No Money to Spare? Invest your Necessities

Forty percent of all American households survive as best they can on 12% of the nation's aggregate income, while financial advisors advise them to set aside money or assets. One disabled college student invests his necessities, and earns compound interest on them.

Rural Humboldt County, Calif. (PRWEB) December 18, 2005 -- Financial advisers and accountants urge every family to invest, setting aside funds or assets for college, retirement, and emergencies. Not doing so, they say, is unwise. However, this advice makes those advisers seem completely out of touch to the average American household. According to annual data published by the U.S. Census Bureau, 40% of American households are doing their level best to survive on about 12% of the nation’s aggregate income. How much of a household’s disability check or food stamps do the financial advisors expect them to invest?

The next higher 20% of America’s households may receive almost 15% of the nation’s aggregate income, but they have the disadvantage of possibly qualifying for credit, and therefore suffering the burden of debt. How much do the financial advisors expect them to borrow for investment purposes?

To the upper 40%, out of the 60% of American households described, getting ahead financially usually means cutting corners on necessities, such as buying the cheapest calories their money can buy, rather than buying decent nutrition. However, the lowest 20% of these households, who make do with less than 3.5% of the aggregate income, can’t even dream of getting ahead, and buy the cheapest calories their money can buy, in hopes that those calories will last until the next month.

How can such households set aside money for investment? Households that qualify for housing assistance may get a break on rent or mortgage payments from government subsidies. Otherwise, the landlord isn’t likely to offer a discount coupon next month. Some utilities may offer a small discount for low-income households, and households with health-related electrical needs. Meanwhile, we can only turn the heat down so far before the family suffers, according to Sam Thorne, a disabled college student living in rural Humboldt County, near Eureka, California. “And if you have a gas tank to fill, you can shop for the lowest price available, but someone else dictates the amount of that lowest price.”

That leaves the phone bill, if the household can afford a telephone, according to Thorne. Fortunately, a federal mandate makes Universal Lifeline Service available to those who qualify. Federal mandate also allows a choice of both local and long distance telephone carriers. A household may choose a long distance carrier, regardless whether or not the household qualifies for Universal Lifeline Service.

Mr. Thorne provides www.CompetingPrices.com, a web site specializing in comparison-shopping calculators of telephone service costs as a community service, because he says, the opportunity to invest in a phone bill is unique, due to all the regional, state, and federal taxes and fees charged as percentages of our usage charges. “Reducing the cost of your usage is like receiving interest on your savings”, he said. “However, reducing your taxes by reducing your costs is like receiving compound interest.”

Comparing the costs of competing local telephone services presents a challenge to Thorne, because some companies don’t allow independent web sites to compare their rates side-by-side with their competitors’ rates. However, he recently worked around that issue and improved the Local Phone Service page on his web site. “During the first nine days after I improved it, nine different people successfully used it to change their local telephone carrier.”

For the 60% of American households that survive on 27% of American aggregate income, a problem that remains is to invest the money saved, rather than to spend it on yet another necessity, according to Thorne. As a disabled student, he still has a problem with that himself, “I do my best to apply the money I save toward paying down my debt, because the interest that costs me is more than I could ever earn on it. Right now, that’s the closest I can get to saving my money.”

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