Many Americans who live paycheck to paycheck blame debt | Hacker News Reader

Many Americans who live paycheck to paycheck blame debt

cnbc.com

113 pointshhs297 comments

I honestly must be missing something about both this article and this discussion thread.

> The Survey of Household Economics and Decision Making asks people how they would pay for an unforeseen $400 expense. If a respondent said they simply wouldn’t be able to or would have to borrow money, sell something or neglect other bills to do so, they were included in the share of people for whom coming up with the money would be a challenge, which added up to that alarming 40%. Yet the Survey of Consumer Finances, which asks respondents for their bank account balance, found the share of households who have less than $400 in their checking or savings accounts was closer to 20%.

> For some reason, many people who had $400 on hand still said they’d struggle to come up with the money. “We were scratching our heads,” Chen said.

What if that $400 (or even $1400) were for rent, or utility bills? Wouldn't it be obvious that you have to borrow money, sell something, or not pay a bill in order to use $400 of it? What's the confusing part? Also, I guess you could call your utility bills (but not your rent) debt, but that wouldn't be a normal usage.

This article, and the vast response to it (which I can't connect to the fairly empty content) is confusing to me. Are they saying something I'm not seeing?

edit: I mean, more than once in my life, I've had more than the money I've needed to cope with an unexpected event in the bank, and I sold something in order to pay for it, because no money fairy was coming before the end of the month to keep me off the street.

> What if that $400 (or even $1400) were for rent, or utility bills?

I guess the key word here is unexpected - as in, outside of what you've budgeted for.

I think parent was saying that the people who have over $400 in their account may already have it earmarked for rent or other bills.

If my monthly rent is $1200 and I have $600 in my account, it doesn’t mean I have $400 I could spend in an emergency

For some reason, I am reminded of the paradox of more hard disc space. Or more lanes on the highway. Any time to capacity is increased, it seems to get consumed and before long, you're out of space again.

This presents a difficulty that perhaps researchers and pollsters can tease out: How many of these cash-poor people genuinely are earning enough to live comfortably vs. don't know enough or don't care enough to build savings, and instead, spend up to their income? Increase their income and they'll just increase their spending and be back where they started.

It seems likely that we could take these numbers down substantially by improving financial management education. Or, simply accept that a large percentage of Americans want to live their life to the fullest that their income can allow.

i think this is referred to as Braess's paradox

https://en.wikipedia.org/wiki/Braess%27s_paradox

No, that's a mathematical trick in graph theory that has rarely been seen in real life because it depends on very specific arbitrary parameter choices.

Are you sure it will get the economy better? Savings is essentially turning consumption money into capital money. What is the benefit of that in the economy where the latter is printed by the trillion?

It's turning consumption wealth into capital wealth. Printing money has a huge impact on that distribution, but it's not something you can increase globally by printing.

We could start by teaching about managing money in high school. I didn’t know how the stock market worked, about the Fed, about saving, IRAs, Roth, 401K, what a w2 really is, the tax brackets and how they work well until after high school.

My high school in the Midwest hardly even covered Trig. There was no Calculus course. We did invest in our football stadium, basketball gym, and various other athletic programs. I’m not saying those things aren’t important, but real education took a back seat.

I did have a class on managing money in high school. It involved a man fanning out his credit cards and explaining that if you pay off one card with another you can maximize "float." We were then quizzed on the 'best' payment methods, which required ordering a few in terms of when we'd actually have to pay. Shockingly, he was not a money-savvy wealthy man.

My point being that there are whole host of prerequisite problems to solve before we can get to a point of using public schools to effectively solve societal problems like this. I think your second paragraph begins to speak to one of the reasons these problems proliferate.

Your school allowed that man to speak to students?

I'm surprised you're being downvoted for such a reasonable statement. If schools teach essential life skills classes such as driver's ed, they really should teach personal finance and home economics (especially cooking) too.

Schools in my area stopped teaching driver's ed decades ago. The community college offers a few classes a quarter. They sell out in about 5 minutes.

I wonder why our accident rates continue to rise year after year.

Funny, my Midwestern high school actually required me to take a consumer economics class where we learned about taxes, retirement accounts, credit scores, how to balance a checkbook, and other stuff.

My highschool had personal economics courses preaching the 70/20/10 rule with saving 20% of your income for short term savings, 10% for long term. People don't follow it because credit(debt) is too easy to get and you can make impulsive decisions to blow money on vacations and other things. I don't know what the answer is but a highschool course isn't it.

More HDD space did eventually solve the problem for most people most of the time.

Which I think is telling. People don’t need unlimited road capacity, but they do want more than a few minor improvements.

A thousand times that...

But the matter with roads is different, because we will not see orders of magnitude improvement on road capacity, ever. What we need is completely different solutions, but it would be great if people pushing for city mobility weren't pushing against the one form of mobility that actually works most of the time.

> "...roads [are] different, because we will not see orders of magnitude improvement on road capacity, ever."

you don't need an orders of magnitude increase in capacity. doubling it is probably enough.

you can do that by putting roads underground, right under existing roads. it's expensive, but we have concentrated and idle wealth that could be unleashed on it. let rich people who really want less congestion pay for it. people in LA willingly pay $20+ for one single-occupancy trip in the toll lanes.

For HDD space these days, inelastic costs are a tiny portion of most people's available space.

Most people these days have a decent amount of hard disk space, enough for essentials, with plenty left over for discretionary usage. Although software binaries and video games are larger than ever, and pictures and video have higher resolutions, changes in the distribution of commercial media have made it less necessary to have storage space for music and commercial movies. With the vast majority of people having enough space, few people are hurt if some others require more space -- those people can just buy more storage, and doing so does not affect people who have enough space.

Roads and housing are different, because one person's usage of a particular instance deprives part or all of another person's use. People (and businesses) may be able to attain a comparative advantage by deriving more benefit from their consumption pattern of these scarce resources than drawbacks they suffer from the consumption patterns of others, so any "spare" capacity is an opportunity for someone to benefit. Demand is thereby induced.

I have been developing another mental model of this. I think that we naturally measure our own lifestyles by looking at the people around us. We want to feel like we're beating the average or at least not too far below average. People we encounter in our lives will try to present themselves as positively as possible, so we end up thinking that their lives are a bit more prosperous than they really are. I think this is where most of the pressure to increase our standard of living comes from.

Then you bring in competition for resources. If everyone makes similar amounts of money and everyone is trying to have a similar quality of life, we will tend to spend 100% of our incomes on our cost of living. Just like how perfectly competitive companies will naturally compete away all profits, competition for housing, education, healthcare, etc. will naturally compete away all personal savings until the average savings rate is near zero.

The only way out of this competition trap is to find some way to escape the average. Either find a way to make much more money than normal, be much more frugal than normal, or be much luckier than normal.

That's "Keeping up with the Joneses".

The way out of it is with cognitive training / therapy to have a healthier outlook on your life, and/or learn to hate everyone trying to sell you stuff.

I think this model is on the right track, though I'd change "quality of life" to "positional goods and signaling games". Not all of quality of life is from doing better than other people in your reference set, else FIRE would be an unreasonable goal for middle-class workers.

It's interesting to think about how to reduce the prevalence/cost of these games.

The average is not really that important. As long as your income is not at the lower end of the distribution it’s a just a matter of choice to live as if your income was lower than it is (except in the cases where you would have access to subsidies if your income was actually lower).

I have found this to be distinctly not true. I don't know of many places were living a more modest life is a good choice. It seems like most people who says this have already benefited from cheaper education, real estate, their partner or career. In many countries average savings doesn't keep up with the increase in property values, especially not in attractive job markets. If you don't have wealth, or go into debt, you are falling behind. I really don't see it, maybe you have some example?

I think the kind of things you're talking about are more exceptions, and probably don't matter as much to a given family in the long run. For example, once I've managed to buy a house, that's a stake in the ground; it doesn't matter that property values continue to rise beyond that, since you've already got the housing you need.

But so many other things really are choices. I see lots of my colleagues replacing their new cars every 3 years; mine is five years old, having replaced the car I previously owned for 12 (and they were a Hyundai and Subaru, respectively, even if I could afford a Mercedes). Having cable TV with all the movie and sports channels is very much a decision that anyone can pass by. How often and where you eat out makes a big difference in expenses. Clothes, shoes, jewelry, furniture, matching stainless steel appliances with wifi, ... the list goes on and on.

Maybe a couple can survive changes in the housing and job market well enough that it they don’t mind the changes to their quality of life. But it very likely will be noticeable to their kids when other families have stronger finances and better access to housing and job markets. If you can’t save more than the difference to such markets what you get for the money is de facto less. It is sort of inflation by inequality. Then the theory doesn’t really hold and the frugality has just been to try and keep up.

I am all for frugality but in many places it hasn’t worked out in the last 10 years because you haven’t had the same access to growth. Unless you already had assets in the first place.

Huh? I guess I'm really not following your reply. It seems like you're saying that my willingness to keep a car for a dozen years and to bring my lunch rather than buying, and my wife having a $30 purse rather than a designer one, hasn't actually helped my financial situation. That seems a rather silly claim.

You also close the door on opportunity. Your wife with a better purse could be making unboxing videos bring in thousands.

Bringing vs buying could be an opportunity cost. I've worked in places that provided food perhaps a job change could help pay fof the lunch.

Apparently I'm wrong, and there's no point in trying to be economical. The evidence is wrong, and people who spend wantonly actually end up with more net available funds. Who woulda thunk it?

Life is not black and white and studies study only certain things. Don't consider yourself wrong because certain use-cases may lead to other outcomes.

Being economical will save you money. At some point being too economical will mean you have to accept lower quality/value. There is a tradeoff.

If your parents were being economical they might not have purchased a computer in the 80s.. It was seen as an expensive toy and not purchasing one would have saved them thousands. Long term the opportunity cost would outweigh the purchase cost.

Buying a cheap kettle it might last 6 months paying a little more and you don't need to replace it for 5 years.

There is an old British saying. Penny wise / pound foolish.

Sure, and you can also buy an expensive kettle today and replace it with an even more expensive Alexa-commanded kettle next-year.

It’s silly to say that not going to Hawaii for a week or not buying a $1000 handbag is going to cost you more money down the road...

Where is the opportunity cost in bringing your own lunch to work? Would he increase his chances of getting a better job if he stopped doing that in his current job?

The person who throws out working stuff for something newer always has a pulse on what is hype and has the first mover's advantage. You can't be the first to write an amazon kettle app if you don't own the product.

The bringing a lunch eating alone vs eating with the group does matter. A lot of company information gets shared during lunches, friendships are made and sometimes you get to interact with people from other parts of the company. This does give you a leg up when promotions come and or layoffs.

Not going on vacation ever or not buying a purse doesn't seem like it would matter. It could if you are looking to join a social group where everyone goes and shares vacation photos or if the group goes purse hunting together.

The point is any path could save/cost you as long as it fits with your goals and your situation. Saving that college money instead of spending it and going could allow you to buy a home sooner but it also could limit your career growth. Everything is a tradeoff.

It also makes sense to buy lots of kettles and designer handbags when you're a merchant of kettles or luxury goods. You could make a case for anything, but some of those scenarios may be more relevant for the general population than others. I'm sure that for most people spending in real estate or education may be better than spending in fine wines, holidays or luxury cars.

> Everything is a tradeoff.

Absolutely. You trade work against money and money against stuff. You could have more money and less stuff. Which means having less stuff now and more stuff (or less need to work) in the future. Because money and debt are tools to move consumption between the present and the future. That's the point. It's a choice and nobody is limiting your capacity to consume in the future by forcing you to consume today.

An example of what? If you are getting by with an income of $X and you get a raise of $Y you have the choice to keep your spending at $X and save the additional $Y.

>As long as your income is not at the lower end of the distribution

I think this is key. If you make $200K/yr, saving 1/10th that means you drive a lexus and not a benz. The Lexus is not worse than the Benz in any objective way; you paid less and got a car that is going to be more reliable and cost less when it does break. I mean, don't get me wrong, I like how the german cars drive, but you've gotta be really dedicated to own one out of warranty.

The problem is that sure, at a high income, you can usually save a lot of money by making sacrifices that are merely aesthetic, by buying goods that are objectively no worse (and sometimes objectively better) - but below a certain point, buying a cheaper good is going to get you something objectively worse; often something that will end up costing more in the long term. Downgrading from a 15 year old Toyota to a 25 year old ford is going to get you something that probably costs you more, in total, to operate, even though the initial purchase price will be lower.

I mean, I think the disagreement here is mostly at what level this happens.

No, the point is that you have the choice of making real sacrifices, getting something that is objectively worse than what you could afford if you spent every single cent that you have and then some. (That’s true at every income level, anyway, not having a mansion in the Hamptons is “objectively” worse than having one.)

Eating chicken today and saving so you can eat chicken in the future may be a better idea that eating prime rib and starving if you lose your income.

>(That’s true at every income level, anyway, not having a mansion in the Hamptons is “objectively” worse than having one.)

I'm assuming, from context, that the figure of merit for this discussion is having money in the future. Obviously, in the context of getting a reality tv show, a mansion in the Hamptons is "objectively" better than having a bunch of cash and a modest place to live, but we're talking about having money in the future here. Buying and living in a mansion is... usually not a great way to go about furthering that goal; I'd argue that living in a mansion, in the context of the goals we're talking about here, is objectively worse than living somewhere modest and putting the rest of the money you would have spent on the mansion in a low-cost index fund or something.

