58% of Americans are living paycheck to paycheck – including 30% earning $250k
cnbc.com
cnbc.com
As someone in that side (if I made 180k post-tax, I would be living paycheck to paycheck - I became aware of it because I'm funemployed with a big spreadsheet), it is not at all poverty, but it is more of a cashflow quirk when they say this.
They're saying their outflow matches their in-flow, but not that all of it is actually being spent (the mortgage at 2.5% is equity).
Not having a bunch of cash in the bank or merely maintaining a 100k rainy day balance isn't paycheck to paycheck, even though these people might describe it so.
So the people who make 250k who live "paycheck to paycheck" are actually sitting on top of a big comfort cushion which they are loathe to remove for financial cushion. That is okay if it is a deliberate choice instead of a "save face, keep with the joneses" peer pressure to keep spending.
This is not even remotely comparable to actual poverty where the floor is fast approaching you if you miss a month.
These articles can be described as feeding some people's "more money can't fix money problems" and some other's mistaken belief that spending everything you get is what paycheck to paycheck means. Also totally different if it is debt you are paying off instead of actually spending.
Also a hit-piece on the "earn and spend" millenials, which is somewhat fair because I don't know if I could be this affluent in my retirement, the way the economy is tilting.
What's different about this generation (esp in the UK where I live) is that they're becoming reasonably asset rich but they feel poor day to day. This is because they spend a lot of their income on mortgage payments (much of which is equity) and they're auto enrolled into pretty decent pensions which also is a building asset (but not one that they 'feel').
Getting things you can certainly afford on credit (which may be the right decision given low rates plus high inflation) compounds the problem.
You're going to buy a car for 40k after a year of saving. You spend 11 months looking at a big number building up in your account thinking 'hey I'm rich' or you spend 12 months with 'no money in your account' feeling poor. But the outcome is the same. Cheap credit creates many situations where credit is better than cash - so will make the feeling of 'no money' worse.
Most people in the US were already living paycheck to paycheck before the pandemic which ate into what little savings they had or forced them into credit card debt and now sky-high prices are putting even more pressure on people's budgets. It'd be crazy if the number of people living paycheck to paycheck wasn't expanding.
I have "expensive" hobbies, but that mostly entails a high upfront cost ($2-3K) for gear that will last a decade minimum, so its not a huge issue.
What the hell are (somwhat rich) people doing with their money? I'm confused since I don't know what there is to spend big money on. Health care is a thing, but I assume high paying jobs have somewhat decent insurance that shouldn't bankrupt you immediately. There are only so many $20K watches and $75K cars you can buy before it just becomes pointless.
Second and more importantly, they are spending on whatever the fuck they want. You do realize you’re going to die, yes? There’s no way in which saving more than your neighbor is “good”, morally or otherwise. Maybe by saving more “now” you have a more comfortable “later”, maybe you don’t — the former may be more likely but isn’t guaranteed, and you should not judge someone for having a different risk profile than you.
The square foot / person is huge and leads to lots of issues around transportation (hello cars !), so the cost on society is massive, especially if you factor in private gardens, which are basically private pieces of land that cannot be used for anything - and aren't that ecologically beneficial.
Lower you housing expectations to a 1500 sq ft apartment with no private garden (but with a park nearby) on a 10 story building and you have something that actually allows for efficient public services and is economically viable for an average person. Of course, rich people will still be able to afford private houses, but that should be the exception, not the norm. The median SFH shouldn't be the reference.
Housing is usually the biggest expense someone has. Asking for luxury here means that you'll have to compromise on everything else. Being reasonable will free budgets for a lot of other things.
Disregarding medical bill, yes, if you spend your money on luxuries, you will have less of it.
> Second and more importantly, they are spending on whatever the fuck they want. You do realize you’re going to die, yes?
Ok, so, clearly people are spending their money, which is why they are paycheck to paycheck?
I think most single people would have an easier time being frugal, but if you have a partner good luck with that. And if you have children you are stuck in the ratrace to send them to the most expensive schools and out of school activities.
