No Money to Spare? Invest your Necessities

Rural Humboldt County, Calif. — Financial advisers urge families to invest funds for college, retirement, and emergencies, saying that not doing so is unwise. This judgment makes them seem out of touch to the average American household. According to the U.S. Census Bureau, 40% do their level best to survive on 12% of the nation’s aggregate income. How much of a fixed income do financial advisors expect them to invest?

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

To the upper 40%, out of those 60% of American households, getting ahead means cutting corners on necessities, such as buying the cheapest calories they can, rather than buying decent nutrition.

However, the lowest 20% of these households make do with less than 3.5% of the income and must buy the cheapest calories their money can buy, in hopes that those calories will last until the next month.

How can these households set aside money for investment? Some may qualify for government subsidies for their rent or mortgage. Otherwise, the landlord isn’t likely to offer a discount coupon next month. Utilities offer a small discount for low-income households and those with
health-related electrical needs, but families can only turn the heat down so far before the they suffer, according to Sam Thorne, a disabled college student living in rural Humboldt County, California. “But if you have a gas tank to fill, and shop for the lowest price, someone else dictates the amount of that lowest price.”

That leaves the phone bill, according to Thorne. Fortunately, Universal Lifeline Service is available to those who qualify. Households can also choose both local and long distance telephone carriers. A household may even choose a long distance carrier regardless whether it is on Universal Lifeline.

Mr. Thorne provides www.CompetingPrices.com, a web site that helps consumers comparison shop for telephone service as a community service, because he says, the opportunity to invest in a phone bill is unique, due to the regional, state, and federal taxes and fees charged as percentages of usage charges. “Reducing the cost of your usage is like receiving interest on your phone bill”, he said. “But reducing your taxes by reducing those costs is like compounding the interest.”

Comparing costs of local phone services challenged Thorne, because some companies don’t allow web sites to compare their rates side-by-side with competitors’ rates. However, he recently worked around that issue. “During the first nine days after I improved that page, nine people successfully used it to change their local telephone carrier.”

For the 60% of American households that survive on 27% of American aggregate income, the problem remains to invest the savings, rather than use it for necessities. As a disabled student, Thorne still has that problem, “I do my best to apply what I save toward my debt, because the interest on that is more than I could earn on it. That’s the closest I can get to saving money.”