>Eating chicken today and saving so you can eat chicken in the future may be a better idea that eating prime rib and starving if you lose your income.

That's kinda my point? I mean, that if you can downgrade from beef to chicken (something that doesn't interfere with your current ability to earn money and does not incur future costs... something that will in fact lower future costs, as chicken is healthier than beef, and if you are poor, you are paying a lot more of your healthcare out of pocket than I am) sure, that's great. If your figure of merit is money in the future, eating chicken could be said to be objectively superior to eating beef.

When you aren't buying the absolute cheapest good available, you can usually find substitutes that are cheaper and impose fewer future costs, and sure, seeking those things out is great, and important to think about all up and down the income spectrum.

But there is nearly always a point at the bottom of the spectrum where there are no cheaper options that are actually cheaper long term - that don't impinge on your current ability to make money or impose big future costs.

If you don't have any place to cook, that dollar menu burger looks pretty good. If you can't get a regular loan and need a car for work, paying way too much for a low quality car at a 'buy here pay here' lot looks pretty good. Of course, both those things will cost you down the line, but what are you gonna do? you've gotta make it through today or there won't be a tomorrow to worry about at all.

Maybe we agree then. If the objective is to save money for the future virtually everyone has the option of reducing consumption to some extent in order to increase wealth (saving or repaying debt). I thought that you were aligning with the "saving is out of reach for most people" side, I apologize for the misunderstanding.

I'm pretty sure this is true, but there's an extra dimension.

When we look at others around us, we see that the Smiths take a vacation in Europe every year; the Joneses have three kids, each in travel sports leagues; Fred Johnson has a new Corvette; the Harrisons just put in a swimming pool. All those people that we take to be our peers are able to do various expensive things, and from that we generalize that we, too should be able to do those things.

The problem is that such expenditures are probably OK if you're doing one or maybe two of them. But it's hard to see that all those other people are limiting themselves in that way; it's easy to see an illusion that our peers can do all those things, and so we believe that if we're of the same economic class, we ought to be able to do them all as well.

I think this is true to a point, if you are making <40k or so saving money requires almost a monastic lifestyle. My income has ranged from 20k -almost 200k and it’s ludicrously easy to save at one end, and almost impossible on the other. It is not super fair to tell people eating out is a luxury they cannot afford.

From a european perspective, eating out is a luxury. Eating out once a week is considered spendy where I live.

I live in an European capital and a decent enough meal at an ok restaurant for both me and my gf costs about 25-27 euros (no wine, just sparkling water for me and in most cases some tea for my gf). I don’t find that terribly expensive, Europe is a big place.

Usually I hear people say that they shouldn't have luxuries like cheap $300 TVs, smartphones or fridges. These things are only for the rich after all. I once tried to figure out how much money I can save by changing my lifestyle. What I found out is that there are a lot of minimum price floors under which what you're buying is complete junk. In other words you're not saving money. By paying $1 less you're also getting $1 less in value or often even $2 less value. Want a cheap computer? How about a raspberry pi? No screen, accessories, no case, no input devices and for people who aren't computer savvy it runs that weird linux thing. If you buy all that stuff you could have gotten a refurbished thinkpad which offers a better experience. Don't want to spend $1000 on proper machine tools? You can hack something together for $300 that doesn't do the job well at all. And the savings aren't even that great. You're maybe saving 40% compared to just getting the real stuff but since you're not buying much stuff anyway and therefore are primarily spending all your money on rent and food it doesn't matter at all, unless you're willing to have a room mate. This again isn't saving anything, you're getting worse quality in exchange for less money. Your "financial management skills" didn't help you out, the problem wasn't that you made a bad decision, you simply don't have enough money. Someone with enough money isn't even going to spend a single thought on buying a used computer, let alone a raspberry pi, they will straight up buy their 16 core workstation with 128GB RAM for $5000 and then be done with it, never using their "financial management skills" at all. What all these poor people need is to increase their earning potential, which obviously isn't easy.

The comparison to a $1000 laptop isn't a raspberry pi - it's a second hand ThinkPad that's three years old. It will be slower, but can do pretty much all the same things for most people, and could still cost 300 dollars.

I don't know the MTTF on ThinkPads, but the wear and tear on a three year old laptop is usually considerable.

I bought my first laptop in 2010 for about €630 and after three years switched to the current one. During that time two out of four USB ports became too loose to function properly in all circumstances. I have more anecdata like this from my friends and coworkers.

Usually the older ThinkPads last longer than 5 years, or at least long enough for the tech to become obsolete.

US median household income is about $60k, which is stagnant for about 15 years despite GDP growth [1]. The median listed housing price has increased by ~50% for the same time[2]. What could a good financial management education teach with these trends in mind?

For a newly-minted median-income household, what is a good financial decision between buying a house or renting? Buying a house with much debt and mortgage payment is risky (remember 2008?) but maybe it is a good investment until that time. Or, not buying a house and continue to pay the rent and helping someone else paying their mortgage may be the safest bet. In either case, there seems growing housing cost anyways that no financial education could help.

Maybe moving to an area where no job exists but house or rent is cheap could be an alternative that no education suggests?

IMO, financial education without considering external environment is easy. It's always like, save more and keep some cash for the risk. But what it doesn't tell people is that the risk is getting higher for the same return and more and more people deplete their income paying the premium.

[1] https://en.wikipedia.org/wiki/Household_income_in_the_United... [2] https://fred.stlouisfed.org/series/MSPUS

I wouldn't say US median income is stagnant, more like volatile. It climbed from 50k to 60k between 1985 and 2008, collapsed back to 55k during the recession and slow recovery in 2012, then climbed back to an all time high of 61k by 2017. But that actually supports your point: it is very difficult to predict a "safe" time to take on debt.

Is that adjusted for inflation?

It's real income, so yes.

“Real” income is adjusted for inflation (by definition). The contra would be nominal income (or typically unqualified is also nominal).

There are two problems with your analysis:

1) You’re comparing inflation adjusted income figures to housing prices that are not inflation adjusted.

2) You’re ignoring interest rates. Low interest rates allow people to buy more expensive houses without paying any more money per month.

Mortgage payments as a percentage of income have been quite flat across all income levels over the past 15 years: http://www.pewtrusts.org/-/media/data-visualizations/infogra...

Am I reading that chart right that the average person with a mortgage pays around 15% of their income for housing? That seems implausibly low.

It might be a hair more than 15% by eyeball, but remember that’s going to include in the average a lot of people who are paying property taxes only or who bought a place 15-20+ years ago and whose PIT payments are much lower than their current income would suggest they could qualify for. I bought in 2007 and my percent of income spent on housing would now fall in-line with the charted figures.

Do you live in Silicon Valley? That might skew your perception a bit. Median income is around $60k, and median house price is $220k. With a couple assumptions that comes out to around 20%

I do not. 20% is more plausible. The gap between 15% and 20% is high.

Note that most people currently paying a mortgage has not bought at current prices.

And with the reasonable assumption that high-income households are more likely than low-income households to buy a house in any given year, we can expect the buyer of the median house to have better-than-median income.

It makes more sense when you put it like that. The average mortgage holder has a 2019 salary but probably only a 2010 mortgage. (Or whatever bygone year is correct.)

Houses are fairly cheap in the US and incomes are fairly high: https://www.nytimes.com/2017/04/21/realestate/first-time-hom....

> Of those who did manage to buy, the median age was 32; median salary, $72,000; and median home price, $182,500. (Among all buyers, the median age was 44; median income was $88,500; and median home price was $227,700.)

Assuming no down payment, a mortgage of 182,000 at 4.5% is $920 per month, which is just about 15% of $72,000 (before tax). It’s about 19% after tax. Still quite affordable.

The first set of numbers are of first-time buyers who managed to buy. That doesn't really speak to housing being affordable, it speaks to what circumstances people must be in before they feel comfortable buying. Median personal income is about half that [1].

[1]: https://fred.stlouisfed.org/series/MEPAINUSA672N

I don’t think the median individual income is the right reference point for mortgage affordability. Do we think that single people who just graduated high school should be able to buy a house in order for housing to be considered “affordable?” If not, it might be appropriate to compare median housing prices to median incomes of groups we expect to be able to buy houses. Median income for family households was $77,000 in 2016: https://www.census.gov/library/publications/2018/demo/p60-26.... Median income for married couples with both spouses working is $111,000: http://www.aei.org/wp-content/uploads/2018/09/census3.png.

Single people that just graduated high school used to be able to afford to buy a house. In some parts of the US they still can.

Part of the change is we stopped building cheap houses. Building a good 600sf house for 20-25k is very possible. Land costs are also an issue in some areas, but much like the car market people build based on who’s buying not the low end of the market. The profit margin is vastly better if you aim upscale.

They did? When did that happen? My parents --- upper-middle class, college-educated --- started their family in a series of small apartments, and certainly never owned houses when they were single.

Most famously post WWII GI bill provided mortgages to a lot of people without a collage degree. It helped them get a mortgage but they still has to pay the bills. It even still only ~5% of the population had a collage degree yet home ownership was common.

Prior to this people would often live with their parents or other other family members, before buying or building a home. Though this was far less common around cities.

My financial advisor says that poor people should start buying more houses so they can keep up with rising prices.

This comment makes the classic mistake of citing flat real (inflation adjusted) income and increasing nominal (so not inflation adjusted) housing prices. If you take the Q1 2019 vs 2004 median house prices, they are 44.6% higher 15 years later. Said differently, the median house price has gone up by 2.5% annually. Basically by inflation.

I'd like to improve the financial education of people making decisions in government. Because they've run up a $22 trillion debt.

And our government cannot come up with $400 to cover an unexpected expense either. Not without going further into debt.

Which is why all such decision makers should at least learn how to run a lemonade stand profitably.

Until then, they should not be deciding what financial education people should be getting either.

It’s called Induced Demand, a very common phenomenon in everything from traffic to housing

https://en.m.wikipedia.org/wiki/Induced_demand

Advocates of “more housing” in the Bay Area, for example, will be dismayed to see that tons of housing and higher density did not work in NYC, prices will remain high, so more housing is not the solution.

This is incorrect. The impact of supply on housing prices has been shown over and over again in the real estate economics literature.

The concept of induced demand in real estate is quite different than in transportation. The theoretical mechanism involves increased amenities induced by higher density above and beyond normal supply and demand interactions. It is likely to be a much smaller effect if it even exists at all. There is no solid research showing it is a significant in practice.

Here’s a recent presentation on the issue:

https://appam.confex.com/appam/2018/webprogram/Paper25811.ht...

"Induced demand" leads to wrong conclusions in general, analogous to confusing the local maxima produced by a hill climbing algorithm with a global one.

It's possible to build enough of anything to satisfy all the demand, even roads. The real problem with roads is the opportunity cost. There are alternative, better ways of satisfying that demand -- like building more housing, so people can live closer to where they work and don't have to drive as far.

So what's the alternative, better way of satisfying demand for housing? Nobody has one? Then we ought to build more housing, even if we have to plow through some induced demand (which may or may not even be present) in order to satisfy the full demand.

I’m glad people understand that building more housing does NOT work

Not really. Induced demand applies to housing.

Tons of housing and higher density appears to be working on London though.

https://www.forbes.com/sites/garybarker/2019/07/18/london-ho...

London has seen extremely high levels of house and apartment building. The market is being flooded with supply, and now prices have fallen 4.4% in the last year. So apparently it's definitely possible for even big global cities to get ahead of demand.

Before someone says this is related to Brexit and not the huge increase in supply, bear in mind that:

• For the whole country prices are still going up.

• That's because in regions outside of London they're going up above inflation, e.g. in the north west they went up 3.4%. But Brexit affects the whole country, so it doesn't work as an explanation.

• Prior claims about "uncertainty" affecting prices didn't pan out. Government economists claimed in 2016 that "uncertainty" would be such a strong effect it would cause a massive recession, instead the economy grew at a strong rate and unemployment hit record lows.

So it seems pretty clear to me that the simple, well understood economic explanation of supply and demand is sufficient to explain these results. New York could probably achieve the same thing if it built enough homes.

It seems plausible to me that Brexit would cause lower house prices in London without affecting the rest of the country.

1. London has (had?) a lot of immigration from the EU.

2. London's economy is very connected to the EU. Lots of European companies use London's financial and business services.

Don't want to argue against your overall point, however.

It might be that London house prices were already overinflated - look at a comparison between London house prices and the rest of the UK: https://d1btnptfa0r0eu.cloudfront.net/wp-content/uploads/201...

I don't disagree with the substance of your point, but London is far from a watertight argument.

China has built ghost cities that are sparsely occupied, so I think the supply-demand concept holds for even housing. Just because the housing was built doesn't mean people wanted it, simply because it existed.

I think in the case of hard disk space or internet bandwidth, the blame is less on users and more on developers who seem to see this as an invitation to bloated (but convenient to develop with) data formats or frameworks since "space is now cheap". (Even if it's actually the user's space and not theirs)

So the equivalent would be rising prices to eat up any benefit - and exactly that seems to happen. At least there seem to be enough studies about the rise in prices of certain sectors vs the (far lower) rise in income to debunk the "they are just uneducated/undisciplined" hypothesis.