If you would earn 250k, would you live in a trailer and take the bus to work?
I can hardly blame people. We are constantly bombarded with ads to buy buy buy. Max out your creditcards, invest in crypto, buy a boat, buy a car, fly around the world for holidays.
Before you know it you cannot get out anymore, no matter what your income is.
Housing obviously. Many rich people like having big, nice houses/apartments. Some even want to have a second house somewhere nice. Travel and similar experiences can easily burn basically as much money as you want. Schools can also be super expensive. Eating out can also set you back a lot if you're into that sort of thing.
DCA, FSA, transportation, 409(a) deferred compensation, etc. It's mind-boggling how many ways there are to mess around with your paycheck.
If we want to keep it, remove all deductions/credits, adjust the rate to something realistic (e.g. 5%) and make the IRS responsible for sending an annual bill to collect.
Bigger mortgage, fancier car, eating out. My mate got a decent payrise, the first thing he did was buy a $50k second-hand sports car. And that's after he just bought his first home with a $700k mortgage. So he's gonna be paying all that off for a loooong time.
Glad he's happy but I never understood the whole sportscar thing. They go vroom vroom just like all the other cars.
There's sportscars and there's luxury/exotic sportscars.
The latter is mostly a class/signaling thing, since you can't even _really_ abuse it unless you're so rich it's the dinghy for your private jet.
But a proper prepared sports car is a substantially different driving experience than "all the other cars".
Likewise with the house. While you probably shouldn't be saturating your entire take home pay with mandatory recurring payments, you're a lot better off spending on assets that hold their value than buying vacations and dinners at expensive restaurants.
This is yet another underappreciated difference between what "paycheck to paycheck" means for the affluent versus the poor. There's a big difference between spending all your money on nice houses and cars versus spending it all on rent that buys your landlord a house and beaters that require more in maintenance than purchase price and will be scrapped at best when you finish running it into the ground.
If you're going to own a car as transportation it will not hold its value. You an screech all you want about your commuter Camry/Accord/whatever but it's still dropping value precipitously, just slower than an Impala, which is basically a reflection of how the owners tend to behave.
I also know some people who are very bad with money and even some who are certainly living an unsustainable lifestyle in order to project the appearance of genuine wealth, but that is by far the exception in my experience.
Saying that it's lifestyle choices and spending habits doesn't sit right with me. I'm not saying that you are doing this, but there are some people who essentially repeat what you've said when what they really mean is something closer to "The dirty poors are living above their station and need to learn to stay in their place!". It's a kind of mindset where you get ridiculous statements about how poor people could pull themselves up by their bootstraps if only they didn't buy iphones or avocado toast. It ignores so many other much larger factors like increased costs, wages that haven't kept up, the effects and impacts of poverty, and the fact that economic mobility in the US is dismal and has been for a long time.
I mean, it's certainly true that pretty much everyone could benefit from more education in managing personal finances. It isn't something most people are taught in school and much has changed over just a couple generations. Not to date myself too badly here, but my parents told me it was wise to put money in a savings account because it would earn interest and at that time, while still not the best advice, it was a whole lot more reasonable than it is today.
Millennials were the first generation of Americans where the majority ended up worse off than their parents and I think going back at least as far as Gen-X that trend has caused an increase in debit as people struggle just to maintain the lifestyle they grew up in.
I've also seen people more recently who don't believe that there is anything they can do to improve their situation, that home ownership is and will always be an impossibility for them, that retirement is a thing of the past etc. and that kind of hopelessness does seem to lead to reckless spending. Smart hardworking kids working 2-3 jobs, none of which give them any benefits, with little to no savings who spend a lot more than they should on convinces and momentary pleasures because they have zero faith in their future being any better than it is today.
There's a lot more going on than people yoloing their money away, especially when it comes to the very poor who in my experience are usually carefully watching where every last dime goes.
Or maybe you are a dog owner so you rent a house so your dog has room. It’s fairly easy to do in a high cost of living area just to feel “middle class”
Music festivals and Vegas trips are also a great way to set small piles of cash on fire.
