I was just thinking...
If I was today to be faced with zero income, how long would my investments be a buffer for me before I was bone dry?
I am yet to do the math on this, but it isn't as long as I would probably hope - but what is?
It is hard with crypto since the fluctuations in value can be quite a wild ride up and down, but based on current prices and financial obligations, what amount of buffer is recommended - six months, a year, five years? Of course, the more the better.
One of the things with Hive (and a few other staking cryptos now) is the potential to earn on holdings, meaning that an income can be earned, even though there are no other incomes - kind of like a dividend of sorts. On Hive, earning via curation is like getting a dividend on staked tokens which will roughly return between 10 - 20 percent in tokens a year. For me though, I would need a "fair bit" more stake to be able to live off curation - but, in the push come to shove world of personal finance, it would be a welcome stream of income - although dicey due to price volatility.
What is interesting is that I read somewhere once that 40% of Americans are a paycheck away from homelessness, which is an incredible amount if true. While I don't know how they calculate this, it is scary to think that that percentage of people also are likely to have a relatively high person debt as well, meaning that losing a couple of paychecks will result in loan defaults and a potential knock-on collapse.
I don't know how many paychecks I am away from homelessness myself, but if I lost all work, I would be able to survive short-term, which will potentially tide me over til I found something else. While it would be scary AF to be in that situation currently, being able to survive immediately is somewhat of a relief.
The obvious problem is that if I was to lose all of my income, it would probably mean that the world is in quite a bit of turmoil and global economies are going to be highly uncertain. I guess the whole idea of investing to generate value is a process of risk management, trying to be prepared for an uncertain economic future in the same way that a prepper prepares for the future by stacking supplies. The idea of money is that one can buy those supplies without needing to store a large amount of them - but demand is of course going to push prices up, meaning one needs to be able to pay more than others are, if there is scarcity in supply.
With the recent Corona conditions, a lot of people started "stacking" supplies to make it through some period of time - mostly toilet paper. However, the shelves did empty of non-perishable and long storage food too.
I wonder how many looked to stack their investments too? Yeah, the stocks crashed and recovered fast, but how many moved across into an investment that they believe is "less perishable"?
I think that this is where crypto will come into play as while it has all the functionality of a currency, it can also have the attributes of a commodity like gold - but it isn't perishable and unlike gold where the "owned gold" is far greater than the actual gold in the world - owning crypto means to have the keys, to have the "physical" possession of it, even though it is only a few zeroes and ones.
Due to the current uncertainty, will more people be looking for the security of real ownership over that of conceptual ownership? Probably, which is why many people are looking to secure ownership of homes, even if they are a little pout of the way. It seems there is now a move toward ownership over lifestyle for some portion of the global population - Something that I think Hive encourages.
The changing reality we are now living is not only disrupting our physical lives, it is bringing into question all of our various concepts about why and how we do things - including what actually has value to us. While it is still going to be approached on a far-ranging spectrum - I think more people are going to start identifying holes in their approach to financial behaviors and look to shore up the weaknesses, with the major weakness being owning very little of value.
This will result in some percentage of people questioning what it means to actually own something and realizing that much of what they thought they owned, is not theirs at all as if they need it, someone can stop them from using it. It is much like "not your keys, it isn't yours" except this is where most of the value of investments lay - in areas that we don't actually have immediate access to.
This doesn't answer the question of how much is the minimum needed as a buffer, but I think that we should all be thinking about what constitutes ownership for us and how that is practically applied in times of need.
Taraz
[ Gen1: Hive ]
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We are just about to find out, I fear. The federal unemployment 'boost' has expired and rent assistance and eviction protection expire tomorrow. Unemployment is back on the rise and a whole bunch of people in the 'middle' used invested money to get by. It really looks to be ugly from where I sit.
I know at least two people that have lived for a time off of their Hive. One who just reopened her business and one that hasn't yet. It had to be scary AF but they had that cushion at the very last.
I honestly don't see what's driving the stock market here, but it's not reflected in the well being of a significant fraction of the population. It's got to be pure profit taking and that isn't sustainable.
For me, the question now is 'how bad will the crash end up being'?
I guess I am on the more optimistic side of things when it comes to America and our economy. however I do live in a State that has not bee hit as hard by the social unrest of the lower 48 states. With the crisis in China, and people still wanting to spend money in America, it seems some manufacturing may be coming back to America.