The fact is that people are just storing more. Higher resolution pictures or even RAW files, 4K movies, high quality audio, games with fantastic visuals in enormous worlds.

Of course the operating systems and apps are full of bloat but that’s only a small amount of storage, really.

I don't think an analogy that focuses on "capacity" alone is a great one. You want an analogy with both stocks and flows. It's worth checking out Donella Meadows' book "Thinking in Systems: A Primer".

here's a rough disk space analogy with stocks and flows:

Suppose you have a disk with free space X. What rate do you consume free disk space? What rate do you produce more free disk space? if flow out (of disk space) is larger than flow in (of disk space) then after some finite time you will always run out of disk, no matter how much free space X you started with. More capacity (a larger initial value of X) just buys you more time until the emergency. Which is useful, but you still haven't solved the actual problem in terms of the delta between the two flow rates. Now if you have your flow rates under control, and you produce at least as much free disk space as you consume, what if the flow rates aren't always steady, but have variability? Then having some spare capacity can help to provide slack or buffer to deal with temporary periods where disk is consumed much quicker than usual. But there are diminishing marginal returns to having lots of excess capacity.

> Annual income twenty pounds, annual expenditure nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pound ought and six, result misery. --Charles Dickens

I'd like to improve the financial education of people making decisions in government. Because they've run up a $22 trillion debt.

The people in government know exactly what they are doing -they just don’t care. Politicians only care about deficits when their party isn’t in power.

> How many of these cash-poor people genuinely are earning enough to live comfortably vs. don't know enough or don't care enough to build savings, and instead, spend up to their income?

Yep. It's obviously ignorance or profligacy. The system is fine, it's the people who are wrong.

Needs a "/s". I'm still not even sure because that sounds like a legit viewpoint people on HN may have.

so... I've never been really poor, but like most of us, I've had lower income and higher income. Everyone gets unexpected bills, but my experience has been that those bills don't get larger with your income (even though most of your expected bills do grow with income) - a lot of those unexpected bills get smaller in absolute terms as your income goes up; both cars and medical expenses, in my experience, tend to move from 'unexpected bill' to 'expected bill' as your income goes up, as you generally get much better health insurance and newer cars.

But even the things that don't move from unexpected to expected are harder to deal with when you are poor.

Example; person A makes $14K/yr at walmart. They put away 10% of that every month. person B makes $200K/yr at Facebook. They put away 10% of that every month.

Say you get a $250 parking ticket.

If you are putting away 10% of your 14,000/yr salary - that parking ticket is gonna be a pretty big bite of your savings. I mean, if you've been putting away $1400 a year, you can cover it, but that $250 is still a big bite.

If you work at facebook... say you are still putting away 10% of your $200,000 salary - that parking ticket costs you just as much, but it is a whole order of magnitude smaller when compared to your savings rate.

Medical expenses are the more common case for unexpected bills; it's super expensive to get hurt while poor. It's not so expensive to get hurt while wealthy.

Say you are playing catch with your kid nephew and you fall and mess up your knee. If you make $14,000, you probably have health insurance with the maximum deductible, and end up having to pay a bunch out of pocket. the 2019 out of pocket limit for an ACA compliant HDHP plan is $6750 - that's going to take a lot of saving 10% to pay off. And even if you do get it fixed, you probably have a job where you have to stand up and carry things; you will need a bunch of time off, time off that you're not gonna get paid for.

Say the same things happens to the software engineer making $200K/yr. First, that job probably comes with pretty nice health insurance; you probably aren't out much out of pocket at all. The place where I work offers a HDHP plan but they actually give you an amount of money equal to the deductible every year. (me, I still take the traditional plan, 'cause I'm willing to pay extra if I don't have to deal with medical billing at all) Next? SWE jobs usually come with a bunch of paid time off. This person probably gets paid to recover at home. And if they felt like they needed to work? they probably could work from home; and for that matter, their job probably doesn't involve knees much, so they are gonna be able to go back in to work much sooner than the guy working at walmart.

My father was career Air Force. Once he was ordered to help privates who were having trouble with their finances. They were paid every 2 weeks, and it was embarrassing to the AF for them not being able to pay their bills in the wider community.

My dad phrased it as half the privates had no trouble, the other half had steak and alcohol the first week, beans and begging for handouts the second. All the privates had the same pay, lived in the same base housing, etc.

He said the feast/famine group simply could not control their spending impulses.

Out of curiosity, was your father able to help the feast/famine group in any way, or able to convince them to change their behaviour, short of the AF switching that specific group of privates to weekly paychecks instead of bi-weekly?

No, he said he failed miserably. He'd work out budgets with them, and they'd never stick to them.

I suppose it's like a nutritionist giving out meal plans. People never follow them.

That's sad. I wonder how many people out there can't control their impulses. I also wonder how much of our economy depends on people spending beyond their means. Technically nobody needs to buy anything beyond bare necessities.

My buddy is similar. He's got a decent enough salary, not a lot of mortgage, should be just fine.

Not long ago he complained that he'd been eating instant noodles for two weeks straight because he was short on cash, and was looking forward to next payday. Literally the day after he called me up to tell me about the new GPU he'd bought. Payday had arrived. He'd immediately bought another 2080 Ti, so now he could run SLI! This is a guy who hardly plays games, and when he does it's like Diablo 3 or Civilization.

And guess what was for dinner at the end of that month, again...

I do impulse purchases as well. But not with purchases of that magnitude. Almost always I manage to restrain myself, take a few rounds. Almost always I end up not buying. And because of that, the very few times I allow myself to go wild, I can handle it without sweating.

Back when I worked for Boeing in the 80's, every other Thursday I'd look out the window and see people running at full tilt for their cars at lunchtime. (These were middle aged and older people.) Naively, I asked another older engineer what was going on.

He said they just got their paychecks, and were it a great rush to get it deposited in the bank before their checks bounced.

These were not poor people, and were well paid. But they had no money.

While I'm sure some in the feast/famine group "just" need to get their act together. It's not always that's simple.

Most people have a limited number of good choices in a day: https://en.m.wikipedia.org/wiki/Decision_fatigue

Maybe other concerns/issues were causing some of them to run out of good decision bandwidth.

Note. I'm not claiming that all poor decisions can be explained this way.

Privates in the military don't get to make many decisions while on duty :-)

They were ordered to get counseling from my dad, and he provided a budget for them. No decisions required.

You aren’t privy to what goes on in their heads, so you can’t really say either way.

Then the whole "decision fatigue" thing is a theory without any real support.

Except you can run experiments to falsify the hypothesis.

Perhaps they spend a lot of mental effort not acting out on the average day. Or perhaps the routine has become habitual and they really don’t think about it.

Ego depletion is questionable - http://www.slate.com/articles/health_and_science/cover_story...

I think this meta-myth (that some people just can't make good decisions) is becoming a hysterical epidemic - https://en.wikipedia.org/wiki/Mass_psychogenic_illness

I think there's a mass nocebo (evil placebo) effect. "I can't, because of ego depletion / decision fatigue / not enough spoons". This then becomes a kind of self fulfilling prophecy - people do give up more easily when they have an excuse, and don't have to admit they're just making a bad choice because they're (relatively) greedy and short-sighted.

> "I think..."

Yet, many studies show how poverty and decision fatigue (or some variant there of) goes hand in hand, often in a negative feedback loop.

_I think_ it's likely that poor people don't read these studies, and, thus, are not subject to your nocebo effect.

Note. I didn't say it explained all behavior.

True, though that's a tough argument to make when it comes to Air Force privates, who have their day scheduled, no choice of clothing, and written procedures for almost everything they do all day.

Interesting, my brother is in the Air Force, too. He's had to counsel some privates who wanted to spend all their money on sports cars and tell them, no, you really should be investing that money in an IRA or something similar.

One perhaps not so hidden cost of American life that I wish someone prominent would seriously investigate is the cost associated with car ownership.

I suspect over the course of a lifetime car ownership could easily be the most ruinous financial baggage that a lot of people incur.

What makes you think this? There are lots of sites/people who do "total cost to own" and the numbers they come up with aren't ruinous amounts as far as I can tell.

I have owned cars for over 20 yrs so I have a pretty good sense of just what a hole in my pocket the whole thing is :)

There are all sorts of costs associated with car ownership beyond mere purchase cost and repairs...things like fines associated with cars that fall more heavily on poorer people...there is just A LOT of cost associated with cars.

You write: "There are all sorts of costs associated with car ownership beyond mere purchase cost and repairs". Service and maintenance is another one. I have colleagues who, overall, like the Uber and Lyft lifestyle, even when facing the occasional cancellations.

I'm curious if there are empirical studies done on the overall benefits and costs of owning vs leasing vs ridesharing?

I don't... understand what you're talking about. Sure there are additional costs to owning a car, but you're not really explaining how they're so commonly ruinous to a person's financial well being.

So far all you've given me is a few worst case scenarios, but what about the average scenario? What's the normal car ownership process like in your mind, and how does that average situation teeter so close to the edge of ruin, as you say?

The IRS allows you to deduct $0.51/mile if you use your car for business. This takes into account all the costs of driving: gas, insurance, registration, depreciation, maintenance and repairs.[1] I don't know if it also takes into account the opportunity cost of having $15-50k sitting in your driveway instead of in an investment.

The average American commutes 32 miles/day round-trip[2] (we're not counting other driving). So they're incurring ~$16/day in direct and indirect costs related to car ownership and driving. Over 1 year of workdays, that's approximately $4k in car-related costs.

The median household income in the United States is approximately $60k.[3]

This implies that the median household spends almost 7% of income just on one car. Most households have 2 vehicles so I'll wager it's more like 10-12% of income. This is also more than the amount households save annually (6%).[4]

1. http://www.mrmoneymustache.com/2011/10/06/the-true-cost-of-c...

2. https://itstillruns.com/far-americans-drive-work-average-744...

3. https://en.wikipedia.org/wiki/Household_income_in_the_United...

4. https://tradingeconomics.com/united-states/personal-savings

So? Their entire income is probably tied to that car getting them to/from work, so it is an investment, with returns being their ability to hold their job.

Right. But no one needs a $15k car, let alone a $50k one, to get to/from work. If you're counting job income as RoI from a car, why not buy a $7k car? That's far better RoI.

And after one has held a steady job for a few years, no one should need to finance a $15k car either.

That's where most of the costs of car ownership come from (apart from long commutes) - depreciation, interest payments, and insurance.

No one needs to wear any clothes at all, or at most a paper bag would do.

And yet, here we are...

> No one needs to wear any clothes at all, or at most a paper bag would do.

Clothes aren't optional because of public indecency laws and also because most places don't have perfect weather year-round. A paper bag won't do because it'll rip in a couple of minutes, or not offer enough protection against the elements. Same deal with a plastic bag or anything else that's not real clothing. Being shirtless or barefoot restricts your entry to many establishments, but if you don't care about those places then yeah shirts and shoes are optional.

All the same, no one needs to wear expensive clothes. If they cover you up, keep you warm, and keep you employable, they're good enough. For a programmer that may mean free swag t-shirt and jeans, and for a rich banker, a $2k suit. But wearing suits every day would be a pointless indulgence for the programmer and wearing $20k suits every day would also be a waste of money for the banker. (I have no idea how much "high-powered finance" suits cost, numbers are estimates)

Unfortunately for your argument, we don't live in the reality that you're trying to pretend exists, where direct utility is the only valuable feature of an object.

Also the fact that you spent so much time talking about the utility of a paper bag more or less outs you as a pedant, so I think I'm done here.

"fines associated with cars that fall more heavily on poorer people"

Examples?

If its a case of Ferraris don't need to pay to park, where other cars get ticketed, fair enough. If its just a case of poor people being more likely to speed, in which case that doesn't seem so reasonable to call out.

I'm not even sure if fines in general should be counted as a cost of ownership. You can just pay to park, you don't have to speed, in general it seems like a cost of rule breaking to me.

I'm not from the US, so the request for examples was genuine.

I imagine the person you're asking was talking about fines being regressive in the sense that if a wealthy person receives a $100 fine for speeding or parking violations, it's basically nothing, but the same $100 represents a day or 2 of labor for the working poor and could be ruinous if they are already barely able to pay their bills.

We can start with the fact that fines are not means tested so a speeding ticket for someone driving x miles over the speed limit is the same for a Ferrari driver (likely a rich person) and someone who would having trouble covering a $400 expense (a poor person)...in fact it is known that this type of situation often has a cascading effect on poorer people...lose your license/registration because you can't pay the fine, lose your job because you can't get to work, become even poorer....

The real problem is that car ownership is more or less mandatory in America because of the lack of viable alternative in most cases.

Those fines I speak of? I have a lot experience with...in fact for most of my late teens and early 20s I spent thousands in fines for various infractions. Not everyone manages to climbed out of those holes.

Any fine is an example. $40 to someone on the breadline is a problem. While to someone wealthy it’s nothing. There are people who don’t worry about fines due to their wealth, and just avoid situations that would risk their licence.

