Despite rising wages, 61% of Americans are still living paycheck to paycheck
cnbc.com
cnbc.com
People I know who have large, immaculately well cared for homes with gardeners and German cars in the driveway live paycheck to paycheck. One realtor I know never sets aside enough money to pay her substantial tax bill (she is on payment plans to the IRS). From the outside they appear wealthy, but they are nearly always broke. The same realtor will happily pay $2000 for a pair of jeans.
I don’t get it. I make a great living. I paid off my house and drive a 2004 Outback. My retirement is looking good. This alleviates my fear of slipping into poverty. I guess I just don’t care about the window dressings of wealth that are so important for some people.
Which isn't saying that some people don't compulsively and unnecessarily spend. But in mid-level careers, determining how much is over-spending may be hard (which increases the temptation to spend, naturally).
Find others on the right path (and some good ideas) at Bogleheads.org
I know there are areas with extremely HCOL, inflation, housing crisis... However, sometimes I do wonder though what some people's budgets are like that they are literally unable to save any money (paycheck to paycheck) making >$100k. Do we know what part lack of financial literacy or simply "living above one's means" play here in the grand scheme of things?
Actually, even if your insurance is employer provided but you still have to pay a significant percentage of the premium, that can be a problem. $12+k/yr on top of what the employer's paying isn't uncommon. Most employers aren't as generous as FAANG and such.
Doubt that's the case for most, but it's one way for that to happen.
(I'd expect that poor spending choices are the main reason.)
[EDIT] Oh, childcare. It can easily be the case that your household income is $120,000 but $25,000 of it goes to childcare—but your household income would be $80,000 without the childcare, so you're still coming out ahead.
The reason for it:
1. Chronic Health issues that are fairly expensive to treat, coupled with the fact I am too wealthy to get government help (this actually was my biggest money sink).
2. Renting in a place "near enough" of my workplace. (still wasn't that near, and the place was tiny, when I moved out a lot of furniture fit inside a hatchback car).
3. Constant inflation + health issues I mentioned before that require me have a diet of items that are more expensive. (I can't live off ramen...).
4. Thankfully this part is over, but some years ago there was the student debts too, at one point I had to pay to service my debt literally half of all my earnings, and had to pay food and rent with the other half.
Parent said he/she isn't from the US where this would be the norm.
Here in the EU (Austria), in most cases you get no extra private insurance even with a high salary, just your public one, which in some cases may not be enough, especially if you optimize for quality doctors/therapists with short waiting times, which are all private, so you end up having to dig into your savings if you care about your health (who doesn't?).
Still, at least even the poor and unemployed have access to half decent healthcare without going bankrupt so there's at least one silver lining.
I guess the interesting part is that many of the people in the US want public healthcare and generally think that the international examples cover everything.
Sure, if you have life threatening condition that needs to be addressed ASAP or else you'll die, you usually get taken care of without it ruining you financially like in the US would, but since the public system is massively understaffed and underfunded, then many health issues which are not life threatening but still impact your quality of life, can end up being out of packet, which sucks, as most Europeans aren't exactly rolling in disposable income (but at least they're not heavily in debt either).
For example, in Austria, the amount of free care you get in case of an accident depend on where it happened. If it's at work, or on your way to/from work, then everything is fully covered, but if you get injured in your spare time, then only life threatening stuff is covered, for the rest, quality of life issues, you have to pay out of packet to have them fixed or have private accident insurance. Basically the public healthcare covers as little as to get you able-bodied to get back to work again, that's it. If you also want to feel 100% again, then you gotta pay up out of pocket.
Since medical school is basically free, Austria has 3x the doctors per capita than the US, yet waiting times for specialists or some procedures are far longer. Why is that, you ask? Because most doctors here don't like being burned out in the understaffed public system, so once they served their "minimum sentence" in the public system to cover their "debt" for their public education, they go into private practice, which means that despite having 3x the doctors than the US, the public system is in a perpetual shortage of personnel.
