<definition of "savings"
This horse won't get any deader. Can we stop beating it?

Moderators?

Thanks,
Doug

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I don't agree. It's profit, but it's not "savings."

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I don't agree. It's profit, or a capital gain, but not "savings."

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I agree that in most cases, the principal amount of the bonds that you
purchased counts as savings. (assuming you didn't borrow to buy the
bonds)

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See my previous post. "Savings" is different from "equity" which is
different from "capital gains". There's a reason why the words are
different. If there was no difference between "savings" and "equity",
then there would be no need to have two different words.

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Because you will have to move in order to get the benefit of the
equity.

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It enters into my equation. If I have to uproot myself and move, and
lose the benefit of my low property taxes, nice neighborhood, well
known neighbors, kids' school and friends, a house that has been
rennovated to my liking over the years, etc, then to me, under my
definition, it does not count as savings, even though it is equity.

Say I've got enough to pay cash for the new place, pay for the movers,
and cover
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See above for the reasons.

By any definition in
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I'm sorry, but you are wrong. If you look at the definition of
"savings" as referenced by Wikipedia, which was linked in one of the
previous posts several days ago, it defines "savings" as money put
aside from income into a bank or a retirement account. This definition
does NOT include home equity. Thus, my definition is consistent with a
common understanding of the term while yours is not.

Don't confuse the word "savings" with the word "equity". They are two
different things.

Sgt.Sausage wrote:
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I'm with you on this. There are degrees of liquidity, and there are
'collectibles' that may be completely illiquid, but a house, even in a
falling market, has some value that's always going to be there.

And if I prepay some principle, I accept that I can't write a check and
retrieve it the next day, but it's money not 'spent' nor thrown away.
JOE

<emailforian[at]gmail.com> wrote in message
news:1156168214.240976.137900[at]m73g2000cwd.googlegroups.com...
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O.K. -- forget that I've "distorted" what you said and go with me
on this for a moment...

Riddle me this:

If I can sell my car, and realize a profit, then the equity in the car
is "savings".

If I can sell my stock, and realize a profit, then the equity in the
equities <grin> is savings.

If I can sell my bonds, and realize a profit, then the principle in the
bonds returned to me upon sale/recall is savings.

How come, if I can sell my house, and realize a profit, it is
specifically *not* savings under your definition?

Moving doesn't enter into the equation. Say I've got enough
to pay cash for the new place, pay for the movers, and cover
any other moving expenses and still have, say, $100K left
over. How is this not 100K in "savings"? By any definition in
the world (except yours) this *is* "savings" -- exactly $100K
in savings to be precise.

Sgt.Sausage wrote:
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What gives is that you have distorted what I said. If you have 10
bazillion dollars in stock, you CAN sell it without a) moving, or b)
incurring debt. Thus, according to my definition (not your distorted
version of my definition), it counts as savings.

Sgt. Gausage, you obviously didn't read what I said carefully. Here is
what I said:

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If you have cold hard cash sitting in a bank, you CAN access it without
a) moving, or b) incurring debt. Thus, by my definition, cash sitting
in the bank IS savings.

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work that way. You can't utilize the value stored in 'em without either
borrowing against them or selling them. You either put it up as colatoral
or you lose (sell (move in the case of a house, sell in the case of other
assets)

Even with cold-hard-greenback-American-FRN-Cash: You either have
to borrow against it (incurring debt) or spend it (lose it).

There is *no* (None, nada, zilch) asset class in which you can both
have your cake (keep it) and eat it to (spend it).

(a) Given: I've got 10 bazillion dollars in stock. AND
(b) I have to sell it to spend it, THEREFORE
(c) It's not savings.

According to this twisted logic, savings doesn't exist in *any* form.

What gives?

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I never used the word "should."

On 2006-08-16, emailforian[at]gmail.com <emailforian[at]gmail.com> wrote:
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Regardless of how the term is used by the vast majority of
non-economic geeks, the BEA is the one who calculates the statistics
that get reported, so their definition is the important one.

And they define it as income minus expenses.

How it *should* be defined isn't an argument that I'm willing to have.

I'll take a crack at this;

jIM wrote:

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Assets minus liabilities. Some include furniture/collectibles. For me,
it's just investments and house. It's what the daughter gets if the wife
and I drive off a cliff. (although I don't count the term policy as a
current asset)

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The part of my paycheck used to fund 401(k)/IRA/pay principle on mort.

