How does $2k spread across a couple of checks make people feel they were "COVID rich" is something I just can't wrap my head around. Even for someone with a low income this would amount to at most a paycheck or two extra
Living paycheck to paycheck, truly, and I mean truly in that sense where you need to wait for checks to clear before buying groceries occasionally - is extremely common. When you live like this long enough, "big" costs start adding up. That funny sound in your car that you can't afford to get fixed gets worse. Your tooth hurts super bad, but can I afford a $1000 dentist bill? I'll just hope it doesn't get worse. Maybe your kid gets really sick, forcing you to take time off you cannot afford to (not everyone is salaried or has vacation/PTO policies), adding to the strain. You go to credit cards to stretch things out, but of course that has a limit to how far it can go, especially when you're barely treading water. Eventually you will drown, something has to break. What it is varies and will probably largely determine the long-term outcome of the situation.
Anyway, all this to say, there have been many times in my life where these nagging, lingering problems that caused significant strain and hardship in my life that I simply could not afford to fix would have been solved immediately with a few thousand dollars, or whatever "trivial" amount you want to put as a value here. $2000 can actually be a lot more than that when you consider interest and paying down a credit card debt. I can think of one very specific time in my life where $500 being loaned to me was the difference between where I am now and being out on the street, and that is not an exaggeration whatsoever.
The reason you cannot wrap your mind around it, and why this bothers me, is that comments like this come from people that truly cannot imagine how massive swaths of the united states, and more broadly live day to day - it comes from a position of enormous privilege, even if you may not realize/acknowledge it. To me, I struggle to imagine how this comment I am responding to can be made at all, but I know our life experiences probably differ in a drastic way.
I am very lucky in that things panned out (relatively, I still deal with residual issues due to living that way for as long as I did, about 15 years) and I was somehow able to finish school due to traits I believe not many people are lucky enough to have. I don't believe at all that many people in this situation are there of their own fault, and I'd die on that hill, but I can only provide my own brief story and some really basic cost of living statistics that are very easy to look up. It's bleak out there.
Only the author can detail on what he really means, but do you think the extra 2k would significantly influence the people's behavior on the medium / long term (I do agree that for many it can have a significant impact on the short term and really help them) ?
For example, I've been at absolute zero and living in my car largely because I just couldn't find a job and literally ran out of money trying (I guess count the car and laptop as an asset, w/e, but actually in the red), and if I'd been given 2x $2k cheques, I'd have a hard time finding a way that it would change my habits for positive or negative for longer than a few months, except if I'd looked for a quick source of substance based relief, which I didn't and wouldn't but assume that's irrelevant for now. I'd probably just try to stretch as far as possible and maybe get a few more calories, or a shower, or temporary gym membership. I can sympathize with the confusion somewhat, because to influence my decision making long-term, I'd have to be set back or set forward in a more reliable way than sudden burst of cash. Like I'm not going to get a loan or a 1 year apartment lease, it would be more like a campground instead of the street for a week every month. I do think worst case scenario, back to the substance topic, is that if you're in a really bad place financially, for no fault of your own (which I absolutely agree that this applies to a majority of people in those situations), it's that you become addicted to something, but everyone's dealt a different hand from a different deck and I do believe I'm way off the mark in terms of what other people might do.
Edit: Actually, that sort of windfall might also make it feel way easier to start spending on food delivery bs, which I have to imagine is a somewhat crippling negative long-term financial habit, especially if you're already working like hell with a family and it's an obvious efficiency increase.
To clarify my opinion (hopefully beyond doubt so that you can't imply things I do not think), I think that blaming people will not solve anything, people are not poor due to behavioral issues, people that are currently poor must just be aided (in multiple ways) to get out of the situation. But people do react differently to different ways of helping, and as we don't have infinite resources, we need to discuss how such interventions affect them on short/medium/long term.
If you prefer more to find points in which you disagree (points that were not clearly there or semantic points as "short term help") I don't think I can bring anything to the discussion. I remained without a formed opinion of why the jump in defaults appeared...