The state just doesn't have enough money to pay for every heath issue for everyone, but only the gravest of heath issues, and with our ageing population and stagnating economy, the situation is getting worse by the year. I heard Sweden, Finland and other rich EU countries have similar issues in their public system.
https://twitter.com/BadEconTakes/status/1228143455399858176
A better way to understand our problems is that our medicaid and medicare programs are the most generous in the world - so much so that extending it universally is so friggin expensive.
I laughed out loud at the idea of the US thinking universal healthcare would be expensive considering all the trillions spent without blinking to pay for two pointless wars, the 1.7 trillions to be spent on a stealth plane that can't fly in the rain, and the trillions printed in the last couple of years and dumped on the stock market.
This talking point really undersells the order of magnitude difference in cost.
So would we just end up with a government plan that we still need to pay premiums, deductibles, co-pays, etc on? And where are the systemic savings (providers still need to have billing agents to deal with this and private insurance, government overhead peobably isn't that much better than business overhead)? Do the people who can't afford it go on Medicaid to cover the balance like they do if they can't afford current Medicaid? Or are the suggestions really just misnamed and are totally different?
Also, hospitals in the US don't need to be decked out like an oil-sheik's mansion with expensive frivolities. In Europe, they're really spartan on luxuries as they're just places where you go to get treated, not art galleries.
My point is, a lot of the massive costs in US healthcare is just down speculation and waste, both of which could be reduced of desired without sacrificing quality.
I've been on state Medicaid in the US. I've also been on a single payer in Europe. People really have no point of comparison on how much more luxurious Medicaid is. You are still visiting the oil-sheik mansion, but with no out of pocket and no limitations on how much or often.
Hospital will still shake you down for all your money, but the government has no problem footing the bill.
I generally agree. But I have heard that they will push lower priority (non-life-threatening) operations to the back in order to get other insurance holders to the front of the line. Basically because the reimbursement rate from other insurance tends to be higher than Medicaid.
I don't doubt it. In the US, doctors and hospitals are incentivized to treat you like a cash cow and to do as many tests or procedures as possible, even unnecessary ones, knowing that your insurance company or the government will foot the bill no questions asked.
Whereas in Europe, the doctors and hospitals in the public system are incentivized to do as much cost cutting as they can by doing as little tests and procedures as necessary, to reduce costs and waiting times, and have strict regulations on when they can refer you to specialists or more expensive test, needing to justify it when they do.
This means that sometimes you can end up with some undiagnosed condition going chronic on you because the public doctor didn't want to, or wasn't allowed to refer you to an MRI scan when you first showed some light symptoms, because your light symptoms weren't severe enough to warrant such an expensive test. I sh*t you not, this happens more than I'd like to hear. It's why health tourism is booming in Europe, where people from richer EU countries go to the Eastern states for private tests or treatments since preemptive care in the European public system is failing people big time and they can't afford the private system in their wealthy countries.
Sometimes, having a fully private health system, really does have its benefits.
One slight addition. They might be medically unnecessary, but have become legally necessary in some cases. Either because medical protocol has adapted to try to charge more, or because if you don't you might get sued because "Every other doctor would have run that test", etc.
But it is still very much about the money. When I got my wisdom teeth extracted, I had to go in for a 10 minute consult with xray on one day, then go in on a second day (even though it could be done on a single day). Why? Because insurance will not pay for a consultation if it happens on the same day as the extraction.
As for the government footing the bill in the US. Some procedures are deprioritized by hosptials of the patient is on Medicaid. The Medicaid reimbursement rate is generally lower than that of other insurance, so they prioritize the people/insurance that pay more.
There a certainly some areas of interest to be address, like how to protect from bankruptcy even when someone has insurance, or what edge cases many of these uninsured people fit into that aren't covered by employers, the exchange, CHIP, Medicaid, and Medicare. Although in many discussions this is glossed over or not touched on at all. It would be interesting to see if requiring coverage for part time and contractors would affect anything. Especially if that would help pull people into the middle class (no idea if it would).
Only 4% of US bankruptcies are because of medical bills (<https://www.washingtonpost.com/blogs/post-partisan/wp/2018/0...>). A tipoff that [insert large percentage here] of bankruptcies aren't actually because of medical costs is that only 6% of bankruptcies by those without health insurance are because of that cause. The biggest cause of bankruptcies is lack of income, which health insurance doesn't affect regardless of country.
