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Our consumption based economy has pushed most Americans towards being spendy rather than thrifty.
Every month there's some marketing injected holiday that tells people to go and spend money. Most middle class are getting by with credit and carrying some 5 digit credit debt not including their student loans and mortgages.
My parents used to consider all loans and debts as being bad but not today, people tend to carry large debt loans of student and mortgage debts and feel good about it.
Many folks especially NYers are spending more than 50% of their paycheck towards rent/mortgage which is dangerous if the economy tanks. On top of student loans and other debts most folks only have a few hundred left from their paychecks. Which is why the next recession will put a lot of people's lifestyle on reality check.
I heard a story on NPR this morning about teaching financial literacy classes in high school, and how it can help keep future generations from making the same mistakes that this author did. A good financial literacy course can, at the very least, keep young people from getting into bad debt situations early on which limits opportunities to save. The problem is that very few states require financial literacy curriculum.
This is true for a family of four trying to survive off $46k. They have absolutely no money to save or spare even if they live extremely frugal. Flip phones, no cable tv, driving 10 year old cars that are paid for, and living in a modest 3 bedroom house or apartment I will agree they will have no money to spare regardless of how cheap they live.
Just depends on how careful they are. My household income is about that much. My house isn't big, but the kids both have their own rooms. The house is 6 years old and everything in it is in good repair...ac, plumbing, appliances. We have two cars that are 15 years old, paid off. We do our own repairs when possible...I did the brakes on the minivan this weekend. I fix our appliances and my husband is good at changing out light fixtures and replacing faucets, sinks, toilets, etc. so we make small upgrades to our house pretty often...ceiling fans, deeper kitchen sink, nicer toilets, etc. Everyone in the family has their own computer and their own tablet, and our phones are a couple of years old. We've all got good health insurance through my husband's job. We eat pretty decently. Right now I've got $1500 in savings and $4500 available on a credit card, in case we have any emergencies.
I know people who have more than double our income who are really struggling financially, even some of my neighbors whose mortgage is probably about the same as mine and they can barely make it, but I know they have more money because they both work. It's just a matter of planning, and (for some folks) getting to the age where you're determined not to ask your parents for money, ever, for anything.
There is no amount of frugality or thrift can pay for middle class requirements now. I could fill a room with iPhones for what college costs today. If I'm given a 6 month window of time left to live by a doctor, I could check in to the Waldorf Astoria for my last few months and still have a lot more money left over vs. paying for the health care.
The author sacrificed his retirement, his savings and his parents savings to send his kids to great colleges. He had to set them up beforehand to get accepted so he moved to the best district possible and his wife stayed at home. How many of you would tell your kid, "you got into Harvard but I can't afford to pay for it, so you're going to community college."
It seems that he was extraordinarily successful at setting his daughters up for success, but at what cost? That's pretty much the takeaway from the article. College was not always that expensive - even the best ones. The things like your regional podunk state college used to be teacher's colleges that were literally tuition-free! If you got accepted you paid for housing and books, period. Now they cost $20K a year. There is little price elasticity in higher ed either. It's not like Bates College is that much less than Harvard. It's about the same, actually. It's not like University of New Mexico is that much cheaper than UC-Berkeley. Again, about the same. Unless you all think college educations are 15 times better than they were 40 years ago, there is something wrong.
What we SHOULD be doing, and what I think the author is trying to inspire, is for people to start beating down the doors of the health care and higher education industries. There is something wrong with both and people complain, but don't to anything about it & continue to pay it though loans, etc... What's worse, there is very little price elasticity for higher ed. A lower quality private school like Bates College costs about the same as Harvard. University of New Mexico costs about the same as University of California-Berkeley. It's not like you can "go cheap." Going cheap means low-tier public regional universities or community college. All the similar tiered colleges have similar sticker prices nationwide. I say this as someone who strongly believes in the mission of community colleges... they are NOT the same. If someone is capable of going to Harvard but goes to a CC.... their parents failed them.
Last edited by redguard57; 04-25-2016 at 11:37 AM..
The author sacrificed his retirement, his savings and his parents savings to send his kids to great colleges. He had to set them up beforehand to get accepted so he moved to the best district possible and his wife stayed at home. How many of you would tell your kid, "you got into Harvard but I can't afford to pay for it, so you're going to community college."