I've been that poor before (never _truly_ struggling like some countries experience, but unable to comfortably afford both food and a roof), and some other units might make that check make more sense:
- 4.5 yrs worth of rice, flour, or beans (the bulk of my diet by weight and by cost)
- 5 months of rent
- 5.5 yrs of electricity (almost all of which went to cooking or refrigeration -- heat was unnecessary unless it was under 0F outside)
- a new-to-me car, enough money for the parts that I'll inevitably have to buy to fix any used car shortly after I buy it, and enough gas to drive to work for a year
When you're struggling paycheck to paycheck, that's a life-changing amount of money. I'd already escaped that life by the time covid hit, but if I hadn't then that might've been my ticket out.
As to how somebody in better circumstances might be "COVID rich"? I can only speculate, but even in the middle class people tend to have a number of "essential" payments: health insurance, mortgage/rent, newish clothes for their kids, you should probably eat a vegetable once in awhile, .... People are living "paycheck to paycheck" in those more comfortable lifestyles, and going from $0 to $2000 in discretionary income is huge. That's a year of weekly date nights at someplace better than McDonald's, a year of monthly date nights at a pretty good steakhouse or other gourmet opportunity, kayaks and road-trip money for the whole family, a very nice clavinova and a few months of lessons, ....
In either case, I suspect the key to understanding is to compare that $2k (really $2.2k-$3.3k in equivalent income depending on relevant tax details) to $0 rather than to total expenses.
Based on stats looks like they massively paid down debt.
I think that term ("Covid rich") isn't meant just for the checks, but for the general increase of disposable income.
If you are low income, $2-3k in checks can effectively be a pretty big windfall as people note in this thread.
If you were middle income, there was probably a bunch of discretionary spending on e.g. meals out, shows, vacations that you didn't spend compared to previous years. It's not hard to see that being an "extra" 5 figures for lots of families.
On the lower end, assuming you were able to WFH the instant savings from not having to commute (gas, tolls, etc). Was a pretty big change to your budget.
Other things like childcare can be a significant expense for many families and it’s a huge change when kids were forced home and the expense was avoided. Some of these things came with reduced household incomes, layoffs, etc for other households. But if you were able keep your income and just reap the savings then you benefit. At first, before inflation kicked in, but since then if you’re income hasn’t increased ~30% or more since 2019 (very dependent on your locale) then you’ve probably been digging a hole the past ~2 years, unless you are a great with budgeting and cut back in real time as prices increased. My feeling is it’s been had to do for many people as most people don’t budget and I know for many income hasn’t grown enough to keep pace with inflation.
I’m pretty pessimistic about Covid economics/politics. My opinion is it should have triggered a global recession, likely worse than the financial crisis. There’s still a ton of inflation that needs to flush through the financial system. While we talked about flattening the curve of the virus, we really just flattened the curve of the economic fallout of such a large event. I think a period of austerity is likely going to be required. Rates and prices have a lot of people locked in their houses or out of home ownership, average vehicle age is at a record high, people are dining out less, even cutting back on their beloved Starbucks, etc so I think the signs of this are ramping up. I’m not quite sure how it plays out, especially with the US political leadership changes coming up; but I feel like the majority of Americans (at least) have some financial strains coming their way, likely uncomfortable changes will need to be made and will feel like a type of austerity to us.
Do you mean four or that four figures feels like five?
>> ..., there was probably a bunch of discretionary spending on e.g. ...
i.e. money in your bank account that in a "normal" year you would have spent already. On top of the checks.
I grew up kinda poor and lived this as a kid, my family was always helping or being helped by a neighbor or something. Through my friends and some extended family I knew these things were like a sign of our “class” and even slightly more secure people would never do them, it would even be a social faux pas to even ask for help. Now, at middle aged, I’ve done pretty well for myself and sometimes make other types of faux pas statements like “just buy a new car instead of dealing with that”. I have to be somewhat mindful that even a 10 year old used car is a huge purchase for many people. Even if it’s in good shape and can get another 5-10 years out of it, and would technically be the best move, it’s not viable if they can’t afford it or have to subject to some usurious loan.
TBH I generally like to just take the “it’s impolite to talk about money” approach unless I know the person well enough. Although I’m a financial professional so people tend to like asking my opinion/advice on a lot of things, even if I barely know them, I have found that I prefer to avoid those types of conversations altogether until I know you pretty well.
Especially the idea that money just disappears so spend it whilst you have it. That’s like saying your legs might disappear so cut them off now to avoid the surprise.