I have seen over the last two years a small building boom, and business boom around me. Yes the virus lock down hurt, yes we have a lot of people wearing mask, and a lot of people not wearing mask, but the communities around me don't seem to mind one way or the other it is a personal choice. I have only had to put a mask on for one business, that is all.
So I really don't see a crash coming that will have wide ranging effects for where I live nor can I see how it will effect my life that much. The housing bubble bust did not stop me from selling and then buying a home. The housing bubble bust did not have long lasting effects on the economy. The Internet bust did not have long lasting effects on the economy.
I do not see long lasting effects from corona virus issues having a long term effect either. but like I said, I am pretty much and optimist.
I wonder what this will look like - or if it will actually happen.
I think in regards to masks, you might have a northerner approach to life - a bit more common sense.
What I think will happen is that it will concentrate more wealth in fewer hands again - the next layer of the pyramid.
At 200 billion, Bezos has made 21M a day for every day since Amazon was founded - including weekends. Quite incredible. Corona has added about 50 Billion to his net worth. Sure, this is all technical and is a drop in the ocean in comparison to the derivative markets - but it tells of what is happening with the money flow.
This is happening in Australia too. In Finland, I am not sure how much was spent on this, but I have a feeling that it was less per capita.
This is how I see it. I will see rockbottom, feel rockbottom, but not have to touch rockbottom.
The collapse is going to be mammoth. I would suggest that some percentage of the profits will ove into new stores of value - to "protect" it from reach.
I think you could be right, particularly from the 'near top' and middle. I think there will be a 'correction' where a whole bunch of fiat disappears from the supply. People will realize that (and mammoth inflation) are both possibilities that might be mitigated in crypto, and probably more so there than anyplace else.
I think there is going to be a severe human cost, AND a severe monetary cost to the entire nation.
The thing with the rich is, they spend cash on generative assets - and who they buy it from spend that cash on consumables.
It is going to be global. The human cost is going to be immense.
If there is hyper inflation just 'holding spot' might seriously be considered 'generative'. I'm sure at least some would see it that way some would see precious metals rather than crypto as the answer.
In my particular case I'm hoping for devaluation not inflation. Much of my income is fixed. In hyper inflation I'd be left sucking wind.
The Federal Reserve Bank’s Leave No Billionaire Behind policies. 😏
I think I am just shy - so will drop off the billionaire peloton.
I think it's a long-term drop. The Fed is fighting the effects of COVID on the economy. At the same time, it is fighting sell pressure from Baby Boomer retirements, which are at their peak. The demographic effects on the economy are a major long-term downtrend unless much of the Boomer wealth is inherited down. COVID might suck up retirement savings for Boomers, however. One good hospital stay can devour retirement savings.
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!ENGAGE 20
ENGAGEtokens.We will see, and sooner rather than later. I expect a crash, not a recession. I don't know about everywhere, but the bank that my brother works for offered delayed payments on 4 billion in loans. Those deferments end tomorrow, too.
10 million unemployed and that is rising pretty fast. Travel and hospitality are just toasted.
It has been happening for years already -most just haven't paid attention. Something large is brewing.
Ownership, does come in to question in all walks of life. I can sit here and know I own my computer, but with out my own source of power that particular ownership is meaningless if it is not usable. You can almost own your own car, but with out a drivers license being able to use it is iffy, not to mention the constant tax of having to power it whether via gas or electricity. Once again no power, no ownership.
There really is no minimum needed, when trying to build a buffer. It is not something that can ever be a real number. While working if one wants to retire you need to be able to take at least 20% of you pre-tax income and be able to save it in a safe place for 30-35 years. Problem is determining what that safe place is.
Along with the safe place, you need to have those funds grow as the years pass by. Taking a ten dollar bill, putting it in a coffee can and burying it in the back yard is not going to be any help in 30 years.
Okay so a practical number to shoot for I would think would be one year of buffer income. That number is always going to grow each year as cost do have a tendency to rise. One year of house payments, one year of all current out going expenditures such as electric, water, sewer and what ever other monthly fees your country/town/city require. Being able to keep that roof over your head is the most important thing.
I know a lot of people will think different. But when you are out of work, need work, and are living on the street with no address, you are going to learn why it is so difficult to get off the streets. One of the first things I would think a potential employer is going to ask is, "is he reliable'? Living on the streets with no roof over your head does not in the minds of many equate to reliability. Truth or not, it is perception.
If I was to invesnt 100% clean and free power - do you think I would be able to release it freely?
