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I'm almost 30 and have a good job with a lot of savings.
My personal opinion is that if you can't pay for something in cash without a significant change in your lifestyle, you can't afford it and shouldn't be buying it.
I don't agree with your assessment. First, we first need to understand the difference between NEED and WANT. Let me give you an example - someone could have an investment portfolio of stocks and funds of 400k that could sell a small portion and buy a new shiny car that costs 50k. Per your rule, that would be right. But what if their current car is hardly 3 years old and in excellent condition. Do they need a new car, or want a new car?
Secondly, debt is a very powerful tool that you can use to build wealth. That is what most corporations do, mostly successfully. You could get a low interest loan and invest somewhere where higher returns are assured. I know a bunch of folks who could afford to pay down their mortgage, but don't, because the interest rate on their mortgages is so low (~3.5%) that they better invest their money elsewhere and make 8-10%. Not all debt is bad but it could get risky very fast, so enough research and caution is required.
their skill set has also not kept up with "inflation" either. why should someone get paid more today as opposed to last year if they are still doing the same thing? if they dont learn anything new, dont make more sandwiches, dont take on additional duties?
even if the minimum wage is $50/hr, by staying static in their skills when they are directly in competition with technology, that leaves them open to being fired when someone walks in and says they can operate the machine quicker, better or when someone can sell them one that eliminates the job altogether.
so what is the point of "helping" them with a higher wage if they dont bother improving themselves at same time? they will still be out of a job soon enough and earning $0 no matter what the current wage is
a lot of college grads that got out of school in years past is going to face this if they dont figure out how to apply what they learned in school to their job. the knowledge they got will become outdated or forgotten. employers will just hire a new grad over one from a decade ago that equally has no experience in the field. and the economy will just brush those people aside and keep on ticking.
That makes no sense. Burger flippers are doing the same thing today they were doing 50 years ago. 50 years ago, their wage would pay for a place for them to live and put food on the table. Now it doesn't. It has nothing to do with building skills. It has to do with everything costing more now and pay staying the same.
Maybe if the middle class wasn't so busy trying to live "the middle" class lifestyle, they can save some money.
My friends are hitting 30 and getting settled & it is shocking to see how different people are managing their finance. Even in my small friend circle, where all of us grew up in poor immigrant community, I am seeing few who are building new house/driving luxury cars/vacations few times a year while holding down a contract position. Then I have others who have good income but choose to get older tri-level or bi-level house for cheaper price & driving the same old Toyota/Honda. I personally feel pressure to "keep up" only to knock some sense back in to me few days later.
Good point. We are as Americans are trying to keep up with the Joneses. That is why we see some folks who make six figures are still living paycheck to paycheck because they are living in a $500-600k house, driving a $80k Cadillac Escalade or a 80k Mercedes/BMW, buying the latest iPhone, flat screen tv, and planning exspensive trips out of the country every year.
You can be making $200k a year and be no better off or maybe even worse off than the person making $50-60k a year living in a $150k house, driving a $20-25k Toyota Camry who keeps their outdated cell phone, keep watching their old 5 year old tv, and takes a cheap trip 4-5 hours out of town instead. The person making $50-60k might have more in savings than the person making $200k because they have far less debt.
If Americans were more frugal with money they could save more. Instead of buying that luxury SUV or sedan when you get that big promotion on the job keep driving your Toyota or Honda and save the extra money you are making.
The 50th percentile of income in the US is $46,000 per household. That's $885 per week. That's not the sort of income where designer clothes are a consideration. Hell, licensed daycare for two kids would be $5-700+ of it. Add $200 a week rent, $150 food, and it's all gone, before any transport costs, shoes, clothes, utilities, medical.
Half the population has no spare cash, because half the population has very little money at all.
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.
A single person with no kids making $46k should be able to save something every month as long as they don't live in California, NYC, New Jersey, Miami, or some other ridiculous high cost of living area.
I believe the author of this was on NPR, talking about how he was "working poor," while sending his kids to private school! I had to change the channel shortly thereafter because I was afraid he was about to make a case for government assistance, and I didn't want to cause an accident when my head exploded. Unbelievable!
I don't really sympathize with the writer but I don't think he is looking for sympathy. He seems to acknowledge he is largely the reason he finds himself in this predicament.
^This.
I also grew up in NYC (albeit low income) and my parents at the time probably bought one of the cheapest houses in the neighborhood so that they could live in a decent area. (They borrowed the d/p from my grandparents.) My parents never moved to a bigger house even though they wanted to---we had six people at one time living in less than 800 square feet. They did not send us to private school that they couldn't afford like the writer of the article, who could have bought a coop in an area with decent schools in Brooklyn as there are MANY of them. They didn't pay for college---I had to go to the local city college. They didn't pay for my wedding---I had to pay for it myself.