In Germany, Switzerland, and several other European jurisdictions, Bußgeld/Ordnungsbusse (fines) are distinguished from Geldstrafe (penalty? amercement?).

Depending on the gravity of the offence, the law (or court) determines the amount to pay, and it is in units of money for the Bußgeld, but in units of Tagessätze (daily fine) for the Geldstrafe. Now, how much money a Tagessatz corresponds to is determined in a second step based on the income and wealth of the offender.

So, for example, a banker in Switzerland that went 114 km/h instead of the allowed 80 and overtook on the right several times was fined 450,000 CHF (around 450,000 USD - yes, half a million).

I find that quite sensible.

https://www.blick.ch/news/schweiz/zuerich/halsbrecherisches-...

> I find that quite sensible.

I guess it depends what you think the purpose of a fine is. personally, I think a fine ought to be a rough estimate for the excess risk you exposed other people to. I don't think a speeding banker exposes society to any more risk than a speeding janitor.

> personally, I think a fine ought to be a rough estimate for the excess risk you exposed other people to.

Ok, but that's not actually what a fine is for. It's meant to be a deterrent against future offenses, both by the party it's levied against and for others.[1]

1. https://criminal.findlaw.com/criminal-procedure/fines.html

> The purposes of imposing a criminal fine are to punish the offender, help compensate the state for the offense, and deter any future criminal acts.

looks like the source you cited supports both perspectives.

So then you agree that the goals of "punish the offender" and "deter any future criminal acts" would not be served by having the same fine amount for everyone, regardless of means?

yes, but I personally don't think that's a good goal for a fine. generally speaking, there are two kinds of offenses: those that hurt people, and those that don't necessarily harm, but expose to excess risk. if you actually hurt someone, you should pay the approximate cost plus a little extra. if you hurt someone seriously, some jail time might be in order. but I think excess risk is better handled through liability. there's something sort of absurd about being punished for a behavior that didn't actually hurt anyone.

tbh, I don't actually support speeding tickets in the first place, at least not on the highway. people speeding in a well-maintained vehicle (and obeying the other traffic laws) are not a huge threat. I'm much more worried about the people weaving between traffic, obstructing the fast lane, reading instagram, etc.

> there's something sort of absurd about being punished for a behavior that didn't actually hurt anyone.

So there should only be penalties for DUI if you get into an accident?

It's impossible to predict in advance which specific incidences of risky behavior will cause harm. That's why the behavior itself is penalized. If there is actual harm, the penalties ramp up.

> if you actually hurt someone, you should pay the approximate cost plus a little extra

How does someone "pay the approximate cost" for risky driving that kills or seriously injures someone? If you use the various "value of life" calculations floating around, there are at least some people for whom it's not a lot of money on a probability adjusted basis (e.g. $2m * 0.1% chance of them causing a fatal accident). But accident victims, their family and friends, and society as a whole would prefer that an accident never happened at all than have someone write a check after the fact. This means no one can be allowed to buy a "risky driving pass" by virtue of their wealth.

> people speeding in a well-maintained vehicle (and obeying the other traffic laws) are not a huge threat

The numbers appear to disagree with you. [1] Speeding is a factor in a quarter of all traffic fatalities.

> I'm much more worried about the people weaving between traffic, obstructing the fast lane, reading instagram, etc.

I agree but I've also noticed that weaving between lanes goes hand-in-hand with speeding. It's hard to keep going faster than other traffic without constantly switching lanes to find space.

1. https://www.nhtsa.gov/risky-driving/speeding

there are two major problems with the document you linked.

> NHTSA considers a crash to be speeding-related if any driver in the crash was charged with a speeding-related offense or if a police officer indicated that racing, driving too fast for conditions, or exceeding the posted speed limit was a contributing factor in the crash.

the entire definition of "speeding was a factor" boils down to either 1) an officer was there and gave you a speeding ticket, or 2) after showing up to the scene of an accident, it was the officer's opinion that speeding contributed to the crash in some way. the whole document rests on this tenuous connection. for the purposes of this document, speeding can "be a factor" even if the officer didn't think it was a contributing factor, but happened to write a speeding ticket!

the other major problem is that the document makes little effort to tease apart other risky behaviors that may correlate with speeding. it only breaks out age, gender, surface, and BAC for separate consideration. put another way, this document describes the entire population of people who speed (which is about half of drivers in the US [0]), but cannot answer the question: "how dangerous is it to exceed the speed limit in a well-maintained car if you do nothing else wrong?"

given your responses so far, I expect you will consider this paranoid/cynical, but I don't trust the state to set reasonable traffic laws. just as an example, in my city the government was caught deliberately reducing the length of yellow lights immediately after introducing red light cameras. the state sees traffic violations as a revenue stream. they see something easy to measure (eg, speeding), and make laws that most people will break. they're not interested in investigating whether the limits make sense, or whether they are even enforcing something meaningful. no one is willing to make speed limits their hill to die on, so they get away with it.

[0] https://one.nhtsa.gov/portal/site/NHTSA/menuitem.554fad9f184...

> "how dangerous is it to exceed the speed limit in a well-maintained car if you do nothing else wrong?"

What I'm saying is that speeding doesn't happen in isolation. The only times it's "safe" to speed is:

1. To keep up with other traffic. You're unlikely to get a ticket in this scenario, and by following the speed limit you would be making the situation more dangerous.

2. On an open country road, with little other traffic. You're also unlikely to get a ticket here, because of how few patrols would be around - but be aware of deer.

Otherwise speeding will necessary involve weaving in and out of lanes, sudden braking, and following other cars too closely.

> I expect you will consider this paranoid/cynical, but I don't trust the state to set reasonable traffic laws

I don't consider it paranoid or cynical. I'm aware of the yellow light issue and it's a terribly shortsighted thing for cities to have done. But none of this has to do with where we originally started talking: should fines be based on ability to pay?

> they see something easy to measure (eg, speeding),

If it's easy to measure, it's also easy to follow. Do we want more ambiguous laws that can be even more selectively enforced?

> and make laws that most people will break

That's something to lobby against then. Having a law that no one follows reduces respect for other laws.

I'm not from the US, but starting from some income threshold you can use dedicated lanes daily and pay in the end of the month. While for most of the populace occasional ticket for the same thing might be a big financial trouble.

More "fair" scheme would be fines proportional to your income or vehicle cost, but I have heard of such things only in some European countries.

One can find Total Cost of Ownership calculators online, eg edmunds.com. A Toyota Camry that costs $25k has a total cost of ownership over 5 years of $40k, or some $670 per month.

One could get a pilot's license for that amount and fly an hour per week.

That sounds like a lot to me. Our Nissan sunny from 1991 costs around 500 euro/year for us.

Including gas, oil changes, insurance, new tires, etc? How many kilometers per year?

I used to keep very close track of my finances and commented one day at work on how much of our money we spent on our cars. Everyone in the office thought that I was being preposterous and that they spent nothing near that on their cars. Nevermind the fact that I drove the oldest car and lived the closest to work.

Gas / insurance / registration are costs people just generally don't count into car ownership. Probably part of the reason people are so happy to buy SUVs that get terrible mileage.

1200km/year Yes, including all of these.

1200km year is not much (3km/day). The calculation above probably includes ten times as much usage.

Edit: apparently the edmunds.com calculator assumes 15000 miles per year which are 24000 km, 20 times your 1200km.

Avoiding fines is pretty much trivial. It’s insignificant compared to the cost of maintaining and fueling the car unless you’re incredibly irresponsible.

Define ruinous. I'd expect car ownership to be someone's 2nd largest expense. I could see how it could tip someone over the edge.

A great deal of this depends on whether the car is bought outright or paid over time, as car loans are usually hideously bad deals. Better to get a cheap car that will be short-lived while you save for something more durable, in many cases.

Wait, why are car loans hideously bad deals?

1. You're paying interest on a depreciating asset that doesn't earn any return. Worse, the minute you drive the car off the lot, it's worth 20% less than you paid for it. So you're underwater on the loan immediately. Even if you sold it for book value you would lose money on the deal.

2. If you are able to pay cash but choose to take a low-interest loan and put the cash into investments that have a better return, you can come out ahead. But most people either don't have cash upfront, or are not sufficiently disciplined to do this.

3. If you own a car outright you can get by with liability-only insurance. If you owe money on it, the lender will require collision and comprehensive insurance, which costs a bundle.

Doesn't America offer some of the most affordable car prices?

This might be a bad example, but I am pretty sure that luxury German cars like Mercedes/BMW are cheaper to purchase/register in America than Netherlands/Denmark due to taxes.

Yes, but cars are more of a necessity here than in Europe. No matter how poor you are, a 20 minute drive can still take over 2 hours by bus in some areas, and that's nearly impossible to work with.

Depends where in the US, and where in “Europe” (it’s a pretty big place you know...)

I have no statistics to back this up, but as far as I can tell the US seems way bigger on both buying new cars instead of used and on buying cars on finance instead of outright.

You're not saving money buying a brand new BMW on finance in the US instead of Europe if you could have bought a perfectly good used car for 5000 USD in cash.

All the cars are cheaper in the US than in Germany; either somewhat when the EUR/USD rate is low, or enough that (re)importing from the US becomes attractive.

Example: base 2019 Prius MSRP Germany: 28,450 EUR ($31,920) - includes 19% VAT MSRP US: $23,770 - does not include local sales tax

That’s even more of a difference than I was expecting, as the exchange rate is currently on the low side ($1.12, compared to the long term $1.20-1.25 or eye-watering $1.50 it touched about 10 years ago)

We still buy $50,000 cars

Indeed, but the US has 51% more cars per person than the Netherlands and 66% more than Denmark[1].

[1] https://www.nationmaster.com/country-info/stats/Transport/Ro...

My dad and I tried to run a blog investigating things like this and giving advice. We've both been able to keep our car costs remarkably low. He's currently driving the most expensive car he's ever owned which cost him 10k (high mileage truck) and I'm still driving a 1993 Nissan SUV I bought a few years back for $900. Even when factoring in cost of repairs for both cars and bad gas mileage, we've saved thousands and thousands versus driving new[er] cars.

I don't think we were being condescending, but all of the posts were met with outrage that we dare suggest such things. People would say things like "I need a reliable car to get to work, and if it's not new, it's not reliable."

How do you calculate the cost of the risk associated with not having the latest safety tech? Especially subtle things like generous crumple zones which make a car less durable but pay off in the worst case?

I think people forgot that a 10 year old car means 2009. Newer cars are still safer, sure, but that's easily recent enough for good crumple zones, strong pillars and plenty of air bags, all for under 10k.

In his post he says his car is from 1993, which is 26 years old, not 10.

Cars are being built for 100 years; there are improvements, but not that big to say a 26 year old car is not safe enough. My 6 year old motorcycle has the almost the same technology like my 1993 bike I had 15 years ago, the only difference is fuel injection and nothing else. It is not even more reliable, but the manufacturer is the same.

That's why motorcycles are becoming comparatively less safe; none of the many advances in automobile safety can apply to them. People on the front lines of highway accidents have noticed the changes in cars due to crumple zones and the like:

> I have been in the emergency services for a little over 20 years now. Back in the late 90's we were cutting people, out of cars almost daily, and they where almost all dead or very close to it. Fast forward 20 years, and at the same speed collisions, when we stop on scene, people are standing next to the cars swapping insurance info. It is truly amazing to see a car that has disintegrated, and the people are fine.

> It also smells different. Back in the day you could smell all the stuff that was in the car...batteries would rupture, fuel lines would leak, oil all over the road. Drinking and driving was also more common, so you could smell blood and booze. Those smells are all but gone -- only very high speed accidents smell like that now. --https://www.reddit.com/r/WTF/comments/brg6uy/cop_car_didnt_s...

If you actually want to save money, don’t drive an SUV.

The cheapest new car in the US by the same company is 13,255$ and does 31 city / 39 highway. That cheap SUV gets at best 15 city / 19 highway, so assuming nothing is wrong it’s using twice the fuel.

Assuming 15k annual miles and zero mechanical issues you save money with the new car in ~10 years. Though a more through analysis is likely going to make that time shorter as keeping an old car on the road gets more expensive.

If your keep a car for 10 years it doesn't matter what you pay for it. People who buy new every 3 years are the ones lighting money on fire.

It does matter.

As someone who bought a 7 year old car used and has had it for 10, I disagree.

A new car is usually a bad financial decision, especially if you're at your first job.

I admittedly paid too much for my first car. Bought new in 1998 at way too high of an interest rate. I did keep that car for 18 years though, so it worked out in the end.

Buying such an old car takes some knowledge and skill. You can certainly find one that will be reliable. But can the average person actually count on being able to do that?

Beyond that, this may be a good financial decision on a personal level but it doesn’t scale to society as a whole. Used cars are cheap because few people want them. If everybody tried your scheme, the prices would go way up.

The average person can find a pick-your-brand Japanese car or crossover that’s 5-8 years old, if possible pay cash and get liability insurance only and motor for half the typical costs and basically the same reliability.

We bought my wife’s 2005 CR-V in 2011 for $8500 cash. In 8 years, it’s needed less than $750 in parts and we farmed out only one job (a clutch job which involves a good half-day of labor with a lift or a strenuous weekend without one). Total maintenance expenses have been under $2000 over 8 years and if the clutch job hadn’t been needed would have been under $1000. (Was a bearing failure not clutch wear.)