I think the one year is a pretty good target and if working for 20 years, it means around about 5% saved a year (and growing a little) - which makes the amount of people one paycheck away from homeless quite scary. The median wage in the US is 34K - about 3K a month - so that means that a whole lot of people have debts and obligations without the savings to cover even one month.
!ENGAGE 20
ENGAGEtokens.I don't think you need as much of a buffer if you are able and willing to do odd jobs. Many people get in trouble because they hold out for the next job, which in this economic environment may no longer be there. However, if you are willing to work on your own until the next job opportunity, it is possible to get by with modest investment income.
My fallbacks are computer repair and networking, working for temp agencies, and I have even worked in factories. My willingness to go out and get work rather than a job makes it less frightening to survive until the next job offer. Fortunately, I grew up working on farms. Hard work does not frighten me. So, I'm willing to do things that many workers would refuse to do, such as work hard.
Like you, I am quite a ways from being able to use Hive rewards as income. My stock and crypto holdings are also not sufficient to generate the needed income to pay all my expenses. However, they are enough to boost my current income, which helps boost my savings rate.
My strategy has been shifting from paying down debt to building up my savings. I'll be paying slightly more than the minimum payments and spending from debit instead of credit. I know it sounds bad; but, if the economy turns for the worse and I lose my job, I'm defaulting on debts and keeping my cash. I'll have to suffer the impact to my credit for those 7 years, which isn't too long considering I may live another 40 years. Hopefully, things won't go that far and I am able to hustle enough side work to avoid defaulting.
At some point, there has to be a crossover point where your investment income is higher than your minimum payments. That is my goal. I won't get there being timid in my investments. Rather than aggressively paying down debt, I'm building up income. Hopefully this works out well enough that when I reach retirement it won't be with a drop in income.
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In Finland, it is common for people not to work below their education - and everyone is educated. This works in my favor ;)
I am answering line by line - see above :D but yeah, it is becoming a rare skill, - willingness to work hard at anything.
I wish more people saw it this way - A saving stream, rather than an income stream.
I think many are taking this tact - even if they don't have the cash. Live now - default later. I think it is better to have the cash plan than just the "live now" approach.
25 years til retirement for me thereabouts - fingers crossed, nose to the grindstone.
25 years sounds like a great deal of time until you realize that the last 25 went by so quickly. I'm feeling some urgency to my savings as I am between 11 and 20 years to retirement, depending on how well I am able to save. The closer that date comes, the smaller the margin of error.
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I completely agree. I feel like 25 years is just around the corner and it worries me that I am so unprepared.
!ENGAGE 20
ENGAGEtokens.I've had that in mind for quite a few years now and I think it's something everyone should at least give it some thoughts, although it has to be answered considering different variables.
First, we all have several monthly expenses we probably can get rid of in case of need. Stuff we purchase or memberships we enroll into just because we have higher income but we can forget about in case of real need. That brings us to a longer buffer no matter how much money we have saved. Second, there are assets we might be able to sell and get additional income, especially if we own a house and can move to a rental one. And third and most important is speed as the faster we downshift, the longer our earnings will last.
For most people, it is quite easy to add concurrent expenses as their income grows, but they take too long to react in the opposite direction when needed because they have never gone through such a situation and it is hard to assume and not easy to recognize.
Finally, crypto is a whole new open frontier. On top of accumulating as we do here in Hive, and staking to get additional passive income there are new opportunities to try, especially in the new DeFI arena exploding right now. To me, part of the reason the huge growth of DeFI is due to the uncertainty we are all facing due to the economic conditions the whole world is going into. DeFI offers a quick, low-risk, and fast way to experiment with new income options for those who have some fiat to purchase crypto or some crypto to exchange into some of these new tokens.
Some tokens from new DeFI dApps are experimenting HUGE growth and those who are already in crypto should take the time to educate and carefully enter with small amounts into this new world as the returns are too important not to consider.
The new created WHive offers a way to do so using Hive tokens and letting anyone enter some of the Ethereum based DeFI dApps exploding right now.
I have looked at what I can cut immediately by way of subscription, and it is significant if in that hard place. I don't need entertainment most of the time, when in need, even less. At some point, if it doesn't generate value - it is gone.
While there are some practical considerations - I think a lot of this is mental, where we hope things will improve before we have to cut.
I have barely looked into this yet - and I feel I am already far behind the 8-ball.