Of course sometime to comes down to people making medical coding issues on a bill. I've been dealing with that for 6 months now.
In the US, the left assumes (and usually operates as per) that all healthcare plans outside the US are "100% free", single-payer like the UK NHS or Canadian Medicare, as opposed to the actual norm being something closer to that of France, Germany, Austria, or the Netherlands.
France = 30% copay is the norm
German/Switzerland/Netherlands = Everyone chooses from one of dozens of competing insurance plans. Basically Obamacare, except there are no loopholes like the ones that allow 9% of Americans to not get insurance
Austria = Like US, but you don't get to choose the plan (no equivalent to US annual shopping period)
Australia = Both private and public insurance. Those on public are strongly encouraged to move to private
Because they decided to designate a generic medication as a name brand. So even though it was 100% covered last year, now I have to pay 100% ($175/month) until the deductible is hit. I'm also forced to use s specific chain. But they couldn't file the claim toward my deductible because the software system at the chain wouldn't allow for it to be submitted as a brand name (because it's truly a generic). So this whole fiasco is because they decide to designate a generic as a name brand just so they can charge us more, and the geniuses making this change didn't even check to see if their system could handle that new business process.
I’ve been in this position from time to time, and it always came down to making expensive choices or recovering from an unexpected necessary large expense.
I might have a few financial regrets but when it comes down to it, spending as much as I made was always just a choice I could have changed at any time.
I have very little empathy for people making 6 figures though.
I mean.... I literally cannot get my mother to be my dependent, even though I fully financially support her.
Well, if your job is somewhere in an extremely HCOL area, you only have two options: rent (or buy) somewhere extremely expensive, or rent/buy for slightly less and spend a boatload of money on transportation.
A large part of the H part in HCOL is, by the way, that banks and other investors (both domestic and, worse, foreign) have been scooping up rental real estate for way over a decade now - it began after the "fire sales" of the 2008ff crisis and now hit record highs in 2022 [1]. If politicians want to combat the poverty crisis, getting rents and real estate prices under control is one of the most important things.
As for "financial literacy" - no amount of that can help you if you get sick or, worse, if you depend with your life on epi-pens or insulin. Both saw exploding prices over the last decade.
I won't be taking questions or entertaining discussions about the appropriateness of this arrangement. But it's not that rare and it's why I don't meaningfully save.
I literally fully pay for everything for my mother, she's a breast cancer survivor - that's a lot of $$$ for a household of mid 6 figure income.
What we are doing is good and part of a human desire to care for our social group.
However, for many other people, I think a huge part of the problem is consumerism coupled with borrowing. If you are able to be content with what you have or even to downsize, it is much easier to get ahead. And if you avoid all debt except a mortgage, your income will go a lot farther.
People often think about debt as though it is only the interest that matters. But you still need to pay off the principal, if you ever want to be free of it. A $10k credit card debt that you can only apply $500 to per month lingers for a long time.
I think this is a large part of the problem as well. I see so many people taking out large and lengthy auto loans on a new car as soon as they graduate college.
People are encouraged to over spend at ever instance of their life. You go to buy a house, the mortgage company will try to get you spend to the limit of your ability. Every service out there today offers 0% loans to encourage consumer spending so that you can live outside of our means. People are blasted with ads each day encouraging them buy more and more.
It's easy to criticize and make some moral argument about spending, but most of us spend a huge amount of our brain power trying to get people to do more of these things and are paid well for it.
Nearly my whole career I've worked in some part of the marketing world, and when I haven't I worked in e-commerce. Every penny I've made has been trying to get people to spend more and buy more. I worked for a startup that ran ads encouraging people to buy our product rather than have any saving at all. In all my career the concept of "hey what if this leads consumers to an unhealthy spending habits" would be laughed out of the room if brought up.
Now maybe you are one of the few that work in tech and don't either directly attempt to suck money from consumers or spend your day helping other companies doing that, but for the bulk of us it's ridiculous to wave your finger at the spending habits that we, directly or indirectly, work hard every day to encourage.
[0]: https://www.federalreserve.gov/publications/2021-economic-we...
