education valuable in terms of employment is the paper that proves you have it. If the college won’t validate your attendance and degree what do you have except an unverifiable claim that makes you indistinguishable from candidates that don’t have a degree?
> They could have just chosen not to compete in a market with unregulated definitions.
I don't think it's about regulating words. If you promise to sell a blue dog but sell a green dog, I don't expect a regulation saying blue has to be blue.
A reasonable person is not a random (or more sensibly, the average) person though. I think a reasonable person would agree with my explanation. I'm not sure the average person would.
Edit: Apparently multiple people are misreading and assuming I'm trying to flatter myself here. "A reasonable person" is a pre-defined legal term that I have little choice but to use verbatim here. It's essentially a proper noun, but without capitalization. Specifically, I'm _not_ describing my own rationality when I say "a reasonable person" would agree with me. What I'm saying is that I think the legal "a reasonable person" would reason the same way I just reasoned. If you still don't get what I'm saying: had the legal term instead been "a stupid monkey", then my sentence would have read "a stupid monkey would agree with me".
I'm not sure you read the article. The whole point of a "reasonable person" is that it represents an "average person".
> this person is seen to represent a composite of a relevant community's judgement as to how a typical member of said community should behave in situations that might pose a threat of harm (through action or inaction) to the public
This is why we have a jury of our peers picked at random. The randomness is not random.
> Oh, get off your high horse. I'm not sure you read the article. The whole point of a "reasonable person" is that it represents an "average person".
Er, pardon? This isn't my high horse. This is literally your own article's text, which you yourself apparently didn't read:
> As a legal fiction, the "reasonable person" is not an average person or a typical person, leading to great difficulties in applying the concept in some criminal cases, especially in regards to the partial defence of provocation.
Sure. But it's necessary to follow all the guidelines, not just some of them. Also, you responded to incivility with incivility ("which you yourself apparently didn't read"). Please don't do that, even when provoked.