Never too late. I'd suggest to look at the Wrapped Hive videos and get a small quantity of WHive from your Hive and then swap it into one of the new Defi protocols token as Aave (LEND).
First, you will learn with a small amount, second, you will have a chance to diversify your portfolio and third, you will invest in one of the tokens who is experimenting a nice pump as all the Defi ones are experimenting.
I believe we are far away from reaching tops, Defi offers a nice way to avoid KYC required by most centralized exchanges and offers many ways to gain income for users providing liquidity, that is one of the reasons it is growing so strongly.
What are the main DeFi tokens are out there now?
They are pumping every week but right now there is LEND
Balancer and one that is doing incredibly great are Yearn Finance, but I am not familiar with it and have to go deeply into its whitepaper of explaining videos.
All of them run in the Ethereum Blockchain which is the one you can access through WHive.
You can take a look at this site where there is info of all the Defi protocols and tokens
https://defipulse.com/
It is a whole new world, that is why I recommend starting very small in just one protocol as Aave purchasing some LEND and from there, start learning and understanding before investing some more or getting into other projects. But the fact that is a participatory new way of offering finance is creating this growth explosion. Just two days ago, Uniswap volume exceeded that of Coinbase.
!ENGAGE 20
ENGAGEtokens.From tomorrow I'm starting saving 10 EUR per day and forwarding it into a special account. If this could last, In 6 years, I could have saved enough for a new car. Not saying that I would buy a new car in 6 years but it's good to know this financial buffer is constantly increasing instead of decreasing.
10€ seems so little in the scheme of things, but it adds up fast, especially if that account is set to grow at a faster rate than the inflation. 6 years from now, I suspect you won't be buying a car, I also suspect you will end up with more than what is expected :)
Actually 10 EUR a day savings in Lithuania means a lot. I don't know if I can pull it off but I will definitely give it a good shot.
yes, I understand it is a lot there - I meant that in comparison to the car, or isn't that much, but it adds up fast.
But not fast enough, if one is aimed to Model S ( TSLA) , or LucidAir :)
Especially in Finland....
!ENGAGE 20
ENGAGEtokens.Fortunately we have been through this situation a few times before.
Lost 3 houses, cars and almost everything else in my life, but every time I have bounced back.
No doubt, should the occasion again stick its head up, we will simply not surrender and do everything all over again.
Luckily we don't have much to lose and no debts, so it would have to be a calamitous situation that will try to sink us this time. It is always good to learn how to live with the minimum, as then ones appreciation powers are enhanced!
Giving up is never an option!
Track record is reassuring - when the path is of making it through. I think a lot of people nowadays haven't been heavily tested - yet.
This is where most people have stayed away from, instead living on debt.
Yes and agreed and the great fear that when the real test arrives it sows absolute havoc. To survive is to be prepared, not only financially, but also mentally.
The easy life of plenty can turn out to be a deadly serpent.
Two words for this my friend. "Askew values"
"Oh, I have to drive a better car than my neighbor" But the neighbor is a director and I am a clerk living with my parents. So major debt to buy the latest Landrover.
Just one small example. There are millions of others.
Take Hive, look at the trending posts of $30 upwards.
Now why is the charity post of yesterday, about feeding poor little children languishing in the $10 range?
One answer; "Askew values"
The mental preparation is something that most forget, which is also probably why many don't reach financial security either.
Values akimbo - but things can change. When it comes to charity, I think at the moment there is a problem where people have the fear of their own future, so will err on the side of preparation. As hard as it is short term, perhaps in some way it is a good thing long term, rather than have the tiny handful take all the opportunity again.
Agreed and debt is a fool's riches methinks.
So many people are owned by the big banks and if anything goes wrong which it often does they will always end up on the losing side.
Been that way for the past 20 years my friend and it's only a very special type of people that will will step up to help.
Believe me when I say that I see life as it is from the hard side of life.
The good thing is that you have also been there and you know it for what it is!
!ENGAGE 20
Thank you @tarazkp
ENGAGEtokens.Thank you kindly!
bro that sometimes I think to that way too so I buy at lease 50 to 100 dollar of crypto every month because like this pedantic were almost all institutions are shut and have no revenue source and I glad I had some bitcoin that I buy way back after selling them I was able to survive my finance decease
Hopefully it has helped you in your life and will continue to until things improve .
The whole money and investment topic is one that is really dicy.