Yes, it's doable for nearly everyone to stash some amount of money away, sub-$1k or whatever.
However, if you're in the zone b/t $100k/yr and say $250k/yr, it's entirely possible to have your act together financially, and not be able to save a relevant amount due to the cost of basically existing, responsible student loans and a simple social life. The amount of money you're able to save vs the general cost of living means that your small savings is basically meaningless if something happens.
A normal lifestyle can turn into being the walking dead financially. You make a lot on paper, but one wrong event knocks you out. This is why '08 was especially ugly for NYC finance types, despite being firmly upper middle class.
I have friends and colleagues whose experience matches yours, some have come to me for help with their finances. I've found it fairly easy to slash 30-40k/yr from their budgets by simply forcing them to think about which things they're spending money on actually add happiness or utility to their life.
With what is left we have to have utilities, food, clothing, etc. There isn't much left at the end of the month, most of what is left goes into retirement accounts that I cannot touch for many years.
- $8,333 gross ($100k)
- call taxes 25% (this is aggressive) leaves $6,667
- housing expense of $2k leaves $4,667
- minus 2 auto expenses (used car average payment is $465) brings us to ~$3,400
- childcare (which: is not free even when your kids are in school) of $1,500 yields $1,900
- frugally feeds the family on $1,000 per month
- $900 remaining for everything else. This includes all the one-off incidentals (car tires, physician co-pays, etc.).
The astute reader will have noticed that I was generous in my tax, housing and childcare estimates. The more astute reader will note that I have omitted student loans, any healthcare or dental expense, vacations, etc.
This is obviously not an estimate for a HCOL area, this is what the math looks like in much of the country.
Edit: _The Two-Income Trap_ is a good read on this. IIRC it points out that most of the big costs are fixed, where financial gurus often tell people to cut the variable expenses (cut down on avocado toast, or make coffee at home). When obviously tweaking inside the $900 left over won't fix this budget no matter what.
Also worth noting that even if they could halve their housing expense, they still would only be in a position to put away $12k annually. Which, given what we know about unexpected expenses, would probably put them right at actual break-even and prevent them from taking on consumer debt.
(I take an agnostic point of view on the debt itself. The alternatives to not having some kind of financial cushion -- even burdensome consumer debt -- are often worse. Think: "can't get to work because the car is dead and I don't have an extra $750 so now I lose my job and then my housing" as the realistic alternative. The real problem is compensation has not paced inflation for 2 generations, and that the $100k family should be earning much more for the same jobs.)
[EDIT] For anyone from outside the US who's getting a bit lost in all this US-centric budgeting, the TL;DR (and trend which you may have noticed in all this) is that it's insanely expensive to have kids in the US. The main reasons are healthcare costs (including insurance), housing, and childcare. Costs can easily approach $100,000 to take one kid from conception to age 5, with no extravagant spending, and no major health problems.
Between the savings crisis in every generation past the Boomers (worse with each subsequent generation), and healthcare costs going ever-upward, I have a hard time seeing how we're going to have a strong economy in 20 or so years as more and more of our consumer base gets ground into paste by the wheels of The System and can no longer drive the economy with spending, yet we still don't seem to be anywhere near fixing any of that.
Most of our neighbors(and families in our kids school) drive tesla's and other luxury cars or brand new non-luxury cars, they always have brand new clothes and iphones and a few have rolex watches or other high end brands. I do feel like maybe its a southern california thing to live extravagantly but I suspect most are living way beyond their means and if a partner would lose their job things would drastically change for them overnight.
We have our house we bought 12 years ago and renovated for 8 years. My SO left her job 3 years ago to study again and in essence doesn't make money. So for the time being it is me. But we value great local organic food and produce and that next to our mortgage is by far the biggest part of our spending. We still put money on the side, but maybe because while we like to spend money (even just for fun) we don't overindulge.
Maybe because we are not as social so that we do not compare and because our values are not in line with spending money to be walking advertisement carriers.
Not sure but when I hear of people in the US with 250k+ living paycheck to paycheck I wonder how that is possible. On the other hand I know people where both make 125 - 150k in Germany and also are living paycheck to paycheck.