We’re under $11K into this thing, excluding gas, so $110/mo or so and still totally reliable.

You’re right on the market; it’s great that not everyone wants them: makes them cheap for those who know how smoking a deal they tend to be.

> and we farmed out only one job

That speaks of expertise and therefore is poor measure of TCO for the average person. That said, buying a 3-6 year old used car is frequent advice.

Where people fall down is not buying a used car. It's buying a used car they could not afford as a new car. If your buying a used vehicle that was 30+k new, your not actually getting a cheap vehicle, just an old one.

By far the cheapest car I ever owned was a Mercedes E300D turbodiesel. Was a $55K car in 1998 and a $6500 car in 2009. Mercedes in general but diesels in particular are built to last and are quite inexpensive to maintain if you DIY or use an independent mechanic.

A $6500 Jaguar is probably not a good budget recommendation though... :)

88% off on a 12 year old car is a serious discount. But, if it’s actually lasting 10 years as your daily driver without needing serious repairs you may just want to be buying lotto tickets :)

PS: A friend owned a used car for 3 years then sold it for a net profit without doing any repairs. But, good luck retreating that without spending a lot of time looking for great deals.

I suspect the biggest win is getting over the mostly mental hurdle of “I deserve a new car because reasons...”, deciding to buy used, and then just not picking absolute maintenance hogs. Most cars are quite reliable now and can easily go 150-200K miles without major drama. 10 Audis owned for 10 years will likely cost more than 20 Toyotas owned for 10 years. Even “over paying” at a place like CarMax (who makes it “easy” to shop for a late model used car) is better than getting fleeced at the new car dealer.

People love buying new cars though... It’d be a lot more amusing if it weren’t so financially harmful. (I confess to buying a new electric LEAF but only because it came with $10K in government money in the trunk. Even with you guys buying 1/3rd of it for us and Nissan financing it at 0% interest, it’s noticeably more expensive than our other cars. Good car though. Has needed wiper blades and washer fluid in 55 months of ownership.)

> Buying such an old car takes some knowledge and skill.

That was part of the point of the blog, transferring that knowledge.

> it doesn’t scale to society as a whole.

I dislike this argument, something doesn't have to scale to society as a whole to be a good idea. Tons of people that are rich or unwise can keep buying new cars and thousands of my readers can start buying used cars without throwing the whole world market off.

It’s not an argument, just a plain statement of fact. Remember, the context here is an article about the reasons why a huge number of Americans live paycheck to paycheck. It’s quite relevant to mention that having everyone buy old cars can’t solve this problem.

It also could be the thing that lets them find a job and avoid financial ruin.

Public transit sometimes works, but it almost always increases how long it takes to get somewhere. If I was struggling to make ends meet by working two jobs and had kids, public transit would likely add so much time to my commute, that I'd have to choose between a second job, and having any time with the kids.

Frankly, I think car ownership is one of the most freeing things we have in modern life. It opens up doors that would be closed if you relied on other forms of transportation. Being able to go where you want, when you want, is very valuable.

Car ownership can only be financially ruinous if you value your time at no cost.

I live in a city with excellent public transport, and still, purchase of a car really improved my quality of life. Instead of 45-60 minutes using public transport, I can get to my dad's house with 13 minutes of driving. A recent example where I picked up a PC monitor from Samsung's service center and returned it to the store I bought it from for a replacement took 1 hour total instead 3 hours lugging the 27" monitor through public transport or spending two days worth of income on taxi rides.

The monthly TCO of my car amounts to around 4 times the cost of the public transports' monthly pass, and that doesn't account the money spent on taxis or ride hailing apps. I consider it worthwhile for the immense benefits I'm getting.

We're talking about Americans who live paycheque to paycheque. Presumably their time actually is valued at close to no cost (by their employer). Nobody is arguing everyone should drive a cheap old car.

>I suspect over the course of a lifetime car ownership could easily be the most ruinous financial baggage that a lot of people incur.

Not everyone in America needs or wants a car (NYC, etc). But everyone needs a roof over their head, and so I would vouch that the most ruinous financial baggage is....rent.

In my area minimum rent starts around $700/mo, but I have friends in the Bay paying $2000+/mo. $2000 a month! You could buy 2 beaters every month with that! Your first car broke down because it cost $900? Don't worry, just buy another for $900 and still have $200 left over...

I recognize repairs are expensive for cars that are $30k or even $20k, but there is nothing mandating you to keep that car or to not trade it in for a sub-$5k beater. The only counterargument here would be safety, and if you have kids, I guess that justifies the price tag.

Kids or not, though, you still need to pay rent, and if you're lucky enough to own a house, you still need to pay a mortgage.

In the Bay Area more realistic numbers seem to be around $2000 for a beater and $2000/year for fixing things that go wrong with it (mostly labour costs, $120-150/hour at independent shops here.)

Had my commute been a little less (bringing me under 15K miles a year) the overall cost was remarkably similar to a lease on a modest car.

I'm not surprised and the problem starts with buying a car.

I've always purchased fairly low cost used cars but I recently went to a dealership for the first with someone who was getting a new car (for themselves).

It boggles my mind how reluctant the salesman was to give the "real" price of the car. He also made it sound like it was a nearly impossible task just to get the actual amount the payments would be. He explained how it would take days, require making a charge and would have to get permission from his manager to even start the process. It was a total joke.

They also did everything in their power never to mention the real price of the car with interest applied on the payments, but it's such a non-ignorable amount. It could easily end up being 20-25% on top of what the listed price is from interest.

It really striked me as a situation where if you weren't detail oriented and let the salesman convince you into the purchase without running the numbers yourself you could easily get yourself in a lot of financial trouble.

You can find list prices and option prices on the manufacturer website. Then google for what discounts people are getting off msrp, as well as interest rates. Then tell the salesperson you know what if costs, and you’ll buy it if they give you that price. If they don’t, walk and use a lower hassle service like Cartelligent.

I think the point is that if avoiding, or outsmarting the main sales channel is required, then it probably explains why all the old, sick, busy, distracted people are struggling financially, as this is only one industry out to con them.

Yes. These types of things can require mistakes to be made, and then self education once identified to prevent the same mistake in the future. Which is a lot to ask of someone running a family and working two jobs...

When I'm trying to contain my costs, I ask how much something costs if I pay 100% in cash right now. If they can't give me a number, I generally won't make the purchase. When they that I'm ready to walk away, they usually find a way to give me a number.

Where does personal responsibility come in?

It's ludicrously easy to determine what payments will be, how much interest you'll pay, or what a narrow range of market price is for the vehicles you're considering.

It's hard to imagine dropping tens of thousands of dollars without doing the slightest bit of common sense research as anything other than willful ignorance.

Too many people are buying cars using financial products they don't understand: https://news.ycombinator.com/item?id=14476381

> It's hard to imagine dropping tens of thousands of dollars without doing the slightest bit of common sense research as anything other than willful ignorance.

Totally.

But most people don't do that. Instead, they walk into the door and listen to the "expert" selling the car who is doing everything in their power to rip you off or give you a false sense of what you're really paying for that $25,000+ listed item.

It's insane to me that it's even legal. It's even worse than phone companies advertising something is $X per month but then there's 100 line items added in at the last second. Hotels do the same thing. It's no surprise so many people are in debt. So many companies (including medical facilities) do everything in their power to trick you or lie to you in order to make a sale.

There’s basically 2 types of dealerships. One that sells at rock bottom prices, advertises low prices online no one fully qualifies for, and rarely negotiates much. They focus on what the maximum amount of month you can spend and nothing else. They are the ones selling big trucks and big engines for sky high rates, but not always. Sounds like this is the place you went.

The second type of dealer doesn’t have tons of deals advertised and is usually priced on par with the places around them. They are much more focused on providing a nice sales experience and service. They usually have big lots and repeat customers. Baby boomers love them. You can haggle but they won’t hit rock bottom prices unless you pit two dealers against each other. All numbers are given to you and it doesn’t have the monthly cost tables.

This was a pretty big Ford dealership for reference. The sales guy was laser focused on the max amount being paid per month. Every question was around that and most non-monthly payment questions were diverted unless it was directly related to the listed price.

For rough numbers: The average cost of car ownership in the US is around $9000/yr and 15000 miles (24000 km). So, if an extra $25/day would ruin you, or paying $25/day to go 40 miles (65km) seems ridiculous to you, then you should not buy a car.

This is of course an average. Where you live and what sort of car you choose matters a lot. Putting aside luxury, and new cars and focusing on just transportation… there is a tradeoff between average daily cost of ownership and reliability. If you can say "sorry, won't be to work on time, my car died" without jeopardizing your income then you can live the exciting life of the $500 car. My daughter's friends who do this get by on something like $4-5/day to pay for the car (excluding "mandatory" insurance, which is around $3/day, they pay that sometimes, or not depending on their work situation). Fix the small things, maybe with help from friends, sell it to the scrap yard and get another when the big repair comes.

more rough numbers: I live in an Australian city with decent public transport -- well, decent in patches. It costs about USD $3.3/day for public transport fees if you take the train every day all year. I don't need a car. Now I mostly commute to work on bike (15km return). It costs maybe USD $140/year for bike parts and repairs on a bad year, call it USD $0.4/day. I still use public transport a day or two per week, so that's maybe plus USD $1.2/day on average.

On the other hand I pay a bit more in rent to live somewhere with easy bike and public transport options.

> then you should not buy a car

How then they go to work? I understand that in the USA public transportation is quite lacking except for a few big cities.

Picture a US old suburban area as a network of multi lane roads on something like 5 to 10 mile spacings. These roads will be lined with businesses. There will be some area of small shops on the road, some of strip centers. Maybe a big mall. Some office buildings. Behind these buildings it becomes residential. There will be bus service along these major arteries.

So, choose to live on an artery near a bus stop, and that entire artery becomes available to you for employment without owning a car.

It’s true, you can’t get to arbitrary residential addresses without long walks, but commerce is on the arteries. Try to avoid needing transfers to a different artery. That is a huge time sink.

Newer suburbs, 20+ miles from city center, are different. They only have commerce at the intersection of arteries or specialized areas and this does not work for bus riding.

This is all for fungible employees in fungible jobs. If you are a skilled professional in a suburban employment your pay will be high enough to have a car and live in the quieter areas off the arteries.

> I understand that in the USA public transportation is quite lacking except for a few big cities.

I won't pretend it's the greatest but I've lived in quite a few 2nd and 3rd tier US cities like Phoenix, Atlanta, Jacksonville Fl, Nashville, Knoxville TN and quite a few others and the buses are certainly capable of getting you to work and back. Everywhere I've lived the buses run 7 days a week from early in the AM to late at night and some run 24 hours a day in Atlanta. Pretty much any bus route will see a bus come along every 20 or 30 minutes with some stretching out to 45 minutes. Some routes though will see a bus every 5 or 10 minutes depending on the day and time.

Even in Jacksonville FL which has more land area I think any other US city, there is no urban part of the city that is more than a half mile from a bus stop. You can even take a bus from the north extreme end of the city to the extreme south, where a shuttle connects that will then take you to St. Augustine (a suburb of Jacksonville), a grand total of probably 60 miles, for less than $4 total. That doesn't seem too bad. Is it perfect? No. But I think the public transportation system problems may be a little overblown at least in the cities I've lived in.

If I do not have car it will increase my commute time at least 3 times. I may manage to come late to work due to flexible IT job but most people do not even have that option.

Considering job situation in general in this country people have to commute wherever they get job. I feel this is just fantasy that all of us can live near public transit.

Two of my friends surprisingly told me they live paycheck to paycheck on salaries well into the six digit range. When I asked why, they both said "that's just how they've always lived." So having the discipline to save a little is clearly a challenge for them, despite having a very good income.

I know a lot of people like this. A lot! And they are not traditionally dumb either (about other things).

It's amazing; it's like they are under some kind of spell and can't see right before their eyes, just when it comes to this.

Frugality and being content with what you have goes a long way. People should stop comparing themselves to other people.

That explosive emotional combination of greed and envy is behind so many bad financial decisions.

That's me! I make a ton of money for where I am NOW, but there are certain circumstances that made it so that I'm now just trying to recover. Logically, I always knew that every single step I was taking would lead me to this. Emotionally, it didn't matter and I'd be able to deal with it.

There's a difference between "all I'd need to do to put a thousand or more dollars aside each month is to not party hard each weekend" and "all I'd need to do to put a thousand or more dollars aside each month is to not pay rent or not buy food" though, isn't there?

"well into 6 figures"

Do you understand how much money that is? Compared to the rest of the world population, I mean.

Please don't tell me these people cannot food and rent.

That's my point. His well-off friends are burning through their money by spending it on luxuries. If somebody sits them down in January and tells them they need to have saved up $20k by December, it's a small adjustment in lifestyle and a change in a few habits.

For a family making $50k a year, that's very different.

It’s really not that difficult to be broke in a major USA city, on 100k a year, if you work in certain industries or hang out in certain crowds.

It's never "difficult to be broke", just spend more money than you have, even billionaires go broke.

Most billionaires don't go broke because they spend more than they have on personal expenses. They tend to go broke because of bad investing.