It seems that he was extraordinarily successful at setting his daughters up for success, but at what cost? That's pretty much the takeaway from the article. College was not always that expensive - even the best ones. The things like your regional podunk state college used to be teacher's colleges that were literally tuition-free! If you got accepted you paid for housing and books, period. Now they cost $20K a year. There is little price elasticity in higher ed either. It's not like Bates College is that much less than Harvard. It's about the same, actually. It's not like University of New Mexico is that much cheaper than UC-Berkeley. Again, about the same. Unless you all think college educations are 15 times better than they were 40 years ago, there is something wrong.
There are cheaper choices in higher education -- state universities and community colleges, which can be a good place for two years before transferring to a four-year school, even if it means five years total for the Bachelor degree. But the big takeaway on education costs here is that the parents (and ultimately the grandparents) fully funded the two daughters. Why?
These young women should have had summer full-time and semester part-time jobs. They also should have taken loans to pay for their education, even if this means that they would spend a year living on their own after high school to demonstrate financial independence from the parents. I don't know exactly how the conversation "went down," but the parents and grandparents should never have offered backstop subsidies.
Pay yourself first.
Same thing with the wedding. It's strange to me that the author knows that paying top dollar for non-essential expenses was incorrect, but he kept doing it:
(1) Moving to East Hampton (overpriced area but justified by its 'good schools') when Glastonbury, Connecticut or Exeter, Rhode Island or Doylestown, Pennsylvania are a quarter of the price with equally 'good schools' and about the same driving distance to Manhattan.
(2) Paying for expensive, private schools
(3) Generally poor financial planning (taxes, liquidated retirement fund for the wedding, selling the Brooklyn co-op)
When I was growing up (not all that long ago), middle class was...
-living in a one-story, ranch-style brick house with a carport or garage in a good little neighborhood filled with similar homes
-having one nicer (but not luxurious) car and maybe an older vehicle as a second car
-taking vacations an hour away at the beach for a long weekend or maybe a week in the summer, or visiting family in another state, or maybe going to Disney or somewhere like that like once in your childhood, not every single year
-eating well (but nothing fancy) at home most nights and eating out maybe once a week, etc.
-TV in the living room. Some lucky kids had a TV in their room, but it wasn't "expected."
-One desktop computer that was shared by the entire family (with dial-up internet...the horror!)
Now, middle class is...
-McMansion
-big, gas-guzzling, brand new SUV with blind spot detection, rearview backup camera, the works
-another nice, newer, expensive vehicle, maybe another SUV, or a truck, or a luxury car
-the newest iPhones
-tablets for everyone in the household
-laptop for everyone in the household
-flat screen TVs in every room
-expensive starbucks coffee every day
-"Organic" groceries
-Dining out frequently
didnt say anything about it keeping up with inflation. i said their skills havent kept up with the times. so why would their pay go up.
if inflation is a reason why prices go up, then skills are the reason people get paid more or stay employed.
there is no reason minimum wage "should" go up with inflation. that is just something you "want" to happen to make it easier on people working those jobs. my fix for it would be to tell those people to get off of minimum wage, and the quickest and simplest solution to that is for them to acquire skills that get them a job better than minimum wage.
no one is aruging that it hasnt kept up with it, that is simple to calculate. but why should it? humanitarian relief is not part of the job, companies are not non profit organizations.
I read the thread title as $400K and thought like 90% of people would have a hard time coming up with that.
I'd be surprised if 10% of people could come up with $400,000, as it's unlikely that many people have that much in terms of liquid assets. I'm wondering how much of the 1% could come up with this amount right away. I can't imagine all that many emergencies, outside of a kidnapping, that would require that much money right away.
It's absurd that so many people can't come up with $400 in the event of an emergency. If you have a steady job, you should be able to come up with that amount of money unless you've made a number of poor life choices.
I heard a story on NPR this morning about teaching financial literacy classes in high school, and how it can help keep future generations from making the same mistakes that this author did. A good financial literacy course can, at the very least, keep young people from getting into bad debt situations early on which limits opportunities to save. The problem is that very few states require financial literacy curriculum.
Dave Ramsey's Financial Peace University should be taught in every high school in the country. It would revolutionize this nation.
Dave Ramsey's Financial Peace University should be taught in every high school in the country. It would revolutionize this nation.
That's bible-based, so no, it should not be taught in public schools. Financial literacy, yes, but there are plenty of other better resources out there, ones that wouldn't violate the Constitution.
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