So maybe I just can't imagine how this works because living in such a way is something too far from my experience.
We haven't saved much money living in NYC, with our parents needing financial assistance and residual debts. Dietary constraints also make it much more expensive to live in US.(celiac and lactose intolerance add to costs)
So it's not unfathomable.
I'm also very suspicious that it would cost 40K per year to rent a reasonable place for 1 or 2 people anywhere in the US except maybe SF
......
EXAMPLE: 120k income breakdown:
Federal actual rate 16.5% (24% marginal)
CA State actual rate 6.4% (9.3% marginal)
Medicare rate 2.9%
OSDI rate 12.4 %
CA SDI rate 1.0%
= 39% right there
PS the highest marginal tax rate in the US is 50.3%.
Federal rate of 37% and California rate of 13.3%.
I still don't think there's an affordability crisis in general though. From what I've seen in this thread it's more of an inability to downsize. Everyone needs a car (sometimes 2), a big house, to live in the most expensive cities, to have kids, and they'd rather go into debt than compromise.
There might be a big step between poor and middle class though, as you come off benefits and have to pay higher taxes and health insurance. Child care also seems prohibitively expensive.
That's about $7.7k a month after tax.
Now factor in some variable combination of:
1. Rent (3-4k for a 2bdrm or larger) 2. Student Loans 3. Debt 4. Childcare (daycare) ($2-3k) 5. Health care
This excludes 401k contributions, saving for a financial buffer, any type of car or commuting expense.
Federal tax: ~26k State tax: ~7.5k Work covers 20% of health insurance premium, leaving you with 20%: ~4k
OK, now we are at $112,500 take home pay.
2 BR apartment accessible to public transit in Boston and in a safe neighborhood, let's say $3000/month + $250 utilities = 39,000. (you are probably not getting a particularly lavish apartment at this price point).
Now you have $73,500 left.
Daycare for two kids from 8 - 5:30: $15k x 2 = 30k
$43,500 left.
Throw in a reasonable life insurance policy, car + insurance payments for a modest car (kind of necessary if you live in Boston and have kids, unless you spend more to live in the kind of neighborhood where you don't need a car), modest medical and dental care out of pocket costs, basic kids clothing, basic clothing for you, diapers, and groceries and you are already eating pretty substantially into what you have left.
Pretty much everything above is stuff that you need to spend in order to live reasonably comfortably (by US standards). Let's say after all of that you have 30k left.
So you have 30k that you can spend on quality of life improvements, entertainment, travel, etc. You can hopefully save some of the money too, but if you are hoping to save towards a down payment on a house in the boston area, you're really not going to be living a lavish lifestyle on that kind of money either.
My point is that HN is full of young people without families who can't imagine how other people aren't saving money. Meanwhile, the cost of raising two or three kids in a high cost of living area would buy a single person a lifestyle that most people would agree is pretty lavish.
Because rent is always due at a particular time of the month people need to use whatever cash buffer they have to cover expenses until their next check. So there's people living "paycheck to paycheck" that do have a non-zero amount of dollars in the bank but that buffer is constantly being drained and refreshed paying all the non-rent bills. If they don't have a cash buffer then they need to use credit cards which have fees and interest that obviate any savings margins.
There's a wide dynamic range in the "six figures" category of salaries. In HCOL areas it takes a pretty high "six figures" salary to get over the "paycheck to paycheck" living.
In my early 20s, I was earning $120K a year while living in rural Texas. I had an expensive apartment (3 bedroom), a leased Lexus IS, and spent lavishly. I also got a second car (a Honda Fit) for grocery store runs. If this sounds absurd, yeah I know.
2 years of this and I had some 401K savings but no after tax investments. I wasn’t even maxing out the company match. Just before each pay day, I might have had $800 in my checking account on a good day.
My case might be extreme (I don’t know), but it was certainly poor financial decisions.
Real-estate, stock market, bonds, literally anything you could throw a dart at is up big over the last 10 years.
Most of my college peers moved to Austin or Dallas where cost of living and housing is extremely different. Austin median home price is now $575k in the city and $480k for the 5 county metro region.