Plenty of billionaires became billionaires in the first place by investing aggressively and using debt to build something. And once the music stops, or the table turns, that might all crumble if caught off guard.

It's weird that the converse holds as well: I know someone who managed to save up $20K in 2 years on a grad student salary of $30K/year, in the Boston metro area. That's a third of his income on a salary well below the median.

It'd be interesting to see how savings rate correlates with income, both across groups and as one individual's income rises over time. I suspect that you'd find some correlation (though probably not as much as you'd expect) across the whole population, but when tracking an individual, their savings rate probably will remain largely constant whether they're making $30K/year or $300K/year.

As with many things in life, habits play a huge role.

People with low incomes have little choice but to budget responsibly or go into crippling debt. Once you get into the habit of spending responsibly, it’s easy to continue that habit even as your income rises. You’re used to making what you earn go a long way.

On the other hand, if your attitude is, “yeah, maybe I’m not making much now, but I should totally be making fat stacks in a couple years,” then your poor spending habits are likely to continue. You’ll go into debt with the expectation that you’ll be able to pull yourself out of it as your income rises. But living beyond your means is a very hard habit to break. You start to rationalize: “hey, I should have a much better lifestyle making $100k than I did at $50k.” Except, well, you weren’t really living off $50k; you were living off $50k plus a lot of high-interest credit.

> People with low incomes have little choice but to budget responsibly or go into crippling debt.

Not at all, poor people waste their whole paychecks on lottery tickets and such all the time. They just end up never having any savings.

I suppose it depends on whether expected future debt is considered ‘debt’.

If you have no savings, then it’s very likely you’ll still go into crippling debt eventually; at best, you’re staving it off until retirement. At that point, cheap credit is probably not going to be as readily available.

But I get your meaning. Yes, there is definitely an in-between where people can spend their entire income without accumulating immediate debt (social debt and future debt not withstanding).

>> poor people waste their whole paychecks on lottery tickets and such all the time.

All of them, all the time? More than other people? Evidence?

I didn't say all of them, "all the time" is an idiom, I didn't say more than other people, and if you want some evidence, hang around a gas station for ten minutes.

Or hopelessness looks for hope through the lottery. As opposed to the hopelessness being caused by the lottery.

> I suspect that you'd find some correlation (though probably not as much as you'd expect) across the whole population, but when tracking an individual, their savings rate probably will remain largely constant whether they're making $30K/year or $300K/year.

As someone who used to spend all of their money, overdraft and credit cards and now lives far below their means I don’t think my experience is that unusual. People who save in their teens or early twenties are pretty far out of the ordinary; I’d bet as their incomes increase the proportion of their incomes saved increase too. Consumption smoothing across the life course is how ~80% of people act, modulo having to save for expensive consumer durables. People borrow or save less when young than old.

I read somewhere that it's typical to spend about 5% more than you earn if you don't track your finances / budget. Having lived both a budget focused and YOLO lifestyle, I'd agree. It just kind of happens - restaurants, vacations, other luxuries that ultimately end up having a pretty minor impact on one's perception of quality of life.

As software developers, we have pretty analytical minds. It's kind of absurd if we don't place some occasional focus on simple things like personal finance and retirement planning.

Personally I value my time working so highly that everything else became secondary. I don't even work on anything particularly important or wide-reaching, I've just clicked something in my brain that puts grocery shopping, budgeting, and other activities second such that I spend an egregious amount of money on take out and other lifestyle creeps.

I think its because there is such a gully between middle class and upper class in the bay area. I make low six figures and the next bracket is so far away that I just feel kind of meh about it.

I think this behavior is hugely detrimental and I'm actively trying to change it, but its what I notice as status quo for my peers and I.

I don't buy the trope that software people have analytic minds. I've seen a lot of source code.

Compare them to the general population.

Funnily enough, it is because I have an analytical mind that I actually think I over optimized on my spend. I, like many I know in this industry, have been playing the credit card reward game since 2012. I live a very minimalistic lifestyle as far as buying things goes, but then plan out rounds of credit card applications and "manufactured spend" to rack up hundreds of thousands of points at minimal cost every year, and have used those points to fund nearly free travel for the past 6 years (mostly one summer vacation and holiday travel + weekend trips). I can't remember the last time I paid for a flight or hotel unless it was a really good deal and made more sense to use cash vs points.

Have been fortunate to fly international business/first/suite class + stay in some really nice hotels.

I agree. One thing that is helping me not be so careless and I read someone on HN mention and went further with it is so simple: enable email and push notitications of your bank account.

Any time you spend over 100 dollars you should be aware of what your balance looks like. It reminds you to step back and not be careless if you just literally got paid and you are already eating well into your funds.

I also setup weekly balance notifications for every Friday. Another simple hack was opening up an American Express savings account. I put at least 10% of all paychecks straight into that account. This ensures I save and the APR is like 2% or something way more than any other savings account I have. Taking money out is a slow process and there is no debit card. Keeps me from being careless as my savings builds up.

Lastly my company had a stock program I would buy shares and sell them once they went longterm and invest into dividend yielding ETFs stock. This has allowed me to build up side income.

Took me a few years to stop and think about these things and form a strategy for myself. If you wanna save smarter any time you get a raise put that extra income straight to a savings account and let it build up. Everyone should have SHTF money.

I’m making well into six figures and I don’t have any significant liquid savings. Child care for two kids, student loans, rent, new minivan, it adds up quickly. I have a bunch of money in my 401k, but I’d be struggling pretty quickly if I were laid off with no severance.

> Some 40% of Americans would struggle to come up with $400 for an unexpected expense.

Would you say that they are in that 40%? Or is it a different case?

The reality is that although there are people out there that end up dire financial straits through no fault of their own (job loss, health issues, etc), an awful lot of people end up in poor financial condition just due to lack of impulse control.

It's not hard to do. Most people think nothing of spending $100 at the bar on a weekend, but do that every weekend, that's >$5000 which is a chunk of change even for well off people.

That blows my mind, actually, for two reasons:

1. If you're a single person, even in the Bay Area, I have no idea what you're spending that money on; and

2. In 10-20 years when those same people are no longer a "culture fit" I wonder if they'll rue their frrivolous ways.

So being poor or being close to it affects people in different ways IME. For some, this means spend as soon as you have it or it'll just go away (eg there is a noticeable uptick in large TV purchases around the EITC). Others will live ridiculously frugally. Some will be super-driven. Others almost defeatist.

In my case there was a time growing up when we were "poor". This is Australian "poor" not American "poor", which is a whole different thing. I don't mean homeless either. Just money was really really tight, as in baking bread because we couldn't afford to buy it, that sort of thing. This actually wasn't obvious to me at the time.

Many who have been "poor" IME never escape the feeling that even in times of bounty everything may still disappear tomorrow. There is much less sense of security. I really think this is one thing that many people who have always had money just don't understand. And I don't mean "wealthy". I just mean they never grew up in an environment where they had serious money worries.

Anyway, the income potential in Australia in software is substantially lower than the US. I was fortunate enough to get a job in Big Tech (NYC) some years ago. I noticed that I'd feel "bad" when I "wasted" $20 on something, like a shirt I didn't end up liking.

A few years ago I ran the numbers on how much I'd saved since coming to the US and honestly I was shocked, as in up until that point I had no idea just how little of my income I was actually spending. And this is a holdover from that psychological lack of financial security. To put this in perspective after paying all living and food expenses, my discretionary purchases and so on that I was still saving 30-40% of my gross income (including 401k). I'd say my income is pretty typical for Big Tech, nothing extraordinary.

Thing is, I actually have no idea what I'd the rest on if I decided to live paycheck to paycheck. So when I hear stories like yours I'm honestly befuddled.

A machining hobby, boating, owning a racecar, getting a helicopter, building a bunker, failing at a startup, having a health problem, travelling around the world ski-ing or mountaineering, getting divorced, paying child support, extreme altruism...

I hear you. I grew up in an Asian country with very very frugal day-to-day lifestyle. Think restaurant eating only on birthdays. Watched movies in theaters only twice in 18 years.

I have serious trouble spending money. I just feel so bad spending $15 on a movie ticket or buying t-shirts more than $10. This despite earning well into six figures, in NYC as well.

Growing up with shortage has fucked our psychology.

Funnily enough I had the same thing thing moving from Bristol in the UK to Sydney in Australia. My salary jumped more than 2x, I've got no idea how to spend it all despite my best efforts to drag everyone to the pub, and so at current rate I'll be able to retire at 45 or sooner.

I'm honestly surprised to hear that about Sydney because the cost of housing in Sydney is insane. Or is it just the case that salaries in Bristol are horrible?

So if I were looking at how to maximize my take home income and retire in the shortest amount of time and I was just picking a place on the globe to do this, I'd pick Seattle, hands down.

I'm not in the bay area, but I think I could blow my entire income. Some top floor luxury apartments are north of $5000 a month (even for 1 bedroom, I've seen 3 bedroom ones north of $7,000). Add in a top end Tesla with insurance and parking is another $2500 a month. That's $90,000 a year right there. Throw in expensive groceries, eating out every day, first class travel, 5 star hotels and it'd be pretty easy.

The definition of "couldn't handle" is wrong. Most people could handle it, it just would mean extra debt - but so what? Average US credit card debit is over $5000. Who cares about savings when you can just get more debt?

The fact that credit card debt is at 18% during a historically low interest rate environment also implies that a lot of people simply don't pay back their debt.

The flip side of it is that people are willing to work for lower wages, because a steady income - even if it is low - means you can get more debt!

Finally, of this money that shouldn't even exist in the economy drives up prices for everything, the best example for this of course is student loans versus the cost of education.

I think when people come across extra funds they just use it to upgrade their life. Maybe they buy the nicer soft drink and snack, they spend more time at the bar with friends, they decide to buy audio equipment or another computer monitor, or they incorporate an extra prepared meal into their regular routine. There are so many small ways to spend money that make us feel like we're living a better life, but when the dust settles the improvement was only temporary.

I knew someone like this. At the risk of being super rude, in a post bragging about their tax return and new Playstation, I asked why they weren't paying down the debt they were recently complaining about.

I forget the exact words but it was basically, "I'm paying down the debt on misery and depression."

It reminded me of some of the sadder parts of my time in university. Sometimes you need a little injection of joy and you try not to burst into tears as you type your debit PIN in, knowing this is basically all you've got left.

I am living in India now and I realize how many things are very hard to get here. If India had a market like America, I am pretty sure most people in India would love to go into debt to experience the products and service which market has to offer.

Here if I've to get something, either I've to import and pay import duties and IGST which effectively doubles the price of product and it's headache to deal with customs. Often it's not possible to find interesting products on local market as a techy.

> living in India now and I realize how many things are very hard to get here.

What are the things is hard to get in India?

There are tons of people in India spend/go into debt to buy a fancy motorcycle, card or cloths or house. Millions of people are in Debt. Thousands of farmers suicide every year because of debts. They may not buy the same thing as Americans, but a lot of people do live paycheck to paycheck.

I would struggle to pay an unexpected 400 bill and would definitely put it on my credit card. This seems like a smart decision to me. When I put that bill on my credit card it affords me an extra 30-60 days to come up with the money. I am in the process of paying off debt, acquiring money generating assets. I would eventually like to be in situation to pay a bill like this, but it seems better pay off as much debt as possible. I guess if I lost my job I would be in bad situation, it is hard to start making money without taking some risks.

I posted in a different thread on a similar topic the other day about how recent tax policy shifts helped me increase savings and pay less than 10% effective tax last year. My post was downvoted and flagged.

If you already have wealth, the economy is working pretty well for you. If you’re in a low paying job, often times with irregular schedules and less than even 20 hours a week, you’re in a world of pain.

I’m not sure what the solution to the problem is. Just discussing it at all has become so controversial.

> If you’re in a low paying job, often times with irregular schedules and less than even 20 hours a week, you’re in a world of pain.

Who is to blame if you are only working a low paying job only 20 hours a week? By all means, it's not an easy world out there. But... wealth + opportunity isn't going to just fall from the sky?

Maybe I am guilty of looking at things the wrong way? Curious to hear your thoughts. Hope I don't get downvoted... :/

>Who is to blame if you are only working a low paying job only 20 hours a week?...

Without more information, we don't know? Does the company even offer low ranking employees more hours than that? Etc etc etc.

> Who is to blame if you are only working a low paying job

I'd argue that it doesn't matter. Whether you take the position that it's the fault of parents/colleges/the education system/predatory lenders/politicians, or the position that it's primarily the fault of the individual, the reality remains that most people are staggeringly unable to change their circumstances.

In general, income/class mobility in the US remains extremely low, especially when someone's first jobs are low income and they have no secondary assets. This is a life-long condition for many (and, arguably, often a multi-generational condition).

Anecdotes to the contrary are a favorite conversation topic, but the lack of mobility remains. What (precious little) applicable information is present in up-by-your-bootstraps stories is either not actionable or not acted upon.

I'd argue that "what if someone is to blame for their circumstances?" and "if I/$self_made_person_of_the_week got out of poverty, why can't you?" are both pointless questions. They attempt to find root causes for a symptom which, when addressed, makes discovery of the root cause a moot endeavor.

