Don't Quit Your Day Job…

The issue of the declining savings rate in America has been mentioned as one of the ways in which the younger generations are falling behind economically. The credit crisis caused massive deleveraging in America which increased the savings rate, but most of it was due to consumers reducing debts and liabilities as opposed to building assets. There could be many causes of this, but to name one: in times of uncertainty, consumer tend to brace themselves for a more hazy future by building net worth as quickly as possible. A decrease in stock prices and home prices eliminated much of the buildup of household assets which needed to be counteracted by an increase in savings. Also, credit standards have tightened, which has further compounded the problem and increased the deleveraging among American households.

We apologize in advance if this discussion is too concentrated on minutiae and definitions, but we’d like to clarify an issue (with the help of our readers!).

Let’s just throw it out here: “How do you define savings?”. It’s a serious question, and you’re going to get two articles with serious answers… one from yours truly and another from Cameron, our resident Economist. Let me lead with my definition: ‘savings’ , in my mind, is any money set aside from current earnings that is easily accessible, liquid, fungible, and have a reasonable chance for maintenance of principal and appreciation.

Let’s call this post PKamp3′s financial confessions!

In response to a Dollar Challenge by fellow Personal Finance writer Corey at 20′s Finances, we’ve decided to give all of you curious folks out there in the Internet a view of your humble host’s finances. As a condition of the challenge, all numbers included in this post are post-tax (For the record, more goes to tax than savings. Thanks California!). Without further ado, here are our non-GAAP 1st quarter finances, audited by the firm of DQYDJ.net.

A commonly heard refrain in the personal finance world is ‘Keep 3 months of living expenses in an emergency fund!’ If fact, this is heard so much it’s almost become a mantra for people taking control of their finances for the first time. Where does this ‘3′ come from? Why do you keep it? All this and more will be answered, read on…

My article “A Penny Saved is 1.76366843 Pennies Earned” was included in this week’s Money Hacks Carnival!

Head over to this week’s carnival, hosted at Own the Dollar, and check out the 69th edition of the carnival. The article is located under the heading “Frugality & Saving Money – $10,000 Federal Reserve Note 1914″.

If you come into money, don’t ignore paying down debt as an option. Oftentimes paying down debt can save you much more money than you can earn with another option. Additionally, paying off a loan in full will increase your future cash flow. Read on for a look at debt as an investment and a closer look at tax-equivalent yield.

“Bennet Sedacca announced to the world at 10:15 on the morning of March 5, 2008, that venerable Bear Sterns & Co., the nation’s fifth-largest investment bank was in trouble, big trouble.” The first paragraph opens with a bang. Ten days after Sedacca made that call, he was proven right. Bear Sterns was no more. William D. Cohan’s House of Cards: A Tale of Hubris and Wretched Excess on Wall Street, explains how Bear Sterns got there.

“A penny saved, is a penny earned,” wrote Benjamin Franklin in Poor Richard’s Almanack. The quote is repeated as fact by many people, often while picking pennies off the ground. Our friend Ben lived in a simpler time, and it’s time to revisit this famous quote with a little (disgusting? intriguing?) math to see if it holds up to closer scrutiny.