Growing up in a working class family (dad worked at a kitchen, mom as a part time hair dresser) we always had a maid from mexico come in once a week for $60 for ~8hours. She cleans, does laundry, and even cooks a meal and makes a big pot of beans during her time. In Austin I pay $150 for a 2hr cleaning session with no extras.
When Ivy League business school grads are having to save until their 40s to buy homes, what does that imply for the rest of the country?
I think these are two separate issues.
> business school grads saving into their 40s to buy homes
For example, on this -- surely, if anything, manufacturing outsourcing has only made business school grads get paid more?
If you're not already familiar, take a look at Baumol's cost disease [0] for more on the phenomena at play here.
Median pay out of top b schools is ~$125-$150k. If you have a stay at home partner and a few kids, you prob need to make partner/Director before you can buy a townhouse in a Brooklyn.
That said, if you're single and work for an I Bank in Chicago, you'll be able to buy when you hit VP in your early 30s.
This is not equivalent to “buy homes” — this is like saying they wait until 40 to buy a car because the Honda Civic they drove in their 20s doesn’t count, they need a BMW.
Is it possible they have to wait due to larger than average student loans (although many do come from wealth), or that the high paying jobs they seek are in HCOL areas?
If you are even luckier and can be a developer in those cities making 150k-200k you feel like royalty with a ton of extra money to travel often.
The other problem is that if you want to "better your life" and stop working at Amazon for $15/hr, historically you had to go somewhere where those better jobs are (often NYC/SF/LA, depending on industry). Maybe with remote work becoming more common this will change, but telling people to live in low CoL areas unless they're already making a good income puts a serious damper on social mobility.
> historically you had to go somewhere where those better jobs are
There are plenty of good paying (maybe not FAANG's 500k salary but 6 figures nonetheless) jobs in Chicago, Atlanta, North Carolina RTP, Columbus, etc. The biggest contributor to social mobility is getting a good degree at a good school. If you get any engineering degree from any decent state school - doesn't matter mechanical or computer or chemical or whatever - you're making good money.
If you read Road to Wiggin Pier, Orwell talked about his vain attempts to get people to save money from week to week. Instead they wasted it on strong tea and good toast. What he came to realize was that this was _all these people had to look forward to_.
Even if wages were to rise, some people's first thoughts aren't to save it but to buy something that brings them joy because that extra couple of dollars' worth of joy is worth more than whatever it brings them saved in a bank account, socked in a share or two, etc.
One tricky piece, of course, is that "food", "transportation", "clothing" can include both discretionary and non-discretionary spending. (As in, you need to eat, but you don't need to get takeout every day.)
Given that unemployment rates are at historical lows, support for short-term unemployment is relatively generous, and social security exists -- perhaps we should be unsurprised that most people are living "paycheck to paycheck".
The family of 4 making $150k and spending not-cheapest-option $40k on childcare and not-cheapest-option $40k on groceries from Whole Foods (or wherever), while paying $30k annually in not-cheapest-option rent, may also believe they have no discretionary income. But that doesn't mean the same thing.
It's normal that a lot of people live paycheck to paycheck even when they are well-off. Yes, the increase is probably all caused by worsening of the standard of life, yet it does not measure into what kind of bad it has descended.
(By the way, number of people living paycheck to paycheck is a very weird number. Confidence about the future increases it too.)
Instead, as of Q2 2021 (a year after unemployment peaked), consumer credit card debt was DOWN by $106 billion and Home Equity debt was down $64 billion. Over the same period, Auto Loan debt went up by $70 billion, and mortgage debt went up by 730 billion!
In other words, during the worst economic crisis in a decade, Americans were paying off debt and buying cars and houses! Does this sound like the behavior of people who are struggling to make ends meet?
[0]https://www.cnbc.com/2021/08/03/household-debt-jumps-by-the-... [1]https://fred.stlouisfed.org/series/UNRATE
In that instance of home equity debt going down - wouldn’t it mean that the mortgages were being paid off faster than they were being made? (In absolute dollar sense) To me - that sounds like people stopped getting mortgages… Which is an affordability crisis.
Same with credit card debt.