Yet here I am, much younger than he is and somehow my husband and I can afford to live on probably much less money than he makes. We live in a very small coop and as much as I don't like it, I focus on the fact that it will get me to where I want to be, someday. I am stashing money away (while still enjoying my life) because I want to buy a house one day where I put down about 50% and keep the mortgage payments very low. I would love to run out tomorrow and buy something with at least a second bedroom but it is not time yet.
Honestly, I am more worried about our parents, probably somewhere around the writer's age, because I look around and I see my MIL living on SS only and she has ZERO money saved and is always living paycheck-to-paycheck and my parents who will inevitably be doing the same. And I worry that it will turn into both sides needing financial help constantly, when I sacrifice a lot to be in the position that I am currently in and when I am working so hard toward my goals.
And this is what I find disturbing - you were obviously raised well in a frugal family and are using all you know to keep building on that for your own family. And the fact is, in spite of that you predict your parents have nothing saved and will have to make do on SS alone (which many do, btw). But these are the same kinds of people we seem to be talking down...if they were doing the right things, why DIDN'T they have a few hundred thousand saved? You can do all the right things and still have to live very carefully...if you mess up a couple times or fate hands you bad health, e.g., you are totally screwed with no sympathy from anyone here. Not that they need our sympathy, but there are a lot of hard-hearted people who look at the conclusion and think they know the whole story.
Reading articles like this make me so thankful that I never got married or had kids. I'm 35, my income is $2,500/month higher than my current expenses and I plan on retiring at 50. If I did lose my job, and assuming I had no income coming in, I could easily survive without a job for at least 5 years.
This article just shows that a lot of people in this country make poor life choices and refuse to accept responsibility for it.
Again, people are either not reading the article or missing the point. The author did not call for any welfare program. He did not blame someone else - again and again he blames himself & no one else and admits he made mistakes. He points out, though, that EVERYone will make mistakes - which one of YOU is perfect?
His larger thesis is: the middle class is not longer advancing and has not for a long time, yet we continue to act like everything's okay. A middle class income is not really "middle class." He writes:
Quote:
In a 2010 report titled “Middle Class in America,” the U.S. Commerce Department defined that class less by its position on the economic scale than by its aspirations: (1) homeownership, (2) a car for each adult, (3) health security, (4) a college education for each child, (5)retirement security, and (6) a family vacation each year. By that standard, my wife and I do not live anywhere near a middle-class life, even though I earn what would generally be considered a middle-class income or better.
The author tried to do the above and failed. The list is too expensive. He says he drives a 1997 Toyota. He hasn't taken a vacation in 10 years. He does not use credit cards, so he is not spending frivolously on consumer goods.
Career-wise, he is as successful as we could reasonably expect anyone in his profession to be. Much more, actually. He's a writer who is regularly published and gets large advances for his books - that's a heck of a lot better than most writers. We cannot ask more from him in terms of his career and income.
Now to his money management - the dual mortgages were a mistake, but then he expected his co-op apt in NYC to sell while he was in the process of moving to the best school district he could for his daughters. He paid the price for that. He wanted his children to be raised by a parent & not the TV or daycare so his wife stayed home. That and the high quality school district paid off - since his daughters got into and graduated from Stanford and Emory. Putting them through those schools probably ate up the vast majority of his 6 figure salary - in fact he blames the universities the most for his predicament now, from the article: I am not saying that universities are extortionists, but … universities are extortionists....It meant that we had depleted not only our own small savings, but my parents’ as well.
I do question the choice of one daughter - she went to Emory for undergrad and then University of Texas for grad school in social work. Social workers make around $60K on average. She could have done that going to CCNY then transferring to SUNY, saving a ton on out-of-state tuition alone. The daughter who went to Stanford and is now going to Harvard Medical will pay off.
He also blames taxes - which hit hard when your pay comes in large lump sums from publishers.
Still, he was not wasting his money. He was trying to be middle class on what looked to be a good income. The fact is you can't do those 6 things he listed on pretty much any middle class income. Speaking for myself - my wife and I save about 20% of our income when it comes in, but like the author we always have to dig into the savings for the "constant storm" like home repair, car repairs, last minute flights across the country when a grandparent dies, etc... We are not wasting money on cars - our cars are 7 & 17 years old & paid off long ago. We did not buy more house than we could afford; quite the opposite, we bought half the house we were approved for. Our real savings rate is in the 8-10% range. We don't have kids, though, and we may never be able to afford them because I am pretty serious about having money in retirement. It is a sad commentary on modern life.
What the author is saying is that out of those 6 markers of the "middle class," in reality most middle class people have to choose 3.
Last edited by redguard57; 04-24-2016 at 07:25 PM..
I read the thread title as $400K and thought like 90% of people would have a hard time coming up with that.
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