For example, over here in Nigeria we have struggled with corruption and unemployment for so long that we have always tried to create jobs for ourselves as much as possible. We have always relied more on menial jobs than we ever did on the government. A lot of people rely on what they earn daily to survive. That's why the lockdown was really disastrous over here. But I am glad it made a lot of people look beyond the day to day and consider the right steps to take for the future.
As ridiculous as this sounds - in some way Nigerians are better off than most of the world - you have relied on yourself for so long already. A lot of the world has relied on others for so long, they can no longer do much themselves. It is a weird perspective, I know.
If this thought went mainstream I think it would revolutionize the way people think about finance. I think, in reality, that most of the non-crypto population (and even a significant portion of crypto-lovers) don't really think about their assets in this way. The idea that 'conceptual' ownership of gold that isn't really theirs would really disrupt their feeling of security in standardized assets.
It's funny how the SEC ruled crypto a 'security' in the U.S. I read a post earlier by @taskmaster4420 that talked about the current system and the way it is controlled by the super-rich like Jeff Bezos. It was quite interesting, drawing up the idea that cryptocurrency ecosystems are a way for the people to fight back and shift the balance of power (obviously a long-road approach).
Anyway, great post. Thanks a lot for sharing your always incredible thoughts!
The system incentivizes te accumulation of wealth which can then be used to accumulate more. It isn't Bezos in the wrong, he is playing the system very well indeed (perhaps even somewhat unintentionally at times) - the system is of course, very, very broken however.
Sometimes the dilemma is what do we invest in? In Venezuela it is impossible to save and invest and many of the assets are being devalued. For example, it used to be an excellent investment to buy a house and a car. Now people are abandoning the idea of buying houses because they do not know when to leave the country and cars are not a good investment either because of the gasoline problem. Here it's smarter, for example, to buy a bicycle and large amounts of food, that's how bad we are. You don't think about the future but about the present! It's sad, but true. Greetings, @tarazkp
While I understand this, I wonder how much of it also makes any kind of recovery much harder, so the pain prolonged. I am hoping that in places like Vene, people are putting a little into the "international investment fund" of crypto.
Sometimes the desire to own is not always correlated with the need to earn. I believe too many are confused about this.
I agree - it can be some kind of collector habit - but then, most of what we want in life is not necessary at all for life - including most of what we enjoy and think valuable.
Yes. It is just a matter of perspective and prioritizing
Ownership is somewhat an issue, like you said there are desperate times that'll come where people will realise that what they actually think they own isn't even theirs. It was amazing reading this.
I have seen people lose virtually everything they owned in a moment with a law change - businesses fail because of a new government law. decades of work wiped away. People think what they own is robust, until an authority wants to take it.
Interesting thoughts. Now I am busy calculating my relative safety buffer.
It turns out interestingly that the funds that I am saving up for my house provide me with good confidence in the future. Assuming that the purchase is made, the pillow will disappear. So the question arises, is there any point then buying your own home :)?
This is the question many will ask. Owning property is great, as long as you aren't forced from your land. In some way, I think if all one can own is a house, it might be better to own something else instead. Hard to say though.
I've often wondered about this myself. Financially we would be ok for the short run but that would be decistating to our retirement savings.
Perhaps bartering will be a large part of the way of the world in the future when a bag of beans becomes more valuable then something from pottery barn. Or not, I'm no economist, but these though exercises are important I think to ready ourselves for hardships in unforseen times.
The old say was "buy war bonds" now I think it's changing to "buy crypto"... And beans
I do think that tradeable skills and services will boom in value over the next decade or so - as jobs become scarce. Crypto and blockchain fit in well with this as trustless systems that allow people to buy and sell from each other with relative confidence.
I like this word of yours...
Thanks
Welcome... I do not know where you got this beautiful speech that you are sharing with all of us, it seems to encourage us to read.
What was your secret while you were writing? What inspires you? (^_^)
I have no secret - I generally write in flow and I am inspired by the life around me - the conversations I have, the patterns I notice. I guess it ends up being a blend of art and reality.
Several million.
several million satoshi?
100,000,000 = 1 Bitcoin
At least 100,000,000,000 Satoshis
I thought this was going to be a post about getting man tits, which I desperately need. As for financial buffers, there is no right answer. But since you have a family, I wouldn’t fault you for setting it higher than myself. For me though rather than just increasing the money I have saved up, I am trying to increase the ways in which I could potentially earn an income, trying to turn it into multiple income streams and hopefully some of those will still be viable even in extreme situations.