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Sure. How do you make a million dollars in the restaurant biz? Start
with $5M. Someone's snapshot means little. It's how they got there and
where they are heading.

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I can't think how, but there's likely a contrived answer that would work.

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Certainly it measures something. For some, it's a target number, a goal.
For others, there's no limit to what it would take to be happy.

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To increase one's net worth, mostly.

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Well, save 5% but get a 20% annual return, and you're better off than
someone with a higher savings rate but lower return.

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Only if a dramatic shift in lifestyle is desired. If you make $20K and
are ok with that, then $20K/yr from the investments will let you retire
in the manner you've lived. If you want better, you need to up the
savings. I understand from the discussions that the replacement rule of
80-100% needs to be adjusted for the client. So much of my income goes
to savings, both retirement and college, as well as mort payments, that
I'm sure I can live very well on 60% of my income. For others, they will
travel or pick up hobbies at retirement and blow through money faster
after they retire. Either way, it's percent of income, gross is the
usual approach.

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There would be a high correlation. Back to my answer to 5.

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I think there are 2-3 issues being muddied into this one thread

A) what is net worth?
B) what is savings?

and the million dollar questions

1) Can a person with high net worth not be financially successful?
2) can a person with low net worth be financially successful?
3) what is net worth used for- is it a measurement of something, or
something people try to achieve (is it the cause or the effect?)
4) what is savings used for?
5) does a person with high savings (amount) saved accomplish more than
someone with a lower amount?
6) Is the amount saved more important than the percentage saved?
Percentage of what?
7) Savings (both amount and percentage) will generally lead to high net
worth, will a person with high net worth necessarilly have lots of
savings?

Greg Hennessy wrote:
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This quote from the bureau of economic analysis does not answer the
question by itself because we have to know how they define "personal
consumption." I did some quick research, and it is unclear to me
whether they include mortgage payments. At one point in their
methodology, they state that the purchase of a dwelling is not
included, but they also state that they impute "the space rent of owner
occupied housing" as personal consumption. Look at table two in the
below cite.

http://www.bea.gov/bea/ARTICLES/NATI...p/methpap6.pdf

In any event, regardless of how the term is defined by the BEA, the
common definition of the term by the vast majority of non-economic
geeks is consistent with my definition, which is supported by the
Wikepedia cite provided above.

BreadWithSpam[at]fractious.net wrote:
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Here is a quote from Wikipedia, the citation you provided:

"In common usage, saving generally means putting money aside, for
example, by putting money in the bank or investing in a pension plan."

This is exactly what I have been saying all along. Thanks for
providing a citation to support my position.

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What, ruin a perfectly good argument by inserting facts????

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"Personal saving is the amount left over from disposable personal
income after expenditures on personal consumption, interest, and net
current transfer payments."

"emailforian[at]gmail.com" <emailforian[at]gmail.com> writes:

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Here, argue with the BLS, the BEA, and every economics textbook
I've ever read:

http://en.wikipedia.org/wiki/Saving_%28money%29

For my next trick, I'll prove that Net Worth is not equal
to assets minus liabilities. And that one plus one equals three.

--
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You have not provided a specific citation for this statement.


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I'm afraid you are the one who is redefining the term. Almost noone
includes home equity in the common understanding of the word "savings."

"emailforian[at]gmail.com" <emailforian[at]gmail.com> writes:

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Disagree all you like, but that's how the government defines it
and it's really the only consistent way to do so.

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"what's your net worth?" Some folks include their home equity
and others don't. Leaving it out makes it a relatively useless number.

What's you *liquid* net worth typically excludes home equity, but
that's a little more subtle.

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define things as you like. but don't expect folks to know
exactly what you mean if you redefine terms which do have
specific definitions already.

--

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Are you posting responses that are easy for others to follow?
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<BreadWithSpam[at]fractious.net> wrote
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Agree - and any "Savings" increases your net worth.

BeachBum

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Yes, we have been through this, and, again, I disagree. It all depends
on your definition of "savings". I define it as *money* or liquid
investments (not home equity) that I have put aside and can readily
access and spend at a later date without borrowing or moving. I think
my definition of "savings" is more in line with most people's
definition.

I think if you ask most people "how much do you have in savings...",
very few people will include their home equity as part of their answer.
Thus, we can disagree on how we define the word "savings" but I think
my definition comports with the common understanding of the term.