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There's so much conflicting information out there about what people have in their bank accounts. I've seen articles saying that too many people are keeping too much in their checking account:
If the median checking balance is $2900, the average $9100, then how is it that some people have NOTHING to pay for a $400 emergency? How do these two situations exist simultaneously? Are people flush with money, or are they paycheck-to-paycheck every month?
The data is a bit skewed because not every checking account is free. Some require high balances to avoid fees to earn the benefits they have, while OTOH, there are also checking accounts that pay high interest up to a certain amount, like my 3% checking account I have which pays that rate on balances up to $25k. So, while I'm in need of liquidity (like right now while I'm in between jobs), I max that sucker out.
I believe the median to be more accurate to the standard situation (if you look at the average for the average US HH wage and below), though if that's a monthly end balance or Median daily balance, who knows.
If the rent eats first, you should be on govt assistance, or be in section 8 housing where the tenant only needs to cough up $100 per month as the govt absorbs the rest from the evil landlord.
If the rent eats first, you should be on govt assistance, or be in section 8 housing where the tenant only needs to cough up $100 per month as the govt absorbs the rest from the evil landlord.
You have totally lost me. Where did you get THAT idea? Section 8 housing is very hard to get. In my area, the waiting list is closed 99.5 percent of the time. About every five years, when the "expected wait time" gets down to 12 months, a lottery is announced a couple months in advance (to allow word of mouth to get around the 'hood).
There is a one-week window for people to sign up for this lottery, which selects some number (3,000 last time) households to be added to the waiting list (about 8,000 applied last time).
"Winners" get on the waiting list and can expect to wait up to five years for a voucher. Then they have to go through the formal application process, and if approved, they have something like 90 days to find a landlord willing to accept their voucher. If they can't find a willing landlord in 90 days, the voucher expires and is issued to the next person on the waiting list.
All lottery "losers" must wait another five years for the next Section 8 lottery.
There are probably MILLIONS of people who SHOULD be getting Section 8 rent assistance but, as I said, it's very difficult to get.
The data is a bit skewed because not every checking account is free. Some require high balances to avoid fees to earn the benefits they have, while OTOH, there are also checking accounts that pay high interest up to a certain amount, like my 3% checking account I have which pays that rate on balances up to $25k. So, while I'm in need of liquidity (like right now while I'm in between jobs), I max that sucker out.
I believe the median to be more accurate to the standard situation (if you look at the average for the average US HH wage and below), though if that's a monthly end balance or Median daily balance, who knows.
The people who do business with those institutions (mostly commercial banks), should leave and join a credit union then. Most accounts in credit unions are free and offer the same benefits as a normal bank would without minimum balances to "earn" benefits.
1/2 the problem is yeah the checking accounts require minimum balances to avoid fees, the other half of the problem is the consumer not doing anything about it in a free market (i.e. pick a competitor that gives a better deal).
I fell for this trap too, but I realized how I was being shafted and made changes. It's a pain but well worth.
You do know that only about 15% of people in the U.S. smoke any more...so at least let's not act like smoking is a MAJOR reason for why people are in debt....'kay? A lot more people drink - certainly supposed "middle class" people - let's throw that in the ring as a reason. A pack of cigs is about $5 if you buy a carton...how much is a sixpack or a non-Boone's Farm bottle of wine?
Smoking is pretty much an avocation among those in lower income brackets. For example 26% of adults below the poverty line smoke. 34% of those who only earned a GED smoke. These are the people who can least afford it. Yet they do.
So look at this for a minute.
The poverty line in the US outside of Hawaii and Alaska is $12,140.
The average amount spent on cigarettes per smoker is $1,789. So close to 15% of that person's income goes to smokes.
Let that sink in for a second. If all these statistics are accurate, that means fully one-fourth of those under the poverty line fling away 15% of their money on cigarettes.
But by concentrating on the particulars you have missed my point entirely. Not having enough money for emergencies is not one big thing, but the death of a thousand cuts.
Here's a helpful way to think about it. You know that daily coffee so many pick up from Starbucks on the way into the office? $3.50. No big deal, right?
Wrong. Because when you factor in how much you lose to taxes -- payroll, SSI, gas, sales, property, etc. -- it really takes you earning $6.50-$7.00 to pay for that cup of coffee. But let's use the nice round number of $7.00. Get your daily Starbucks fix before walking into the office, and that's $35.00 of your pretax income per week. Fifty workweeks a year and that's $1,750.