People were clearly able to leverage more debt based on the auto- and mortgage debt figures. Credit Card debt would not go down if people were strapped for cash. If you're worried about making rent next month, why would you be paying more than the minimum on your credit card? You wouldn't. Hence, if credit card debt is going down, it's because people had cash on hand and weren't immediately concerned about their ability to pay the bills--hence my point; falling cc debt indicates that people were not in a precarious position.
> In that instance of home equity debt going down - wouldn’t it mean that the mortgages were being paid off faster than they were being made? (In absolute dollar sense) To me - that sounds like people stopped getting mortgages… Which is an affordability crisis.
You're confusing Home Equity debt with Mortgage debt. HE debt is when someone borrows against their home equity so that they can 'spend' the equity they have in their home. It's low-interest, collateral-backed consumer debt. This type of debt went DOWN, indicating (again) that people had cash on hand and didn't have an immediate need for it.
Auto- and Mortgage debt went UP, indicating that people were buying cars and houses.
This is evidence of something, but it's not evidence that the American people were struggling to make ends meet during the crash. The fact that Americans were paying down debt and buying cars and houses during an economic crisis clearly belies the idea that most American households are on the verge of financial ruin. They said the same thing before the crisis, and folks clearly did just fine.
Who exactly was this period such a crisis for? The crisis is coming now for the people who need to buy inflated goods as the stimulus is wearing off.
Idk, I think that's a pretty broad generalization. Many certainly know they can escape poverty, but the how is important.
When I was working three part time jobs just to keep my head above water and have some amount savings, I would think to myself that this is just temporary. Eventually things will get better. I often wonder how many people fall into this "My money situation is just this way temporarily, I'll make more later at some point and things will be better"
The dangerous part is not acting to change that temporary situation. It's exhausting to do the routine of work day by day. Then taking the extra effort to get an education, find a better job, etc all become more difficult when working multiple jobs just to stay afloat.
For a few years I was in position to help review families' finances and offer counseling and direct them to community resources, and here are some things I learned:
0) comparison is the thief of joy 1) people are wasting huge amounts of money on credit card interest payments 2) spending less than you make is the main factor in not being constantly stressed by your finances, not having any debt is a close second 3) being stressed about your finances really sucks the fun out of life (and is super hard on most marriages) 4) getting a raise but not increasing your standard of living is often the easiest way to accomplish #2 (and fixing #1 if needed) 5) most people either overlook meaningful spending cuts they can make, or they want other things more than reducing financial stress (see #0) - these choices can be hard (e.g. move away from HCOL area) but those who are willing are almost always able to achieve #2 and are much happier as a result
Either way the middle class and poor get screwed but the wealthy who took out ultra low interest fixed rate loans to buy up assets all over the country are going to do fine.
They forget they represent everyone, not just those who fund them.
It's a weird form of irrational behavior that falls under economic animosity.
The solution is to let asset bubbles deflate and do more targeted fiscal stimulus, less monetary stimulus, and use tax policy, not artificially low rate government borrowing, to pay for it. Our government is increasingly ineffective due to political divisions and ideological puritanism so I understand why the fed feels it needs to act but I feel like monetary policy is too broad of a brush that generally only benefits the moneyed elites.
I don't make that much, and I support a family. The only thing rest makes me feel financially insecure is the way that IT hiring "works" today. I'm slow at code screen and my background is in irrelevant systems. Living in a terrible area for IT jobs doesn't make it any easier. If I could easily switch jobs and retain a similar salary, then I would feel good.
I could support my family only half of my income. I'd have to get rid of this house for one where payments are a lot cheaper. I'd have to eat cheaper meals. I have to quit buying so many toys... But I have a large income, and I like my lifestyle.
I do have good savings that comes out first, but sometimes I wonder why: both my parents got cancer at 65 (they are still alive, but social security is more than enough to pay for what their body will allow them to do), I had other friends who didn't even make it to retirement. Why not enjoy life and the money I make now - I can't take it with me when I'm, dead. (of course I also know those who lived to over 100)
This isn't a very good metric for determining financial health.
Humans can survive and thrive in very extreme climates. We can grow enough food for everybody. What we can't do is figure out ways for both of those things to happen without preventing people's standard of living from going so far backwards they get shooty.