My problem with "life" is all the... nickle and dimes...
$10 for Nextflix, $90 for Amazon, etc. On top of Gas, Electric, Phone, Internet, Car, Insurance, Gas, etc.
It's easy to watch the money flow in... and right back out.
$10 for Nextflix, $90 for Amazon, etc. On top of Gas, Electric, Phone, Internet, Car, Insurance, Gas, etc.
It's easy to watch the money flow in... and right back out.
It is totally false. It blames citizens for national structural economic problems like hidden inflation and like bad housing policies discouraging building/planning.
People spend $10 for Nextflix, $90 for Amazon, etc as short term pleasures because they cant spend $GIANT on a mortgage. What are you supposed to do? Might as well treat yourself.
Of course, I'd rather get a home, but if I cant afford it, I wont just sit at home staring at a wall.
It's false for some locations but not for others. I checked on the two homes I lived in growing up and both appreciated slower than inflation from the late 90s to the early 2010s when they were last sold. In real terms they are about 20% cheaper than they were when my parents bought/sold them.
Flyover suburbia is more affordable than it was 20-30 years ago. All major physical items are better and cheaper than they used to be. Netflix is cheaper and better than VCRs + rentals + expensive cable. The big difference is health care and college costs. But most people don't have huge medical bills and college is somewhat of a choice.
The cost of living increase is largely driven by California, NYC, and Seattle. Pretty much every where else things are cheaper than they used to be.
As an example, there are depressed areas in flyover states where costs have indeed gone down. But incomes have gone down even more -- they are once thriving places like Binghamton NY which had industries that have since moved overseas.
There is also the cost of healthcare, education, and retirement savings. My father benefited from a pension plan -- I have to save myself in a 401k. My father paid no employee premiums for healthcare, I pay about $900/mo for the family premium (before copays and coinsurance.)
Healthcare is definitely eating up more of the budget. I'm open to the possibility that it's eating up so much more of the budget that it's making buying a house prohibitive, but the numbers I see don't back it up. Most people still have employer provided healthcare and don't pay 900 a month in premiums. Part of that is CoL. Your contribution are higher than my family plan premiums I got through the market place.
Actually the median 401k balance at retirement is only around 60k, so that alone would quadruple their retirement savings.
also minor addendum: someone with the median 401k savings might receive something close to the median social security payout of ~$15,500/year. since this is a guaranteed payment until end of life, this is like having >$375k in a retirement account at age 67. $200k is a meaningful amount to add to a $60k retirement account + social security payments, but it doesn't do anything close to quadrupling the person's safe spending capability. it's more like a 45% increase, which is still nothing to shake a stick at!
I would not bet on social security retirement age staying at 67, nor would I bet on the purchasing power of $15.5k remaining anywhere close to it is today.
You are comparing apples and oranges. You are comparing today's values at retirement to future values at retirement. It is almost certain that $200k 40yrs from now will not be worth $200k in today's dollars. Inflation accrued over 40yrs -- however low and however faked -- is absolutely going to make that $200k seem not so much.
Presumably, some of the $200k invested will grow, but also, not all the 200k is invested right now, it drips in over 40yrs.
You also forget the wildcard of healthcare lottery. One large medical surgery co-pay and you lose half your nextegg.
This is the problem. $200k in 2020 dollars wont mean much 40yrs from now. Similarly, $60k sounded like a huge figure in 1980 for retirees planning for 2020. For a proper comparison, you'd need to compare purchasing power of $60k to a retiree today vs $200k to a retiree in 2060 -- i'll bet it is about the same!!!
Inflation is a huge unknown here. My parents' home in 1981 was $35,000. The same exact house today is over $1,000,000. Rent used to be $150 to $200/mo. The same rent today is over $3500.
I re-ran your numbers here: https://www.investor.gov/financial-tools-calculators/calcula...
I did a monthly $100 contribution at 6% assuming tax free comounding for 40yrs and came up with your figure of $200k. That is right -- you'll have $200k at this rate. But in the year 2060 that might be just a year of rent and you're broke!
you are right that inflation is a huge unknown. if inflation goes up massively without a corresponding increase in nominal returns (unlikely, but possible), it would make that 6% figure incorrect. in this case, you would have less than $200k 2020 dollars in 2060, but the real value of a 2020 dollar would not have changed.
as a concrete example, suppose I own a three shares of microsoft stock and you have a brand new ipad air. both are worth about $600 today. if I offered to trade you my microsoft stock for the air, you might be happy to do so if you don't have any use for the ipad. if the fed prints trillions of dollars overnight causing the value to collapse, it doesn't change the fact that my three MSFT shares have roughly the same real value as the ipad. "2020 dollars" is just a slightly more abstract way of describing this dynamic.
Except that CPI is a deviously misleading number. I wonder if the same approach applied in 1980 would come close to aligning with 2020 numbers (including healthcare, college, rent, energy, etc.)
Please be brutal in your response, I want to understand if my understanding of this is all wrong!
. . . maybe . . .
4x nice restaurant or dates = $200 1x Weekend trip = $250 Hobby projects = $100 Drinks with friends = $100 Media Subscriptions =$50
Yes, managing finances takes some level of skill when there are many different expenses in a modern personal budget. But there are ways to live frugally and get ahead. They just aren't flashy or fun.
On two very small incomes my wife and I made big financial strides early in our marriage. We were very frugal but we made it work. We had the lowest tier Internet. We had a very conservative budget for eating out and groceries. We didn't have Netflix or Amazon. Once we paid off a number of debts, our spending was able to increase responsibly.
Edit: More tactful wording.
You didn't pay off $60k in student loan debt and buy a house by refraining from Netflix.
It's all about priorities, and having a vision for being financially "free". The victim mentality is an _enemy_ of human creativity.
You can say, "this area is too expensive; we need to find a way to move somewhere else". You can say, "I need to sell this gas guzzler and get a cheap, used commuter car." These things aren't _fun_. But they set you up for success.
US minimum wage is $7.25 per hour. 2 people working full-time at minimum wage would bring in a household income of $30k per year. But you couldn't possibly pay off $60k in debt and buy a house with that. So your household income had to be much, much higher.
One cannot save oneself into a higher income.
I'm sorry lapcatsoftware if it sounded like I was making light of poverty. Poverty is terrible. But at least in the US, there is _so much_ opportunity to not be stuck on a minimum wage salary. Resigning to the idea that, "Well, I guess I just have to work for minimum wage" is not going to help and it doesn't have to be true. It's sad to think that people give up mentally when there's so much they can do to help themselves.
That person is never going to move up the economic ladder no matter what rung they start on or what decade they are born in.
Even the car cost is not as big as the sticker price, because it has residual value. Granted it may be a big figure, but it is also spread over several years.
Seems to me you're literally one raise ($10K or so, and there's two of you?) away from making up such deficits, and you want to be near opportunity for that to happen.
Work another year or two, and you're doing just as well.
Following your own logic, it's almost like saying how dare you say you had _any_ budget for eating out? Why not just save even more money?
I think the reason we want to believe otherwise is because of the tremendous wealth we have experienced recently, so we expect that trend to continue indefinitely.
To me, it is the lack of gratitude for what we do have and can afford that galls me.
There is no reason why the current situation should be allowed to continue, and many reasons why it should not. Obviously it's a hard practical problem to crack (given that a naive approach to redistribution of this kind would be met with a great pushback and implode various systems that we depend on), but unless we do something effective, we'll keep ruining the planet while trampling the poor at the same time.