People overwhelmingly don't get out of poverty. With a very few ascetic exceptions, there is not an affirmative choice being made to be poor--even in the most conservative interpretation, people are "irresponsible" rather than pro-poverty. Poverty causes suffering (to poor people and to many other layers of the social fabric, including non-poor people). Alleviating or removing suffering is within the power of the state and affluent people as a whole (from donations to social welfare/education programs to moonshots like UBI and a million other proven or plausible strategies).

Who is culpable is not pertinent to the removal of the proximate suffering of poverty, and I suspect that after removing that proximate suffering, the culpability question would no longer be as relevant/interesting (historically/sociologically, maybe, but not as an answer to a widespread social need).

To be clear, mobility (and the severity of poverty) used to be much, much worse in the US (and is still quite bad in many places). But the suffering remains. "You make your own problems" is as useless to point out to financially suffering people as "you just eat too much" is to point out to someone who has been 100kg overweight for 30 years. Solving the immediate suffering has an effect.

If I was in poverty and I wanted to get out of it, I'd go get 2 jobs and make a lot of sacrifices. It wouldn't be pretty, it wouldn't be fair, it wouldn't be fun. But it's not impossible.

Not everybody gets to be healthy, naturally beautiful, natively speak English, work 40 hours a week with full benefits, and get paid thousands/tens of thousands/millions of dollars a month. I'm sorry that people dealt the worst card in life in terms of net worth (those in poverty) are staring up at a proverbial mountain to climb, but I don't really see another solution other than work + sacrifice. Wealth and opportunity aren't going to fall from the sky for them.

> "if I/$self_made_person_of_the_week got out of poverty, why can't you?" are both pointless questions.

Are they though? There's a recipe to get out of poverty. Start exchanging as much of your time/mental health as you can for more money, and don't inflate your lifestyle. Why can't people in poverty be bothered to have to sacrifice more than those that are wealthy? I have no idea. Why do 18 year old supermodels get to date and live off of millionaires while I have to work for a living? Life isn't fair.

> If I was in poverty and I wanted to get out of it, I'd go get 2 jobs and make a lot of sacrifices. It wouldn't be pretty, it wouldn't be fair, it wouldn't be fun. But it's not impossible.

Overwhelmingly that seems not to be occurring. It either does not work as well as you think it does or is not undertaken. People, as I said, do not want to suffer economic hardships.

This isn't an appeal to fairness or egalitarianism, but to the reality that intense suffering is endured by the poor, and that it can be alleviated from the outside regardless of whether or not you think they are responsible for their own suffering. This is an obvious thing to want if you don't like others suffering and acknowledge that most people, no matter how much they want to, do not leave poverty on their own.

> Why can't people in poverty be bothered to have to sacrifice more than those that are wealthy?

That's . . . incredibly insensitive. I understand that ad-hominems are frowned upon here, but that statement is both callous and makes some seriously flawed assumptions about who is sacrificing/suffering, and how much. It also reflects a very "fuck you, I've got mine" mentality, which is not conducive to the formation of functional, compassionate, good-to-inhabit communities at any scale.

One reason for why it does not happen is that two full time jobs are possible only if st least one of them allows you slacking. The issue is not just lack of fun, but being too tired to function properly. And also when you have no outside of job duties.

Jobs that don’t allow slacking pay well because otherwise they have comically high turnover. I worked night shift in one service station and a day shift in another one for over six months and I’ve worker bar with a day job in a supermarket. Working 60 hours a week is easily within reach for any able bodied person under 40, even on a construction site. Over 60 hours or once your body starts to go you’ll be more restricted but once you have a few years in any job you can do the average work that you do on autopilot basically in your sleep.

This argument is incredibly uniformed and privileged. You are assuming that you start from zero... healthy body, no obligations, mental stamina, stable living situation, no unexpected problems. The reality is far worse. It's much more likely that you'd be in debt from past mistakes, which drains your monthly income and removes access to emergency credit. You're probably taking lower quality jobs, which means bad hours and a longer commute. This directly leads to less sleep and lower quality food, affecting your health and your ability to work. You are stressed about money all the time, affecting your willpower and measurably lowering your base IQ. You are probably responsible for other people (children, parents) and unlike to have a stable partner helping you. WHEN (not if) something goes wrong in your life like a car repair, illness, etc your fragile plan is shattered. Your only option is to go deeper into debt, probably at very high interest. Depending on the circumstance you may end up losing your job(s).

Yes, everyone should work hard. Some do escape, and everyone should try! No one is "owed" anything. However, the fact that a person remains trapped in poverty does not mean that they are at fault. "Pick yourself up by your own bootstraps" remains almost completely disconnected from reality.

If the only places that call back are low paying, but you need to work, that's where you're gonna have to work until you can find something better.

You can try to work more hours, but far too many businesses keep employees with enough hours to keep them coming back, but not enough to get health insurance or benefits.

Some might say you should get a second job in these cases, but the schedule is erratic. This, in the long run, guarantees there will be an overlap and you'll have to choose. Neither job will change your schedule (because that causes a cascade of who can cover and it's much easier to say no), so you'll invariably catch some flack and eventually be let go or have to leave.

It's very frustrating being in that cycle, and I can see why some/many simply wouldn't bother

Largely a result of NIMBYism keeping home construction figures near economic centers low, resulting in a huge demand-supply imbalance, forcing renters into a bidding war for access to those markets, causing much of the surplus to go to landlords.

Also, the treatment and legislation of housing as an investment asset class rather than as a life necessity.

And then there's the healthcare industry, swallowing much of the real wage gains in recent decades in the form of rapidly rising insurance costs (cleverly decoupled from peoples' paycheck, so they feel like it doesn't cost them anything).

And, of course, designing most of our cities to require that people maintain enormously expensive personal cars, or waste hours per day navigating sub-par mass transit systems.

There are myriad other causes (advertising, consumer culture, extremely expensive infrastructure, government writing blank checks to universities, etc etc), but I think these are the majors.

Looks like this article is trying to reconcile the multiple conflicting studies on this topic, especially around some of the wording of the questions. Here's the key takeaway:

"Many of the people who have $400 or more available to them likely have already earmarked that money for another obligation (and so, in other words, the cash isn’t really available to them)."

So if you're not in a good position, what little money you have in savings is already going to go somewhere else by the end of the month, and adding an expense on top of that would require an additional debt of some kind. It's still not clear to me, though, how credit cards factor into this since many people put any significant expense on their credit card rather than writing checks/handing over cash.

This research seems pretty obvious, or at least it doesn't tell me anything that's surprising.

All I get out of it is that if your policy is to ride really close to the edge (between income and spending), and if you have credit available to you, then there will be times when you take on debt.

OK, but what else would you expect? Some people are meticulous about finances, and some people aren't. Do you expect the people who aren't meticulous to constantly track both credit card balance and bank balance, then stop making credit purchases the moment they don't have the cash to back it? By definition, it's the sort of thing they don't typically do. With no process to prevent it, of course sometimes the credit card balance will grow larger.

In other words, this doesn't really show that debt is the cause of the inability to come up with $400. It might be, if someone cannot reduce their expenses or increase their income, which of course is true for some people. But in general all it means is that they haven't, not that they can't.

>For some reason, many people who had $400 on hand still said they’d struggle to come up with the money. “We were scratching our heads,” Chen said.

What exactly made them scratch head? I mean if you have 400 in account, doesn't mean you can just willy nilly spend it on unexpected expense. Maybe this 400 have to last you till the end of month

Americans are tremendous spenders. Pay someone 100k a year, they'll spend 101. Then complain it's their student loans that are weighing them down.

Seriously, since the great recession the American economy has absolutely boomed. If someone hasn't made money in these last few years, it's most likely going to be their own fault.

I find that the people who complain about the economy and how the rich are taking all the money while the poor get nothing, are the same people who don't bother to buy any stock.

If the rich are getting all the real gains in the market, do what they do. Which is buy into the stock market and make money off equity and not time.

Damn, if only I knew I just had to have 50k laying around to invest in stocks to not be poor...you figured it out! We have to let the world know about this.

As an example, I have a friend who just took out a $30k loan on a car because "interest is only 2% anyway, so might as well buy something with the money instead".

I would guess that is an extremely common view for people to have.

Yes there are people in actual poverty. But there are also many people who just think there is nothing to do with money besides spend it.

TBH, 50k wouldn't help. It's a petty amount of money when it comes to investments. On average you can aim at 3% per year. That should be enough to support your lifestyle which is 30k if you are ok with being frugal. Would you live like a homeless if you had 1M in your investments accounts? No, you'd be paying off mortgage on a nice house while figuring out how to make more money, deal with inflation and rapidly rising property taxes, so you won't end up on streets when you retire. If 50k could solve your problems, I'd give it to you now because I believe that fixing someone's life is worth way more than 500 hundred dollar bills.

You don't need 50k all at once. You need a little bit of money from each paycheck, saved and invested for years.

Here's an example, a low-paid guy who ended up with a big pile using just that plan. It really works!

https://www.goodnewsnetwork.org/frugal-carpenter-cut-corners...

Debt literally is the problem. Specifically the creation of the money supply only by a select group of corporate banks. The practice of fractional reserve banking means they literally create money out of thin air as debt when they "give" out loans. This means that there will always be significantly more debt and money owed than money in circulation. And literally all of the value of the newly created money goes to the corporate banks.

The problems in our society stem from this universal basic income for corporate bank persons.

If you take a look at the top finance apps there’s a disturbing number of “bridge loan” apps that are meant to front you money between paychecks.

The article repeatedly mentions credit cards as debit but not mortgages (or rental expense). But it seems unlikely that credit cards are the biggest debt/financial-obligations people hold.

Mortgages tend to be equal to rent in the long run due to efficient market reasons. Credit card debt is especially ruinous because unlike mortgages and car loans, there's no asset for the bank to go after if you default. As a result the interest rates are naturally higher because the people who roll over their balance month to month have to pay for the people who go bankrupt at a casino.

I do not claim credit card debt is smarter than a mortgage. I claim it is a far smaller percentage of personal debt.

For example, reducing housing cost by a few percent would have a vastly greater effect than reducing any other source of debt by the same percent.

If a person is in debt, it's not primarily because they bought a latte, it's because housing cost are high.

So if we're looking at debt per se, then it's housing we should be looking look at.

> Mortgages tend to be equal to rent in the long run due to efficient market reasons.

Not really, the property price and mortgage rate you pay is what you individually agreed to, not whatever the "efficient market" says it may be on average "in the long run".

There's tons of macro factors that are currently driving real estate prices well beyond what's justified by potential rent income. You're most likely better off renting.

Living paycheck to paycheck?

1. Downgrade everything you own. Car and house are the main things. You don’t need that BMW. Get a shitty Toyota.

2. Sell the house and move back in with your parents. If you have too much pride, then downgrade to a smaller place. Pocket the savings.

3. Pay off all your debt and student loans if you have any. Ask your parents to help you out. Swallow your pride.

4. Work towards a better job. Go back to school if necessary. For example, you could get an MBA.

Laziness is your enemy. Take advantage of your resources and network. If I can do it, so can you.

> Go back to school if necessary.

Does anybody ever need to take on copious amounts of student debt? I feel like I have some friends who have bachelors and were able to do it debt/scot free, and then I have friends who have $80k in debt with little to show for it because that's what they chose.

It depends on the country, quite a few countries offer re-education for people when they're jobless.

>Get a shitty Toyota

What if I have a shitty Toyota?

>Sell the house

As if I could afford a house, lol...

>Pay off all your debt and student loans if you have any

"Why are you so depressed? Just don't be sad, idiot!"

>Ask your parents to help you out

What if my parents are as broke as I am?

>Go back to school if necessary

And take on more debt that I'm supposed to pay off?

>Laziness is your enemy

My enemy is a system hijacked by the rich to smash and grab as many systems and institutions that are supposed to help poor people as possible.

>Take advantage of your resources and network

I have no money. All my friends are poor. If I didn't go to college, where am I supposed to find these rich friends to get me job references? If I can't afford to go to a bar or a simple restaurant, how am I supposed to spend time with anyone who could help me out?

I'm not actually the person above. But you must understand why people do not like these common tips you give. It is not because they are lazy, but because they do not have the escape hatches you have/had. They are angry that you think everyone has the luxury of getting a personal bailout from your family members, or that everyone owns a car like a BMW.

I say this as someone in your own position. I have a good car, good apartment, parents who helped pay my student loans, and they even covered my lawyer fees when I tried to start my first LLC.

I am in a luxurious position that millions of my fellow citizens would envy. Yes, of course my parents worked hard, they came to this country in 1999 with $0 in their pockets and worked their way up to managerial positions eventually being able to buy a house in a wonderful neighborhood with three (three!) non-beater cars.

I like to think that I work hard. But the opportunities given to me by having good parents, a strong financial background, being in a calm, safe neighborhood, and especially having a pass-me-down car? Those were free. I didn't work for those. It was complete luck that I ended up with parents who gave me these things.

Luck, not work. That's privilege.

> I didn't work for those

But your parents did.

> What if my parents are as broke as I am?

Sounds like they didn't work as hard/get as lucky as your parents?

What is your point exactly?

My initial interpretation is that you're saying the equivalent of "tough shit, sucks for you", which ignores the negative impact of poverty on the rest of society at best, and is actively inhumane/callous at worst.