Now, if you are single and earn the average household income of $35,000 for single people, that's 5% of your annual income. On coffee. And, truthfully, not very good coffee. I can make an entire pot at home that's better for about two bits.
The same is true for the HBO subscription and the million other things people buy without even thinking about it.
Suddenly that $3.50 cuppa becomes a daily luxury. Same thing for eating out every day, stopping off at the bar after work, etc. etc. I'm just illustrating how quickly people burn through their money on fripperies.
Hey, I like my little luxuries. But when my wife and I have had to tighten our belts, out went the cable package, the coffee, the dining out, and the million other little things. It's really amazing, for example, how much you can reduce your grocery bill if you don't buy beer, wine, and all those other non-essentials.
Last edited by MinivanDriver; 01-31-2018 at 09:06 AM..
I have savings but I have never understood this thinking. A cell phone is absolutely necessary for most people and even though you can get a $50 plan saving $50 a month seems not that much. Also eating out means you don't have to buy food for your home and buying for your home means some of it might go bad. In your scenario people really only save about $1500 or so. And your life really sucks.
I can see the argument that you shouldn't save -- it is sad that most people don't see it. But if you keep 50K around without getting enough interest to keep up with inflation you are losing money on it. I keep savings for emergency but only if I get sufficient return on my investment -- over 4%. I am currently having this argument with my condo board that has 100K in reserves just sitting around without any significant interest but then keeps putting out assessments to keep the reserve levels high.
Where i think people overspend is buying outrageously overpriced homes. It is harder but find a place to live that doesn't cost more than 1500 per month.
Saving $50 a month translates to $600 a year. If you think of that in terms of pre-tax income, that's really somewhere around $1200 annually. If you are single earning the average household income of $35,000 for single people, you've just saved 3.5% of your income by choosing a wiser plan.
As far as the groceries are concerned, food doesn't go bad if you plan. I mean, my wife and I both make really good livings, and we still map out the meal plan for the week and buy accordingly. We eat leftovers for lunch a few times a week. Because that $6 for lunch translates into $12 in pre-tax earnings. Do that daily at work, and you've spent $3,000 in pre-tax earnings, or 8.5% of that same $35,000 in income on lunches.
Same thing for that daily cuppa from Starbucks that I just cited in a previous post. $3.50 per day amounts to $1,750 a year.
So let's put those three items together. A $50 savings monthly on your mobile phone bill, bringing leftovers to work, and cutting out Starbucks, adds up to $5,350 in pre-tax income. That's $445 a month.
Mind you, I'm sure we could quibble over the minutiae of the numbers all day long. That doesn't affect the broader point I'm making, which is that there's always a way to save money for anyone making anything above the poverty line. But justifying bad spending choices gets in the way.
Just to be clear, I'm not advocating living like a monk either. I'm just pointing out that if you are seriously living paycheck to paycheck, but still eating out several times a week, watching HBO, buying smokes, drinking Starbucks, etc. etc., then you are the author of your own problems.
Last edited by MinivanDriver; 01-31-2018 at 08:39 AM..
Ok, I'll play your game for a turn or two.
If the rent eats first, you should be on govt assistance, or be in section 8 housing...
Nope. However the rent is getting paid... it eats first. Or at least 3rd.
(He does get a few things right now and then)
First to eat are the taxes etc that get deducted from your wages.
Second to eat are the contributions you have deducted; hopefully to your benefit.
Third? Your housing costs... that's rent (or mortgage) plus utilities.
Everything else comes out of what's left over.
If more people understood this reality fewer would agree to pay such high rent rates.
(Target 12/52's or 23% of your NET income)
Nope. However the rent is getting paid... it eats first. Or at least 3rd.
(He does get a few things right now and then)
First to eat are the taxes etc that get deducted from your wages.
Second to eat are the contributions you have deducted; hopefully to your benefit.
Third? Your housing costs... that's rent (or mortgage) plus utilities.
Everything else comes out of what's left over.
If more people understood this reality fewer would agree to pay such high rent rates.
(Target 12/52's or 23% of your NET income)
"The Rent Eats First" is a reference to a slogan used by some minimum wage protesters.
Dave Ramsey says food should come first, then utilities, then rent or mortgage. He also recommends 38% of a household budget for shelter. (He's basing all of this on NET income, using the average American who is an employee and who never sees in his paycheck the taxes withheld.)
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