Part of the problem is people think “budgeting” is for when you’re in crisis. A budget is just a financial plan.
When you have more money, it gets harder and harder to understand where it’s going.
Many, many people will max out the house they can afford and pile 2 car loans on top of that. That right there can be 40-50% pre tax income.
We now have a public with only a fuzzy memory of what a real recession looks like. Thanks to the accommodative Fed over the last ~14 years and more recent COVID free money bonanza, people have been rewarded for blindly taking risk and conditioned to think that prices always go up.
A severe contraction with a jump in unemployment and no Fed bailout seems quite possible and might be a painful lesson for the overextended.
(Never had a kid either school, but am acquainted with some who have.)
I remember watching a show on the actor Nicolas Cage going bankrupt. He bought like 15 motorcycles and a $300k dinosaur bone.
I am sure some of these people are in unfortunate debt situations but a whole lot of them are on the Nicolas Cage version of financial planning for the future.
Which still seems not paycheck to paycheck.
That's a 3.X million dollar home. If you have a multimillion dollar asset like that, your retirement savings is the house.
Oldest married a doctor, Resident still, they earn some but just enough for the bills.
Middle one is exhausting savings on his startup. Counts pennies.
Youngest burned out on software, is back to a 'day job' and doing music.
So maybe not the usual stories. But there are all sorts of stories.
Has there ever been a time when frugalness was cool? Many of the people I admire the most have insanely old gear that they maintain and still use. Almost as if they would prefer to use what they already have as opposed to something new, what a thought.
that's what happens when you over leverage your greed. no sympathy from me.
6 years passed, and now with high inflation, maybe the number is already >$300k.
So, essentially banks can create money (fiat ... borrowed from the expression from Genesis 1:3 fiat lux: "Let there be light") by simply inputting the number into a ledger (credit/debit). All the banks then settle between each other and finally with the Central Banks, here: FED. For convenience I have skipped the fractional reserve mechanisms. On top of that for "international settlements", there exists conveniently a Bank of International Settlement (BIS).
From that viewpoint "saving money on a bank account" is 'recursive' (an historic remnant still floating in a lot of minds from the time when banknotes actually denoted legally binding claims on fixed amounts of gold/silver) and highly discouraged and effectively penalized. If one understands the basic accounting/settlements mechanisms involved this becomes evident. Cash is 'inferior' money.
The whole argument about Bitcoin (which I'm not in favor of) as a "superior form" of currency or now rebranded as a "commodity"/"store of value" revolves around this crucial point/promise: Saving money like in the old days. (The 'bible' exploring this topic is accordingly called the "Bitcoin Standard"). The kind of money spending encouraged, now, through fiat money and all its entourage discourages long term thinking and planning - reflected in the more and more fleeting life spans and decreasing quality of the products overall and by the current investing practices - and "robs" the vast majority of people by diluting the money supply, benefitting the few ones with basically unlimited access to "credits" (state, the "rich"). Historically, this "financial intsruments/leverages" allowed industrial large scale wars like WWI or WWII to be "funded" in the first place.
> The term fiat derives from the Latin word fiat, meaning "let it be done" used in the sense of an order, decree or resolution.[0]
I know it's annoyingly pedantic, but I had to look it up because I had never heard the assertion that the word fiat comes directly from Genesis.
The direct etymological connection to the phrase used in the Vulgate (4th century Latin translation of the bible) I was trying to make doesn't exist. At most a weak allusion. The latin word "fiat" ("let it be done") has different specific uses in English, I wasn't aware of, one of which is generally an arbitrary or authoritative command or order to do something; an effectual decree.[0]; which fits the bill much better (:
https://en.wikipedia.org/wiki/Let_there_be_light
and represent probably the most reknown two words of the Latin Bible (depending on which version it may be "sit lux").
So only 37% of the working Americans are living paycheck-to-paycheck. Sounds largely unchanged since the 1970s.