How did your parents start with $0 but get "lucky" enough to work their way up some kind of occupational ladder to the point where they could live in a home and have 3 cars?

Why aren't those same opportunities available for everybody in your opinion? They were available for your parents.

> Pay off all your debt and student loans if you have any.

Paying back student loans seems like a bad idea, what if the Democrats win and forgive student loan debt?

You'll be left holding the bag.

> For example, you could get an MBA.

With another student loan?

> If I can do it, so can you.

Perhaps, but if I was living paycheck to paycheck, I'd be in "good company" with the federal government, local governments, corporate America and the majority of the general population. That's a pretty big interest group. I have a feeling there's a big debt jubilee coming up...

> I have a feeling there's a big debt jubilee coming up...

I would recommend not living as if you expect that to happen...

Perhaps, but I would also recommend not living as if you expect that it won't happen.

>Paying back student loans seems like a bad idea, what if the Democrats win and forgive student loan debt?

You'll be left holding the bag....

This is an extremely bad way to think about handling your financial future. I feel like too many people engage in these risky bets not only with student loans, but also with investments. But consider, what if student loans are not forgiven? Here you would sit at, what? 40, or 45, not having paid anything on your loans. That's a horrible idea.

With all gambles like that, what's foremost in your mind should be:

"The market can stay irrational much longer than you can stay solvent."

At this point, I think the risk that the student loan giveaway will happen is quite low. Nevertheless, if my kids were older and in or done with college, I’d counsel them to pay the minimum on student loans and save the rest that they might otherwise pay in a taxable account just on the small chance the student loan forgiveness actually happens.

There’s nothing inherently better about paying down student debt if the alternative is investing in a broad based equity fund (VTSAX, VTI, etc). There is something better about paying down debt if the alternative is consumption with that money.

> There’s nothing inherently better about paying down student debt if the alternative is investing in a broad based equity fund (VTSAX, VTI, etc).

it depends on whether you have a subsidized or unsubsidized loan. the interest rate on the unsubsidized stafford loans is only a little less than the average nominal return of the s&p500 over the last ~60 years [0]. the safe bet here is probably just to pay the loan off; you don't know if the next ten years will give above or below average returns.

on the other hand, the subsidized stafford loans have only about half the interest of the unsubsidized flavor. if this is you (and you aren't making enough money to lose the subsidy), it seems like there would be a perverse incentive to only pay the minimum and invest whatever is left over.

[0] https://www.investopedia.com/ask/answers/042415/what-average...

If there's even a 5% chance that the Democrats will give you $50K if you wait, that juices the expected return of not paying off the loan significantly.

I agree with you in general that it's economically nearly a push to invest or pay off the loan under normal political conditions, and that the certainty of paying it off has positive value for most people. I also think there's significant psychological benefit to having no student loans hanging over your head, so absent the possible handout, I'd lean towards paying it off. Waiting two or three years to see if the promise evaporates seems reasonable, given the low average cost of waiting.

I see your point, although I don't think I would recommend this strategy to a good friend. there's also an emotional side to it. even if you made the "optimal" economic decision at the time, it would still feel pretty bad to pay off your loans in full over the first 5-10 years of your careeronly to see your peers' debt get wiped out at the end.

“You did such a good job paying off your own loans, we’re sure you’ll enjoy paying off everyone else’s loans as well...!”

> This is an extremely bad way to think about handling your financial future. I feel like too many people engage in these risky bets not only with student loans, but also with investments. But consider, what if student loans are not forgiven? Here you would sit at, what? 40, or 45, not having paid anything on your loans. That's a horrible idea.

I'm not saying you shouldn't pay anything on your student loan debt. This is in reply to the guy telling you to "pay off all your debt as soon as possible", which is common advice from some of these people that are all about financial responsibility. It's not necessarily good financial advice though.

Most likely you should be paying off any other form of debt before paying off your student loan debt. Also, sometimes defaulting on overwhelming debt is actually the right thing to do. Sometimes bankruptcy is the best solution (not applicable to student loans, but still).

In an environment where almost everyone around you (up to the federal government) is "financially irresponsible", being financially responsible yourself can put you squarely on the losing side. It's happened over and over again in history.

Income tax makes it difficult to catch up once you get behind.

I never understood this mindset. All of my budgeting / financial calculations are based on the amount of money that shows up in my bank account each week. That number is significantly lower than what I"m "paid", but is the actual number that matters from a financial point of view.

I have friends who like to talk about how much they make per year and how that means they can afford x,y,z. But it's always the sticker price, not the in the bank amount after all the taxes and benefits are taken out.

I sometimes wonder how easy it is for the average person to practice prudent financial management when the entire economy is geared towards getting you to spend what you can? The advertising sector and one-click buying works out how to isolate you from your herd and then hunt you down like a lion hunts down a sick gazelle, and you have little to no chance of hitting your monthly saving targets, with the big beasts of the digital economy after your last cent.

If this hypothesis is correct, is there a business here? Financial sergeant major - helping you hit your saving targets. Imagine: “GET THE FUCK OFF AMAZON, YOU SHAMBOLIC EXAMPLE OF AN OVERGROWN MAN BOY! AT THIS RATE YOU’LL DIE A POOR VIRGIN”. Business model: pay my automated system a % of the money it saves you every month. “NOW DOWN AND GIVE ME TEN”.

That business is called "power of attorney" -- you sign over your assets to someone you trust. Problem is the person you trust could steal from you, or just charge a lot for their time and effort.

Two problems with that.

Firstly if you want to personify the economy (don't), it has always been "geared towards getting you to spend what you can", from the first markets in antiquity through medieval times. Nothing about the modern economy is new. And please don't talk to me about targeted ads - the entire point of ad targeting is to avoid showing ads to people who aren't likely to purchase something. They're a way to utilise advertising budgets more effectively, but they aren't "hunting you down like a lion hunts down a sick gazelle". Nice imagery though.

Second problem is that there are plenty of modern economies where average people are good at saving money. Germany is the most obvious example: it's the saving savannah of Europe. Germans saving too much money is actually regularly cited by (bad) economists as a macro-scale problem for all of the Eurozone. But Amazon exists in Germany, it has the internet and retailers. They are just financially responsible.

Another good example is Switzerland. It doesn't run a budget deficit, it usually runs a small surplus:

https://tradingeconomics.com/switzerland/government-budget

The Swiss government is also highly democratic, so presumably the Swiss people like it that way (well, sometimes they get annoyed if the surplus gets too big of course).

Way too many people these days talk about ordinary retail businesses as if they had magical mind controlling powers. They don't. But culture can make a big difference.

It's not that hard to escape the vast majority of advertising. But I think culture is a much bigger part of it. My friends tend to be fairly frugal/easily contented, and I find it pretty easy to be the same way, probably partly as a result. If we were competing with each other to have the coolest car/home/boat/whatever, I imagine it would be a lot harder. Fortunately, we're all pretty unimpressed with people who try to show off by being spendy, and so we're all pretty frugal, and invest our money in assets instead of buying nice things. I think if the broader US had a culture more like that, we'd have much more savings.

You made a great point. Though my friends are not like yours. However I consistently keep reminding myself that I can't and don't need to compare/compete with their expense level.

Other thing that keep me grounded is thinking about earning potential and not just total earnings. Things may be going good for now but it can stop sooner than I expect.

Yeah, I don't know how common my situation there is. Absent that, I think what you're doing (trying to keep mindful) is a good way to stay the course.

Who is smarter: someone who was frugal, saved a lot of money, retired and died or someone who kept spending everything, got whatever he could get for the money, retired and died with 0 in savings?

Unless they can predict the future accurately (I don't know anyone who can), the first guy. The second guy had a lot of potential scenarios where he was destitute for the 10 years before he died.

Also, the second guy probably didn't do the world any favors with his resource footprint, given equal earnings. As a parent, I kind of care a lot about that.

"Please don't use uppercase for emphasis."

https://news.ycombinator.com/newsguidelines.html.

Title appears to be “Many Americans who live paycheck to paycheck blame debt”

Changed now. The submitted title was "Here's why so many Americans can't handle a $400 unexpected expense", which is in the URL. URLs are often a source of better titles but in this case I'd say it was baitier.

I think there is an order of "debt" that is acceptable:

1. Unless you go out and buy a house way out of your budget, or you buy a house that was in your budget then lose some/all of the income you previously had, being in debt to a mortgage really shouldn't cripple you under normal circumstances.

1. Having a car payment is pretty socially acceptable. Some people get the latest and greatest every 2-3 years either through leasing or trading in. Hopefully, there are not tons of people in crippling debt because they want the latest and greatest $40k-$60k SUV. I'm sure there are plenty of people in the "I have crippling debt" group who couldn't even afford a car payment.

1. Medical bills. I'd imagine nobody is going to criticize you if you are genuinely in debt because you had to pay to stay alive/keep a sane quality of life that is free from disease/ailment.

1. Student loans. You don't have to go take out $60k-$80k in loans to get a degree to get a job, but a lot of people do. Some people take out loans, then go spend the money on Amazon/vacations/cars. They get to cry they have student loan debt, but did they do the most efficient things possible with the money?

1. Credit card debt. On one hand, you have people who need to protect themselves from financial ruin. With inadequate savings, they turned to their line of credit. That's fine. Emergencies happen. But... what percentage of credit card debt holders (which I'd imagine is one of the most popular/crippling forms of debt in America) are solely in credit card debt because they only used it in an emergency? How many of those people are making day to day sacrifices to try to "get back above water"? How many people are in debt because... they just enjoy being a consumer and spending money.

Out of curiosity the other day, I picked up a magazine that said "How to get out of debt". But the entire contents were basically what you just wrote. Seems like a defeatist bate-and-switch to sell a magazine specifically on how to get out of debt and then have it actually say, "just kidding. you'll be in debt forever. There is no escape"

You don't need debt to explain this:

* Median US home price, $227k

* Median US rent, $1400/month

* Median US household income, $61k

* Median US individual income, $31k

All these facts are one google search away, on the front page. No need for a study to explain it.

I'm confused. What picture does this paint?

20% of a $227k home is $45.4k down

Zillow estimates that mortgage (with insurance + taxes) to be $1,230. A $170 premium to rent versus own seems like a wonderful price to pay to not have to come up with a $45k down payment.

Are you saying houses are too expensive, or wages are too low?

> Are you saying houses are too expensive, or wages are too low?

Median housing cost is 54% of median income. That's.. high. The general recommendation is 30%.

> A $170 premium to rent versus own seems like a wonderful price to pay to not have to come up with a $45k down payment.

On the other hand, you'll be building equity with a house instead of building someone else's equity with rent.

And housing prices don't always go up, but they mostly do.

11 years into a $210k house and I'm walking with nearly $100k after subtracting maintenance costs (carpeting, dishwasher, washer/dryer, water heater, roof, gutters, interior drywall repair, and exterior paint). Total mortgage payments have been about $190k. So I effectively paid $750/month to live in a 2000+ sq ft, 4 bedroom, 2 car attached garage house in a first-ring suburb of our state's metro area (renting it would be well over $2k/month) and I have a nice pile of cash I otherwise wouldn't have saved.

Insurance, property taxes, maintenance adds up.

Usually, you need at least $45k income to buy a $227k house. It is hard for a family of 4 to save $45k when they are living paycheck to paycheck.

That's nice, but it's important to remember that (regardless of your living situation) you are really just benefiting from an increase in the price of a leveraged asset, where the interest is backstopped and subsidized by the Federal government.

If you had taken your down payment, and all subsequent principle payments, and invested them at 5x-10x leverage in a stock portfolio over the same time period, how would the returns compare?

Many millionaires I know would struggle to come up with $400, too, if I passed them through a strong magnetic field outside of business hours.

Could you elaborate?

Our society is becoming increasingly cashless and even wealthy people for the most part seem to regard contingency plans as unimportant. It’s a bit of a tangent, but still related in an emergency planning sort of way.

I have an essay pending about how the burden of proof of innocence is passed onto the account holder wrt access to funds in the bank; the money in your accounts isn’t really yours and the fail-closed nature of it is more dangerous than most people realize.

The article has nothing whatsoever to do with the notion of coming up with $400 in hard currency on-demand.

If a millionaire has a $400 unexpected expense, then they'd most likely pull out a credit card to pay it. Which is additional debt, and according to the article's definition it'd mean that they're "living paycheck-to-paycheck" since they'd take up additional debt for that expense. Heck, I have reasonable savings but I'd not touch them for an unexpected large expense because it's a hassle to touch any long term savings and using short-term credit for that is simpler, faster and cheaper than breaking a deposit or selling stock or whatever.

It has everything to do with that notion - the definition used in this research is ridiculous; having $2000 of unused, readily available credit limit is the functional equivalent of having $2000 cash under your mattress. A $400 expense is going to reduce your net wealth/increase debt by definition, so if the answer to "what would you do for a $400 expense" is "duh, I'd borrow 400 because for me being able to borrow 400 on a short notice is simple and certain to succeed" then that's a quite reasonable answer that doesn't imply any financial problems whatsoever.

Credit cards chips are immune to fields equal to or less than 3T. The magnetic strip dies, but the card lives on.

I’m an MRI radiographer.

Reply on news.ycombinator.com